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Doing business in
Argentina
Capital: City of Buenos Aires
Area: 2.8 million km2
Population: 40.6 million
Official language: Spanish
Currency: Peso ($)
Literacy rate: 98%
Unemployment rate: 7.2% (Q3
2011)
Foreign Direct Investment
inflows: US$ 6.3 billion (2010)
Argentina
Argentina is the world’s eighth
largest country. With 40.6 million
inhabitants, Argentina is not densely
populated; the vast majority of its
population is located in the
metropolitan area of Buenos Aires
(13 million).
Argentina is particularly rich in
terms of natural resources, and,
despite political and economic
cycles, it has managed to grow its
GDP at a rate of more than 7% for
the past 8 years. Estimated GDP
real growth rate stands at 8% for
2011, while unemployment was
estimated at 7.2% for the same
period.
The country is currently under a high
inflation period, with pricing and
salaries being renegotiated for short
periods of time. According to
PriceStats, the inflation rate in the
country currently stands at around
25%. Official inflation figures
published by the government show
a substantially lower inflation rate,
with economists worrying for the
political use of official statistics and
preferring the use of private
calculations.
The widespread availability of
qualified human resources (highest
ratio of researchers in Latin
America), the abundance of natural
resources and extremely fertile
lands have benefited the country’s
growth.
Argentina has a widely diversified
economy, with the different regional
climates within the country
enhancing the diversification. The
country also has a very dynamic
software and IT services industry
(18% growth in sales and 27%
growth in exports per year since
2003), with professional services
mostly concentrated in Buenos
Aires.
Doing business in Argentina
Argentina’s political environment
and its effects on the economy is
perhaps one of the most important
issues to consider when doing
business there. In recent months,
the government has introduced new
rules increasing protectionism and
limiting imports. Businesses
depending on services or goods
provided by other countries should
pay special attention to these
changes.
Culturally, Buenos Aires is the most
European city of Latin America,
which means no significant cultural
differences will be found when
doing business in the main
metropolitan areas. As in the whole
of Latin America, building strong
relationships is highly
recommended, as business has a
strong personal feel. Cultural
differences in doing business are
more likely to be found in smaller
cities, where local cultures tend to
be strong. English is taught in most
schools, with English language
knowledge standing above the
average of Latin America’s countries
and among the highest in the
developing world.
Transport infrastructure is not as
well distributed as it should be for a
country of such vast proportions.
Business activities requiring
particular logistics for its
development should look at
availability of required infrastructure
and possible added costs in detail.
Although Argentina has a double
taxation agreement with the UK, the
country has a wide range of
different taxes and withholdings
regulations varying between
sectors. This makes acquiring
specialised tax advice before
establishing in the country highly
recommended.
Media sector in Argentina
Buenos Aires City is inside the Top 5
of the world’s cities with the most
film shootings. Buenos Aires offers
a wide variety of shooting locations,
architecture styles and historic
buildings, combined with the
modernity and infrastructure of any
cosmopolitan city. In Buenos Aires
almost any urban location can be
set up, while high mountains,
forests or deserts can be found
within the proximity of the city.
In advertising, Argentina is ranked
fourth in the 2011 Gunn Report of
most awarded countries, behind the
USA and UK, and has traditionally
competed with Brazil to enter the
podium. Argentina has a mature
advertising market, built to the
standards of advertising markets
around the developed world. It is
considered one of the most
attractive countries to install and
develop "creative centres" to
provide services for other markets,
mainly for Latin America, but also
for global campaigns.
The majority of Media sector activity
is located in and around Buenos
Aires. Argentina is the world’s fourth
largest exporter of original television
productions and has a Pole (District)
for audio-visual productions located
in Buenos Aires, where nearly all
production houses and advertising
agencies are located.
Rules and regulations in this sector
are particularly detailed;
misunderstanding of the tax
benefits and legal obligations could
be very expensive.
Businesses located in Buenos Aires’
Pole District receive specific tax
benefits such as exemption in Gross
Income Tax (3 to 4% of revenues),
Stamp tax (0,8% of contracts
amounts) and Land Contribution
Tax. There are also tax benefits to
working inside Buenos Aires City but
outside the Pole that provide
reduction in Gross Income Tax.
commercials must be produced in
the country. In the case of a
coproduction, no less than 60%
shall be produced in Argentina.
Smaller regional poles with tax
incentives are located in Córdoba,
Mendoza, Rosario, Santa Fe, Tandil,
Mar del Plata and Gualeguachu. A
tax benefit for software and
interactive marketing development
for the whole country is also in place
(reductions of 70% in social security
taxes and 60% in Corporate Tax).
Further recommendations
It is important to consider that some
protectionist laws are in place. For
example, for any company
constituted in Argentina, the
majority of its directors must be
resident in Argentina. For
broadcasting agencies (TV or Radio)
to be considered as resident in
Argentina they shall have at least
60% of their productions made in
the country. If they do no fulfil this
requirement, advertising made
through this media will not qualify
for income tax deductible expenses.
If broadcasting agencies are located
outside Argentina, but more than
60% of their productions have been
produced in the country, they can
be considered as resident (only for
advertising tax deductible
purposes).
Broadcasting agencies shall be
owned by individuals resident in
Argentina (with a minimum of five
years of residence) or by
companies, legally constituted in
Argentina and with no juridical
corporate relation with any
broadcasting agencies of foreign
countries. The requirements shall
not be applicable to cases where,
according to international treaties to
which Argentina is a party, an
effective reciprocity is established in
audio-visual communication
services. Shareholders of
broadcasting companies of a
minimum of 70% of equity shall be
resident in Argentina and
Chambers and professional
associations of advertising
agencies, media buying agencies,
and production houses are well
regarded and highly organised in
the country. These associations are
able to provide information and
support throughout the start up
process.
The Media sector is a highly
competitive market in Argentina,
which makes exploring acquiring
part of the shares of a midsize and
well established company as an
entry strategy worth analysing. Cost
of acquisition plus due diligence in
these cases (considering companies
of less than 40 people) is usually
not significant to foreign investors,
being less expensive when
compared to the cost of starting up
overseas.
Contact Us
Kingston Smith LLP
Spain and Latin America Desk
Lead Partner: Paul Spindler
[email protected]
Projects Manager: Juliana Zárate
[email protected]
Tel. +44 (0)207 566 4000
www.kingstonsmith.co.uk
KS International has a local office in
Buenos Aires, which is specialised
in Media and Advertisement.
Views expressed in this article are those of the contributor. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material in this newsletter can be accepted by the LLP or any of its associated
concerns. Kingston Smith LLP is registered to carry out audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England & Wales. A member of KS International.