InvestBA’s Alejo Rodríguez Discusses Doing Business in Buenos Aires

At Biz Latin Hub, we had the opportunity to interview Alejo Rodríguez Cacio, General Director of investBA, who spoke about what makes Buenos Aires stand out as an investment destination, as well as about the business opportunities in the Argentinian capital. For anyone considering company incorporation in Argentina, his insights could be of great interest.

Before establishing investBA in 2017, Rodríguez served in a number of high profile roles in the public, private, and academic sectors. Those included running the Securities Department at Bank of America Argentina, working as chief economist for Unilever in Argentina, Uruguay, and Paraguay, and serving as an economic advisor to the Argentine Congress. He has also been a professor of MBA and taught master’s degrees in investment and wealth management at prestigious institutions such as Universidad Tortuato Di Tella, Universidad Austral, Universidad de Belgrano, and Universidad Argentina de la Empresa.

Since forming investBA, it has been named as one of the best investment and foreign trade promotion agencies in Latin America by the Financial Times and International Business Magazine, and has assisted more than 11,000 companies and investors around the world, as well as undertaking more than 30 foreign trade and investment missions.

What makes Buenos Aires stand out as an investment destination?

Among many favorable characteristics, probably the most outstanding is related to the excellent education, level of professionalism, and versatility of the “porteño“, as the people of Buenos Aires are commonly called. It is no coincidence that Buenos Aires leads several international rankings in terms of talent, innovation, and smart cities, such as the Global Entrepreneurship Monitor. Or that it has the best level of English in the region according to the EF Proficiency Index, something fundamental when thinking about the internationalization of companies. In addition, the city has seen the birth of 5 local unicorns such as Despegar, Globant, Auth0, OLX, and MercadoLibre, the most valuable company in Latin America in terms of market capitalization and which managed to rank among the 100 fastest growing companies worldwide in the last year.

Buenos Aires has been recognized by The Economist as the best city to live in Latin America, based on different metrics that include health, education, culture, safety, and infrastructure indicators. Undoubtedly, this is a determining factor when a company is analyzing the life balance it will offer its employees. This important factor, added to the fact that it has a time zone aligned with the United States and much of Western Europe, makes Buenos Aires function as a gateway to all of Latin America, being chosen by large international companies to establish their headquarters or regional hub.

With more than 40 universities, Buenos Aires is also a city with a solid academic and scientific ecosystem, and is the main destination in Latin America for international students from all over the world, making it a cosmopolitan, diverse city with the drive to grow and excel.

In terms of public policies for attracting investment, Buenos Aires offers different tax incentive schemes for companies in the creative industries, knowledge-based industries, hospitality, university residences, and real estate.

Economic Districts

Created more than a decade ago, the economic district policy offers tax exemptions to companies that locate their activities in the southern area of the city. Recently, the Buenos Aires government worked on a readjustment of these laws to promote the audiovisual, technology, design, and arts sectors. This is a series of changes and tax benefits for the development of investments in strategic sectors in the southern area of the city.

This policy allows the development and improvement of the dynamics of each of the neighborhoods where it is implemented. It generates better and new spaces. It favors commercial, infrastructure, transportation, and education growth. An example of this is the Technological District, in the neighborhood of Parque Patricios, where the city Government House is also located. We also have the Audiovisual and Arts District, and the Design District.

In certain cases, these regimes also contemplate incentives to real estate development for commercial, complementary or housing activities in the promoted areas.

Promotion Regime for the Hotel Sector

At the end of 2018, after recording a record growth in the number of international tourists, through investBA and the Ente de Turismo, the city launched a regime for the promotion of the hotel sector with the purpose of increasing the number of hotels and improving the quality of the existing ones.

Thus, investors building new hotels, remodeling or expanding existing establishments, and acquiring new equipment to be used in hotels may take a percentage of the investment made as a tax credit against local taxes. The percentage of the benefit increases based on certain criteria, depending on the size of the business, the location of the hotel, and whether it is a historically protected building.

Promotion Regime for Student Residences

In December 2020, as a result of an initiative of investBA and StudyBA, the city launched a scheme similar to the one mentioned above, this time aimed at the promotion of student residences. Although Buenos Aires is the Latin American city with the largest number of international students, it still does not have an adequate supply of student residences.

In order to increase the quantity and quality of student residences and at the same time reduce costs for students, the city of Buenos Aires launched a tax incentive scheme to promote the construction and remodeling of residences, as well as the conversion of offices, housing, or hotels for this purpose. The tax credit contemplates not only the rental of rooms, but also complementary activities such as gastronomy, recreation, sports, and co-working spaces, adapting to the realities and demands of the target population.

Finally, a relevant fact regarding the positioning of Buenos Aires as an investment destination has to do with the recognition it obtained as one of the 3 best cities in the world for its foreign direct investment (FDI) strategy in the 2021/22 edition of the Global Cities of the Future ranking of the Financial Times, one of the most prestigious global publications on economic and financial matters.

What is the biggest misconception that potential foreign investors have about investing in Buenos Aires?

On more than one occasion that we have met with foreign investors, especially in the case of people from countries with little commercial or business contact with Argentina, we have had to clarify that there are “two Buenos Aires”.

On the one hand, we have the Province of Buenos Aires, which has a productive matrix similar to that of the rest of the country, mostly oriented to agricultural and livestock production and its by-products, something for which Argentina has been historically known. Likewise, the capital of the Province of Buenos Aires is not the city of Buenos Aires, but the city of La Plata, which is approximately one hour away by car.

On the other hand, we have the city of Buenos Aires, which is the capital of the country and, although it is geographically located within the Province of Buenos Aires, it is an autonomous city with its own constitutional, political, and economic hierarchy. As mentioned above, the productive matrix of the city of Buenos Aires is very different from the “typical” production for which Argentina is known.

Like any large global city, the economy of the City of Buenos Aires is centered on services, where professional services, financial services, knowledge and talent-based services, trade, and tourism stand out. Thus, services represent around 70% of the city’s productive matrix and 95% of its exports.

What type of business are you most used to seeing foreign investors looking to establish in Argentina’s capital?

Due to the characteristics described above, Buenos Aires is an ideal business location for the establishment of regional hubs for the export of services and shared services, as well as companies related to the creative industries, knowledge-based industries, and IT companies, all of which require highly qualified human capital.

There are several reasons for this. First, human talent. Buenos Aires stands out for having a highly qualified, innovative, entrepreneurial, versatile human capital with an excellent level of English. An example of this is the result of the Global Talent Competitiveness Index ranking, prepared by Adecco, INSEAD, and Google, where Buenos Aires ranks as the first Latin American city due to its ability to generate, attract and retain talent, both local and international.

The city’s prestigious academic ecosystem also plays an extremely important role. In some sectors, such as software, the possibility of having a constant and growing flow of human capital with knowledge of programming, artificial intelligence, and big data plays a fundamental role. Added to this is an unparalleled cost offer, with a very competitive exchange rate and both national and city tax regimes that allow for lower labor and tax costs.

Furthermore, there is the Knowledge Economy Law, a nationwide tax promotion scheme for companies in the IT, innovation, biotechnology and nanotechnology sectors, among others. The package of benefits, which can be combined with the city’s regimes, includes a reduction in the income tax rate, a tax bonus for the payment of salaries, and exemption from tariffs on the export of services.

Real estate is also a booming sector in Buenos Aires. The aforementioned tax incentive schemes for business districts and the hotel sector, as well as the socio-economic characteristics of the city, have generated important construction and remodeling projects for offices, housing, and hotels, as well as the renovation of facades, infrastructure improvements, and investment in equipment and technology. As an example, more than 350 companies have already located in the Technological District, while the incentive scheme for the hotel sector, even in the face of a complex global scenario for the sector as a result of the pandemic, has accumulated more than 50 investment projects.

What are the biggest untapped investment opportunities available to investors in Buenos Aires?

In line with the previous answers, we consider that the combination of excellent local talent and very competitive prices generates a great opportunity for the establishment of software, technology and knowledge-based economy companies in general.

Also, due to the above mentioned characteristics, Buenos Aires is an excellent gateway for any international company looking to take its first steps in Latin America. Our city also has exceptional conditions for the location of regional shared-services hubs, from where IT, human resources, marketing and advertising, and legal services can be exported to the rest of the region.

The construction sector also presents a unique opportunity, since the exchange rate situation favors it. Buenos Aires today has a price in dollars per square meter that is unmatched by any other global megacity.

Also, based on the available regimes, it is possible to recover part of the investment through tax credits for the payment of local taxes. In particular, we believe that the housing sector for the young population, including student housing, presents a very encouraging potential, leveraging on the recent tax incentive regime for the promotion of student residences and complementary activities.

Finally, any investment-related to e-commerce and logistics behind this fast-growing sector has great potential. Recently, as a result of a joint initiative of investBA, the urban development and transportation areas of the city government, and companies of the logistics sector, the city of Buenos Aires modified its Urban Code to update it to the demands of the current times. In particular, new uses were enabled for “last mile” urban logistics, which is necessary to enable online purchases to be delivered quickly and at lower costs.

How has the COVID-19 pandemic affected investment in the city and what do you expect next, now that the health crisis is coming to an end?

Due to the effects of the Covid-19 pandemic and the mobility restrictions imposed by several governments to deal with it, 2020 saw a reduction in the number of investment projects compared to the previous year. However, such drop was not so significant, if we observe the Capex and the number of jobs generated with respect to 2019 values. This allows us to confirm that the city of Buenos Aires continues to be a reference in the region as a business location, even in times of global uncertainty such as those generated by the pandemic.

Some aspects that favored this result were the investment opportunities mentioned above, the characteristics of local talent, and a competitive exchange rate that favors foreign direct investment.

During the pandemic, taking into account the economic effects on several sectors, investBA, the Ministry of Economic Development and Production, and the Ministry of Treasury and Finance of the city, worked on different schemes to help and contain business and employment. This included the exemption of local taxes to sectors such as gastronomy and hotels, a moratorium program for the extension of terms and reduction of tax debt costs, and loans at subsidized rates for small businesses.

With a view to the eventual end of the pandemic, investment projects are expected to exceed the values of 2020, driven by the excellent characteristics of Buenos Aires already mentioned and by the various efforts being made by the Government of the city to promote employment, investment and productive development.

Thus, it is possible to think of a scheme that enhances those economic sectors that were favored in the last year, such as e-commerce, logistics, pharmaceuticals, IT, among others, and that accompanies the recovery of those other sectors that were more impacted by the global crisis.

Biz Latin Hub can help you do business in Buenos Aires

At Biz Latin Hub, our team of multilingual company formation experts has deep knowledge of the Argentinian market and is equipped to help you expand your commercial presence into Buenos Aires. With our complete portfolio of back office solutions, including commercial representation, legal, and accounting services, we can be your single point of corporate support to ensure the success of your business in Argentina, as well as in any of the other 17 countries in Latin America and the Caribbean where we have a presence.

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