Argentina is on track to become one of the biggest economic powerhouses in Latin America (2nd largest GDP Per Capita) in the emerging region. With its large educated population – 43 million people with approximately 60% of them under the age of 35 – combined with a diverse geographical landscape, Argentina is positioned well to lead the renewable energy sector in Latin America. Argentina has always been perfectly suited for renewable energy technologies, so why are the opportunities more viable now as opposed to 5 years ago? We explain how this came to be in this article.
Investment Opportunity – Renewable Energy Policy in Argentina
Argentina has recently issued new laws (Law Number 27,191, Article 5) that establish the requirement that by 2025, Argentinian renewable energies must account for 20% of national electric energy consumption. Argentina has begun renewable energy auctions and is looking abroad for foreign investment.
This change in public policy goes hand-in-hand with measures by the government to integrate the country into the global world that we live in. Some of these economic measures include the lifting of foreign-exchange controls, elimination of import tariffs, increased number of import licenses and the creation of the Argentinian Simplified Shares Company (S.A.S Sociedad de Acciones), a new type of legal structure which is less complex, and quicker to form. All of these positive governmental initiatives make Argentina an attractive location to invest in; a refreshing change from years of conservative foreign policies.
The Argentinian government is offering a variety of incentives in order to ensure that Argentina remains attractive for both international and local investors and stays competitive in the renewable energy sector. Some of these incentives include:
- Accelerated depreciation
- Early recovery of VAT
- Relief from minimum notional income tax, import duties, and other related taxes
Argentina has experienced great support as it moves away from traditional sources of energy to renewable energy. In fact, the World Bank Board of Directors has approved a USD$480 million guarantee to promote private investment in the sector.
“The support of the World Bank is facilitating progress in our country to achieve in a few months what was not done for a decade in renewable energy, contributing to our objective of guaranteeing our energy security and reducing climate change impacts”, said Juan José Aranguren, Minister of Energy and Mines of Argentina.
Attractive Renewable Energy Sectors in Argentina
It comes as no surprise that eventually Argentina would look to the renewable energy as a growth sector which has the potential to strongly contributing the economy. Many people may overlook the fact that Argentina has such a large and diverse landscape, a perfect match for many types of renewable energy. The world famous Patagonia has abundant and unexploited wind resources, the large north-western region enjoys clear skies for most of the year, great for solar energy, and there are plenty of opportunities for hydro projects. It should be noted that the renewable energy is not only for large multinational corporates; the government is looking for investment for small-scale projects.
Successful Energy Bidding Process
2015 and 2016 saw great success in the renewable energy bidding process. A transparent and efficient bidding system was viewed as highly attractive by the international community and was a great contributor to the amount of interest from foreigners. An important part of any bidding process is listening to the investors and understanding their needs. Argentina has implemented policies that allow this to happen and with assistance from the Argentinian Investment and Trade Promotion Agency, offers are plentiful, highlighting investor confidence in Argentina.
This effective bidding format is expected to continue, further increasing investor confidence in Argentina. As expected, this confidence is generating investor interest in Argentina as a whole, not only in the renewable energy sectors – infrastructure and agriculture have fast become popular investment sectors. Foreign individuals and companies are beginning to see Argentina as an attractive destination with a spike in Argentinian company formations.
Ease of Investment – A Welcomed Change
Another example of the current governments push to re-open the country to the world comes in the form of the Argentinian Investment and Trade Promotion Agency. This independent organisation was created in 2016 by President Mauricio Macro with the aim to promote and facilitate investment internationally.
All of these government initiatives demonstrate the countries desire to re-enter the international arena. Investors are excited at the broad business opportunities now available in Argentina.
The foundation of any foreign investment in Argentina begins with a partnership with a local company who have experience in the facilitation of investment in Argentina. This comes in the form of market entry, company formation and accounting and financial services. A strategic collaboration with a local professional service provider can ensure a successful entry into Argentina.
If you require more information on doing business in Argentina, reach out to Oliver (here), Country Coordinator of Biz Latin Hub Argentina. If you want to learn more about doing business in Latin America, check out this video.