Despite of the adverse results that rank Argentina under the Latin American average in terms of ease of doing business according to the World Bank’s Doing Business indicator (coming in at number 157 out of 189 ranked economies), the Argentinian economy is growing and becoming increasingly attractive to foreign investors.
The new Argentinian government leaded by Mauricio Macri has been implementing new policies and a statistical overhaul, and new growth figures are now being revealed. The Argentinian economy grew 2.1% in 2015, buoyed by a record soy harvest, boosting production in the country’s strong agricultural sector. There has also been good growth in the construction and services sectors.
The following are some key things to consider before doing business in Argentina:
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Doing Business in Argentina – Environment for FDI
Argentina has experienced low levels of foreign direct investment over the last decade, and for fifteen years the country was isolated from the world’s capital markets. The new government has now removed currency controls and reached a deal relating to the countries holdouts, allowing Argentina’s return to international capital markets.
This has brought Argentina a step closer to resolving the decade-long dispute with the country’s creditors. At the end of the first quarter of 2016 Congress approved the deal with the holdouts and the US Court of Appeals upheld a ruling to lift the injunction that had prevented the country from paying its creditors. The government is to sell US$15bn in bonds to help pay the holdouts.
It remains strongly advisable for foreign companies looking to start a company in Argentina to gain prior knowledge of the market and to engage a local expert for help.
Setting up a business
With a total of 14 procedures and 26 days needed to set up a company in Argentina, setting up a business requires good advice and strong local representative. The cost of setting up a business in Argentina has dropped from 15.1% of income per capita to 9.7% in 2016.
Dealing with construction permits in Argentina is particularly time consuming, and the country ranks 173 on the ease of doing business scale in this respect. There are 21 necessary procedures to gain all the right permits and the process takes one year.
Paying taxes in Argentina is another time consuming matter, and the country rates number 170 out of 189 in this respect. Companies on average need to make 9 tax payments a year and spend 405 hours filing tax returns, paying taxes up to 137.4% of profits. Due to the complexities of the Argentinian tax system, some companies choose to let a 3rd party handle their financial reporting.
Argentina stands at number 85 out of 189 in terms of ease of obtaining electricity. Registering for electricity requires 6 procedures, 92 days and 24.9% of income per capita. The agency that businesses must deal with is called EDESUR.
Registering property in Argentina requires 7 procedures, 51 days, and costs 6.6% of the property value. Argentina ranks 116 out of 189 economies.
Argentina ranks 79 out of 189 in terms of access to credit. There are four complex processes to navigate and the cost of getting credit can be high.
Contract enforcement in Argentina takes 590 days and costs 22.5% of the value of the claim. Globally Argentina ranks 38 out of 189 economies.
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