Foreign Investment Laws Effect

How the Foreign Investment Law Effects FDI in Argentina

According to the Economic Commission for Latin America and the Caribbean (CEPAL), in 2015, Argentina was ranked as the fifth largest recipient of foreign direct investment (FDI) within the region, behind Brazil, Mexico, Chile and Colombia. FDI in Argentina grew by a staggering 130% in 2015 reaching USD$11 655 million dollars.

The Foreign Investment Law (Law 21.382) constitutes the legal framework for FDI in Argentina, with the main provisions of this law outlined below:

  • Foreign investors have the same rights and obligations as local investors
  • Foreign capital investment is defined as:
    • Capital contributions belonging to foreign investors applied to activities of an economic nature carried out in the country
    • Purchases of interests in the equity of an existing domestic company by foreign investors
  • Foreign investors are defined as:
    • Natural or legal persons who are domiciled outside the territory with a foreign capital investment
    • Domestic foreign-investment companies which invest in local companies
  • Domestic foreign-investment companies are defined as:
    • Companies domiciled in the country, in which individuals or legal entities domiciled outside the country hold a direct or indirect interest of above 49% in its equity or are the direct or indirect holders of such number of voting rights as are necessary to prevail at the shareholders’ meeting
  • Foreign investment may be carried out in some of the following ways:
    • Converting foreign currency
    • Capital goods, their spare parts and accessories
    • Profits or capital in national currency belonging to foreign investors, provided they are in legal conditions to be transferred abroad
    • Foreign credits capitalization in freely convertible foreign currency
    • Intangible goods
    • Other forms of contribution provided for in especial or promotional systems
  • Foreign investors may transfer abroad realized profits coming from their investments, as well as repatriate their investment.
  • Foreign investors may use any of the legal forms or organization provided within the national legislation.
  • Domestic foreign-capital companies may use local credit with the same rights and under the same conditions as domestic national-capital companies
  • Transient foreign-capital contributions related to execution of lease and services contracts or others not covered by the law
  • Legal acts entered into by and between a domestic foreign-capital company and the company which directly or indirectly controls it or an affiliate of the latter, are considered as entered into by independent parties.

The CEPAL also highlights the need for alignment and integration of FDI policy with other countries’ development policies in order to better attract FDI. Likewise, the business climate and investment promotion agencies are key to reducing information asymmetries and connecting foreign investors with business opportunities. Argentinian investment law stands out from many of the other domestic policies within the country with its non-discrimination principle between foreign and domestic investors.

We welcome businesses looking to do business in Argentina whether through investment, trade or company formation, to contact a member of Biz Latin Hub. We can help your business to better understand the local regulations, laws and opportunities within the country through the provision of professional legal services. Get in touch with Craig at [email protected].