“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.” – Arnaldo Hasenclever, International Business Director, Grant Thornton Argentina
Argentina has a great deal to offer international investors, with its multicultural, welcoming society, its richness in natural resources and considerable potential for infrastructure investment.
“For people from outside the country, Argentina is an incredibly attractive place to live and work,” explains Arnaldo. “They love the weather, the landscape, the meat and the people – our friendliness and the welcome they get.”
Argentina boasts a highly literate, well-educated workforce, with a strong cohort of professionals from various sectors including medicine, business, law, accounting, engineering, and architecture.
But the keys to success for foreign investors, Arnaldo adds, are likely to be flexibility and the willingness to take a long-term view of doing business in Argentina.
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, especially around taxation,” he says. “But for investors who are ready to commit for a longer period, the country offers considerable opportunities.”
Argentina is digitally capable, with high internet and smartphone penetration, as well as high levels of technological literacy among its working population. Some of the country’s infrastructure is in need of upgrade and renewal, although here there is significant opportunity for exporters of equipment and services for roads, ports, railroads, telecommunications, water and sanitation; and electric power.
Argentina's most important and fastest growing economic sectors are energy, agriculture, manufacturing, e-commerce, and telecommunications.
Arnaldo says that 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 here there are ongoing opportunities for foreign investors.
“We are the third largest producer of soya beans in the world, behind only the United States and Brazil,” Arnaldo explains. “A large proportion of these are sold to China.”
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, for example, he adds. Agtech 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 cost for labour, cost of electricity, office or warehouse space is low, while dealing with construction permits has been made easier by streamlining procedures in tandem with implementing an electronic platform for building permit applications.
The process of enforcing contracts, meanwhile, has been simplified by allowing electronic payment of court fees. But international businesses still face a number of bureaucratic hurdles, Arnaldo points out. The process of setting up a new entity was simpler and less time-consuming under previous regimes, although there are hopes among Argentina’s business community that the political class is starting to recognise the benefits of removing red tape and simplifying the tax system.
Access to finance is also very challenging at present, Arnaldo says, due to the high rate of inflation. Argentina has attractive double taxation treaties, bilateral investment agreements, and tax information exchange agreements with a number of 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. “If you are not already established in the country, this can add an extra complication,” Arnaldo says.
“After the parliamentary elections of November 2021 and a presidential election in 2023, it is hoped that these will see us make some progress to a more business-friendly climate,” he adds. “The long-term outlook may be more optimistic, depending on what happens in these elections.”
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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Selling into, supplying or setting up operations in Argentina can be a step into the unknown. At Grant Thornton, we have the experience to guide you. Our Argentina International Business Centre director can co-ordinate access to international teams, resources and global delivery, while also helping you forge valuable trading relationships in the Argentine market.