Argentina's Foreign Investment Law
Price stability and the return of investor confidence in 1996
have created a climate favorable to capital flows into Argentina.
In addition, foreign investors are not required to register in
Argentina, and the government does not report foreign investment
data systematically. According to United Nations data, $3.9 billion
in foreign direct investment was made in Argentina in 1995--more
than three times that in 1994. U.S. direct investment in Argentina
is concentrated in telecommunications, banking, electric energy
generation, gas and petroleum production, food processing and
motor vehicle manufacturing.
The U.S. and Argentina have an Overseas Private Investment Corporation
agreement and an active EXIMBANK program. Argentina is one of
the largest portfolios for both agencies.
The government is moving forward in the privatization of the National
Airport System made up by 60 airports. U.S. consulting firms prepared
the pre-feasibility study with World Bank financing. The regulatory
framework has been approved by the Senate. Once the financial
consultant is selected, the bid should be announced in 180 days,
or first quarter of 1997.
Under the U.S.-Argentina bilateral investment treaty, U.S. investors
enjoy national treatment in all sectors except shipbuilding, fishing,
insurance, nuclear power generation, and uranium production. The
treaty allows for international arbitration of investment disputes.
Foreign investors need not obtain permission to invest, and may
wholly own a local company. Investment in shares on the local
stock exchange requires no government approval. Argentina has
no restrictions on movements of capital or repatriation of funds.
Customs procedures, however, are expensive and time consuming.
Corruption is getting increasing attention in the media as an
issue in Argentina. The government affirms that corruption cases
decreased dramatically following privatization of most state enterprises
between 1989 and 1996. Private-sector corrupt practices are still
unacceptably common in Argentina. A recent survey by Transparency
International, and studies by other business and academic groups,
have contributed to more open debate of corruption and fraud in
Argentina. Argentina has regulations against bribery of government
officials,but enforcenment is uneven. U.S. business has identified
public and private-sector corruption in Argentina as obstacles
to trade and investment. Procurement, regulatory systems, and
health care administration are problem areas.
Argentina has regulations against bribery of government officials,
but enforcement is uneven. U.S. business has identified public
and private-sector corruption in Argentina as obstacles to trade
and investment. Procurement, regulatory systems, and health care
administration are problem areas.
FORECAST THROUGH 1997
President Menem's reelection in 1995 renewed his mandate to continue
economic reform through 1999 and to retain monetary convertibility
with the Argentine peso at par value with the U.S. dollar. Given
the success of convertibility in providing stability and predictability
for growth, the large share of dollar-denominated deposits and
the country's impressive export growth, a devaluation of the Argentine
peso is quite unlikely.
Legislation to be considered in 1996 to deregulate Argentina's
labor union-managed health care system to permit employees free
choice of health care plans could provide attractive new investment
opportunities. Full deregulation of the telecommunications sector,
which could happen as early as November 1997, would also broaden
opportunities for U.S. firms.
Economic growth in Argentina--projected to be about 2 percent
in 1996--will be driven by lower interest rates, continued low
inflation, growth in productivity and the return of foreign capital.
Argentina will likely register a second consecutive annual trade
surplus in 1996--perhaps larger than the $1 billion trade surplus
of 1995. Chile's association with MERCOSUR will generate new opportunities
for Argentine exporters. Many Argentine agribusinesses are well
positioned to benefit from improvements in productivity and world
prices. On balance, Argentina is still one of the brightest stars
among the big emerging markets.
OPENNESS TO FOREIGN INVESTMENT Foreign direct investment is an
essential element of Argentina's economic growth. Argentina's
climate for foreign investment is among the most favorable in
Latin America. The administration of President Carlos Menem has
encouraged foreign investment through national treatment under
a free foreign exchange and capital movement regime without wage
or price controls. Foreign investors, including many U.S. corporations,
operate in major economic sectors.
Decree 1853, of September 8, 1993, governs foreign investment
in Argentina. Foreign companies may invest in Argentina without
registration or prior government approval on the same terms as
investors domiciled in Argentina. A U.S.-Argentina agreement for
reciprocal promotion and protection of investments entered into
force in October 1994.
Investors are free to enter Argentina via the most convenient
vehicle: merger, acquisition, greenfield investment or joint venture.
Foreign firm