Guidance

Overseas Business Risk: Argentina

Updated 15 February 2021

1. Political and economic

Argentina is the largest country in South America after Brazil, stretching from north to south, a distance equivalent to that between London and Baghdad. It is rich in natural resources and has a highly literate population of 45 million, an export-oriented agricultural sector, and a diversified industrial base.

Democracy was restored to Argentina in 1983, following a 1976 military coup. The current President is Alberto Fernández , who was elected in October 2019 with 48.1% of the vote for a 4-year term in office. This October, his party will face mid-term congressional elections. The Argentine constitution allows two consecutive presidential terms, so President Fernández could potentially run for re-election in 2023.

The economy contracted by 2.6% in 2018; 2.1% in 2019; and 10.4% in 2020, according to official and IMF statistics. Real GDP will not return to its pre-decline levels until 2023. Although growth in 2021 will be complicated by continued macroeconomic instability and the removal of stimulus measures to normalise fiscal spending, increased economic activity will result following the recovery of consumption and output in the manufacturing, mining, fuels and construction sectors. Consensus forecasts (an average of a range of independent forecasts) estimate that overall growth for the year will lie in the 4.5-5.5% range.

Argentina recently renegotiated its USD 65 billion foreign debt with private creditors and is now in the process of agreeing a new programme with the IMF to repay a USD 44 billion loan granted under a Stand-By Arrangement in 2018. The programme will seek to enhance macroeconomic stability and support strong, inclusive growth.

The World Bank ranked Argentina 126 out of 190 countries for ease of doing business in 2020.

Read the World Bank’s more in-depth publication and guidance for business: Doing Business Argentina.

1.1 Import licensing

A comprehensive import monitoring system (SIMI) is used to record all definitive imports of goods. Non-automatic import licenses are required for around 1,400 tariff lines (about 10-15% of volumes), mostly including toys, threads and textiles, motorcycles, tyres, paper, metallurgical products, chemical products, optics instruments and equipment, photographs or cinematography and medical-surgical equipment.

For all other imports for consumption of goods under the tariff headings of the Mercosur common market, an automatic advance import license is required.

Many importers say that the approval process for the non-automatic import licenses is cumbersome, and involves frequent delays.

In January 2021, Argentina also introduced a temporary limitation on the use of the official foreign exchange market for goods considered “luxury items”, a category that includes vehicles of over USD 35,000 or whiskies and gins of over USD 50 per litre of FOB value as well as other items regardless of their value, such as tonic water. This means importers will need to use the unofficial exchange rate or wait 1 year to access the official rate.

The recession, devaluation and the above-mentioned import control measures have reduced Argentine imports to 11% of GDP, making Argentina one of the most closed economies in the world.

Exchange rate and monetary policy

The policy of the Central Bank (CB) is to maintain a managed flotation regime and control inflation. The CB will keep a positive annual effective policy rate to manage rising inflationary pressures in 2021. Inflation is expected to rise during the year, as the government allows some regulated prices to increase, and as a result of excess money supply (given that part of the deficit will be financed with new money) and pass-through from exchange rate depreciation.

The CB has used exchange controls, interest-rate rises, and an acceleration in the pace of managed depreciation to avoid a large devaluation. Foreign reserve levels are low, but a new deal with the IMF should provide finance and helps restore confidence in the currency.

1.2 UK and Argentina

Diplomatic relations between both countries were restored in 1990 after an 8-year gap following the Falklands conflict of 1982. In the 1990’s, South Atlantic issues were discussed with the Argentine Government under a “sovereignty umbrella” arrangement, which allowed the UK and Argentina to protect their respective sovereignty positions while seeking practical cooperation on matters of mutual interest.

The UK operates a regime of export controls for certain products, including those relating to defence and security. Further information on those export restrictions can be obtained from the Department for Business and Trade (DBT).

From 2004 to 2015, the Argentine Government adopted an increasingly confrontational approach on Falklands issues. This made wider bilateral relations more difficult but in most instances did not impact significantly on business. The main exceptions to this are in the hydrocarbons, fisheries and shipping sectors where Argentine domestic legislation and other restrictive measures were introduced aimed at preventing international companies from operating in the Islands or their surrounding waters without Argentine Government permission. Many of these measures remain in place.

In 2015, the previous Argentine Government initiated criminal action in a domestic court, including an asset seizure order against international oil exploration companies operating in Falklands waters. The British Government immediately protested this development and have made it clear that Argentine domestic legislation does not apply to the Falkland Islands or its surrounding maritime areas. Whilst neither the case nor seizure order has progressed, they remain extant. British companies wishing to engage in the hydrocarbons sector are advised to seek local legal advice before doing so. There have been no substantive protests against British business interests since the 30th anniversary of the conflict in 2012. PAE, a BP controlled company, and Shell have large onshore operations and BP, Shell and Tullow are running offshore exploration in Argentine waters.

The UK has no doubt about its sovereignty over the Falkland Islands. The British Government supports the Falkland Islanders’ right of self-determination and will not discuss sovereignty unless and until they so wish.

The UK continues to look for areas of cooperation for the benefit of all parties. Despite our differences, the UK and Argentina have undertaken a number of initiatives in recent years, many of which either remain active or are temporarily on hold due to COVID-19-related restrictions. These include:

• two-way trade missions, including a 90-strong Argentina trade delegation to the UK in May 2017 and again in 2018
• bilateral collaboration on a range of programmes, covering such themes as anti-corruption and transparency; open government; media freedom; and, most recently, the response to COVID-19
• co-chairmanship of the Equal Rights Coalition (a group of 42 countries dedicated to protecting and promoting LGBT+ rights)
• increased and ongoing scientific interaction, especially tackling global challenges including preventing pandemics (a multi-million pound joint programme on antimicrobial resistance); climate and biodiversity; and diversification of energy

While disagreements over Falkland Islands issues can make the headlines and give the impression that they affect all aspects of the UK/Argentina bilateral relationship, this is not the case. Argentina and the UK see eye-to-eye on a number of international issues, from climate change to gender and diversity. And 120 UK companies currently operate permanent subsidiaries in the market and a similar number operate through independent agents and distributors.

1.3 Foreign debt

Argentina recently took steps to bring its public debt under control by restructuring its foreign currency debt with private creditors in 2020.

The deal provided some debt relief and improved Argentina’s repayment profile. However, amid still high country risk indicators, for the time being Argentina has had to finance its debt-service commitments and debt rollover with CB reserves and debt issuance in local capital markets.

The next steps to normalise Argentina’s public debt include negotiating a new lending arrangement with the IMF, to repay the US$44 billion loan granted under a previous programme, and renegotiating the conditions of its outstanding debt with the Paris Club group of creditors.

2. Business and Human Rights

Since the restoration of democracy in 1983, Argentina has taken a principled position in the protection and promotion of domestic human rights.

Whilst Argentina has made generally good progress in adopting international human rights standards, Human Rights organisations have identified several areas of ongoing concern including protection of Indigenous Rights, judicial independence, police abuse, prison conditions and women’s rights.

Due to ongoing economic difficulties, exacerbated by the COVID-19 pandemic and associated long-term lockdown, poverty and unemployment indices have risen. Segments of Argentina’s population continue to suffer from social exclusion and an inability to fully enjoy their economic, social and cultural rights.

3. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In 2020 Argentina ranked 78th of 180 countries in Transparency International’s corruption perception index (CPI). It is behind Uruguay and Chile, while ahead of Colombia, Brazil and Mexico.

Although the Argentine legal system can be lengthy, costly and cumbersome, Argentine courts have investigated a number of public officials on corruption charges and have imposed some prison sentences as well as fines. The Argentine press has also investigated corruption allegations and reported on its findings in many cases generating the public condemnation of public figures and officials even before the courts have concluded on the cases.

4. Terrorism threat

For information on terrorism threats, please consult the Terrorism section of our FCDO travel advice for Argentina.

5. Protective security/ organised crime

Organised crime presents no direct threat to UK business in Argentina.

For more information, please consult our FCDO travel advice for Argentina.

6. Intellectual Property

Argentina faces a serious problem with patent and copyright protection. Starting in 2016, the US Trade Representative has placed Argentina on a priority watch list alongside 10 other countries.

In its 2018 Special 301 Report on the Adequacy and Effectiveness of US Trade Partners’ Protection and Enforcement of IP Rights, Argentina is reported to be making progress in IP protection and enforcement and praised the new fast track patent approval process put in force by INPI, the National Industrial Protection Institute.

The 2020 International Property Rights Index prepared by the Property Rights Alliance, a US based think-tank, positions Argentina 70 out of 129 in the world, making slow but steady progress since 2016.

7. Contact

Contact the DBT Team in Argentina for more information and advice on opportunities for Doing Business in Argentina.