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What are the key issues I need to be aware of in doing business in Argentina?

Our company is looking to sign a contract to provide online services in Argentina.   I am getting feedback from our rep that their are signficant tax and legal issues that we need to aware of.  I will be working with both our tax and lawyers but was wondering if anyone had some "hands on" experiences for things even your lawyers and tax accountants don't tell you.

Answers

Topic Expert
International Representative
Title: International Expert
Company: Nair & Co.
(International Expert , Nair & Co.) |

Edward,

Please be aware of the following:

(1) While genuine contractors can be hired, be very careful not to hire employees as contractors since when if you later terminate them, you could be caught flat footed in an Argentine employment court since this country has the concept of "deemed employment" - I can give you more details once I have more information.

(2) Employment liabilities are onerous in Argentina and it is very important that you send out right from the beginning an employment agreement compliant with local laws.

(3) Setting up an Argentine company requires 2 shareholders and the delay arises in getting approval for the 2 foreign entities to be shareholders as opposed to actually setting up the Argentine company once the foreign shareholders have received regulatory approval to do so. The former can take considerable time as the relevant office was recently on strike and is now backlogged with applications.

(4) Getting money into an Argentine bank account to fund the local operations is not straightforward and will require the production of a signed intercompany agreement in order for the bank to credit the funds.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Outside of the tax and legal issues, I have found individuals in Argentina that are extremely intelligent and speak perfect English. If you are having problems in getting the business started due to these issues, you should find another partner to deal with in Argentina. In working in this environment, make sure your points are understood as things do sometimes get lost in translation. Ask multiple questions to make sure things are understood.

The movement of currency should be a concern also. With a leader taking a page out of the Hugo Chavez (Venezuela) "playbook," you should think about hedging the Argentinean Peso. The economy is heading for another potential downturn due to these policies. I am not sure there will be major currency devaluation, but the indicators are not good.

Topic Expert
Stephen Wares
Title: International Expansion Expert
Company: CCW Business Solutions
(International Expansion Expert, CCW Business Solutions) |

Edward - I spoke with a colleague of mine, Eduardo Pestarino in Argentina who provided the following comments for you:

"It is difficult to answer this broad question, without knowing specifics about the type of business and the role of the foreign company in the projected business, however while there are issues related to taxes and labor regulations that can be challenging to a foreign investo I would say that the main problems for foreign companies noted in the past couple of years are related to currency and import restrictions.

Due to a significant constraint in the ability to generate reserves, the government has created a very difficult process to get permission to import a wide range of goods. Furthermore, getting foreign currency is extremely difficult (not as bad as in Venezuela, but close) so repatriation of capital or even distribution of dividends is getting extremely hard…"

I hope these help but should you need any additional help please don't hesitate to contact me.

Thanks

Steve

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