Argentina has a great deal to offer international investors with its multicultural and well-educated workforce, its natural resources and its considerable potential for infrastructure investment. Arnaldo Hasenclever, partner and international business director, Grant Thornton Argentina, shares the opportunities in infrastructure, energy and technology, and provides an insight into what it's like to do business in Argentina. For foreign investors to be successful, they need flexibility and the willingness to take a long-term view of doing business in the country.
"As one of the largest countries in Latin America, Argentina offers a vast array of natural resources and produce. As a G20 country, Argentina continues to support global growth and innovation.”
Argentina offers an attractive place to live and work. People love the friendliness, the weather and the landscape. The country also boasts a highly literate, well-educated workforce from a variety of sectors including medicine, business, law, accounting, engineering and architecture.
Income distribution in Argentina is more equal than in most Latin American countries, with a broad and deep middle class that enables more consumer buying power and creates a significant market opportunity for new businesses.
There are short-term challenges as the country emerges from the pandemic. However, the country offers considerable opportunities for investors who are ready to commit for a longer period.
Argentina's fastest growing economic sectors are energy, agriculture, manufacturing, e-commerce, and telecommunications. It is a digitally capable country, with high internet and smartphone usage. Some of the country’s infrastructure is in need of upgrade and renewal, although there is significant opportunity for exporters of equipment and services for roads, ports, railroads, telecommunications, water and sanitation, and electric power.
Argentina’s well-educated workforce means it is a popular location for software companies to set up, with labour costs being considerably lower than in the US.
Recovery from pandemic will enable many Argentinian businesses to boost their growth rates to pre-Covid levels, with a strong rebound expected in sectors such as tourism and construction. However, numerous barriers to growth remain, not least the relatively high levels of bureaucracy that have persisted under the current government.
However, Argentina has traditionally been strong in areas such as agriculture and food manufacture, and there are ongoing opportunities for foreign investors. Argentina is the third-largest producer of soybeans globally and a large proportion of these are sold to China. Sustainable agricultural technology is another key growth sector, with domestic firms keen to work with technology developers from around the world.
Costs for conducting business in Argentina are low. The average monthly costs for labour, electricity, office or warehouse space are low, while dealing with construction permits has been made easier by a streamlined electronic platform for building permit applications.
The process of enforcing contracts has also been simplified by allowing electronic payment of court fees. However, international businesses still face several bureaucratic hurdles. Access to finance is also very challenging at present due to the high rate of inflation. Argentina has attractive double taxation treaties, bilateral investment agreements, and tax information exchange agreements with numerous countries. In addition to the high tax burden, Argentina’s central bank has placed limits on the dividends that can be repatriated by international investors and this can add an extra complication if you are not already established in the country. At the moment, these challenges mean international businesses are increasingly looking to buy Argentinian companies in order to enter the market.
“In particular, they are entering into partnerships with local firms so they can understand the business culture here: domestic entities can be expected to have a better grasp of the market’s particularities, so this is an approach that is very much worth considering.”
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