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Country Profile — ARGENTINA

PBN Staff

02/05/2001

Argentine Republic
Location: Southern South America, bordering the South Atlantic
Ocean, between Chile and Uruguay.
Geographic Area: 2.8 million sq. km (1.1 million sq. mi.), about the
size of the U.S. east of the Mississippi River, second-largest country in South
America.
Climate: Varied, predominantly temperate with extremes ranging from subtropical
in the north to arid/sub Antarctic in far south. Located in the southern hemisphere,
Argentina’s seasons are the opposite of the north. Summer occurs between January
and March.
Major Cities: Buenos Aires (capital), Cordoba, Rosario, Mar del Plata,
Mendoza.
Population: 37 million (July 2000).
Ethnic Groups: European (97%), mostly of Spanish and Italian descent,
mestizo, Amerindian or other nonwhite groups.
Languages: Spanish (official), English, Italian, German, French.
Time Zone: Eastern Standard Time + 2 hours.
Workweek: Monday to Friday, 9 a.m. to 6 p.m., with a one-hour lunch break.
Business lunches generally extend from 1:00 to 3:00. Business dinners begin
at 9:00 or 10:00 p.m. Business breakfasts are not common. Many businesses are
closed during the summer vacation month of January.
Type of Government: Constitutional federal republic
Head of State: President Fernando de la Rua (since December 1999).
Currency: 1 peso ($) = 100 centavos.
Exchange Rate: Peso is pegged to the US dollar at an exchange rate of
1 peso = $1US.

Current Economic and Political Conditions:
South America’s second largest economy has been buffeted by austerity measures
introduced by the new government of Fernando de la Rua to improve Argentina’s
credit risk profile and to lower borrowing costs. These moves were intended
to encourage investments and consumption after two years of economic stagnation.
But some Argentine economists believe the government “may have overreacted and
miscalculated the impact of its tax increases and wage cuts in a slowing economy
dependent on consumer demand for recovery.” The economy declined by 3.2 percent
in 1999, and by a fraction of a percent in 2000. These conditions have put a
damper on investor confidence, just as Argentina goes to the financial markets
for $23 billion in funding in 2001. Open speculation of default or currency
devaluation has raised concern in neighboring countries that the Argentine crisis
could disrupt their own tenuous recoveries. In December 2000, the IMF agreed
to extend a $40 billion rescue package, dependent on Argentina initiating a
series of fiscal reforms. These reforms are strongly resisted by opposition
Peronistas, forcing de la Rua to resort to emergency decrees to implement the
reforms. But the IMF package, plus the half point reduction in the U.S. Fed
Funds rate in early January, has eased concern. Every half-point drop in U.S.
interest rates translates into a $350 million annual savings for Argentina government
bond funding. Government officials assert that the interest rate reduction will
result in a 2.5 percent growth in 2001, and sustained 4-5 percent rates in the
following years.

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Economic Data (1999, except where noted)
Total GDP: Purchasing power parity = $367 billion.
GDP Growth: -3.2 percent
Per Capita GDP: $US 10,000 purchasing power parity.
Inflation Rate: -2%
Trade Balance: -$2 billion deficit.
Trade with RI: Argentina is Rhode Island’s 24^th largest trading
partner, with $5.2 million in exports in 1998.
Exports: $23 billion; edible oils, cereals, feed, motor vehicles, crude
petroleum, steel manufactures. Export trading partners: Brazil (24%), EU (21%),
US (11%).
Imports: $25 billion; machinery and equipment, motor vehicles and parts,
chemicals, metal manufactures, telecommunications equipment, plastics. Import
trading partners: EU (28%), US (22%), Brazil (21%).
Principal U.S. Exports to Argentina: Computer parts and accessories,
auto parts, parts/accessories for oil and gas equipment, satellite communications
equipment, inkjet printers, aircraft, radio transmitters, and landing gear.

Principal U.S. Imports from Argentina: Raw hides and leather, mineral
fuels and oils, fruit juices, animal and vegetable products, aluminum alloys.

Best Prospects for Exports: Airport ground support equipment, travel
and tourism services, power generation equipment, mining industry equipment,
telecommunications equipment and services, computers and peripherals, plastics
materials and resins, oil and gas field machinery, medical equipment, water
equipment, building products, food processing and packaging equipment.

Tariffs, Trade, Taxes, Trademarks
In the 1990s, the Government of Argentina eliminated most non-tariff barriers
and specific duties, and made major progress in reducing traditional barriers
(such as tariffs and import licensing). Trade was opened to all potential exporters
and importers, making Argentina one of the most open economies in the world.
However, some new restrictions are starting to be introduced, specifically in
the area of customs valuations. There are generally no preliminary requirements
for imports, and document requirements have been simplified substantially. In
May 1999, Argentine trade authorities reduced the statistics tax, imposed on
almost all imports from countries outside Mercosur. Despite the generally favorable
environment for imports, Argentine authorities occasionally create protectionist
barriers. Since 1997, the government has imposed specific duties on footwear
as part of a safeguard investigation initiated at the request of domestic producers.
Specific duties have also been applied to the textile industry and to toys.
In 1999, the Argentine Government implemented a new import license regulating
1,276 products.

Tariffs: Argentina and its MERCOSUR partners established the common external
tariff (CET) that ranges from zero to 30 percent, averaging 14 percent. The
CET gradually eliminated all non-tariff restrictions and other limitations to
trade among the member countries, reaching zero duty and removing all tariff
restrictions for approximately 85 percent of traded goods.

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Taxes: Taxes on imports include the 21 percent Value Added Tax (VAT),
the 9-10 percent advanced VAT on all goods imported for resale, and a 3 percent
anticipated profits tax on all retail goods, except for goods imported directly
by users. Foreign and Argentine firms face the same tax liabilities. In general,
taxes are assessed on consumption, imports, assets, property and payroll (social
security and related benefits).

Foreign Investment: Argentina’s climate for foreign investment is among
the most favorable in Latin America. Foreign companies may invest in Argentina
without registration or prior government approval on the same terms as investors
domiciled in Argentina. Foreign investors may wholly own a local company.

Free Trade Zones: The current Free Trade Zones are La Plata, San Luis,
Cordoba FTZ, Tucuman, and Santa Fe. Imports brought into the zones enter free
of taxes and duties.

Trade Finance and Payment Methods: Commercial banks offer loans to creditworthy
importers, although interest rates are still high by U.S. standards. U.S. exporters
should take the high cost of money into account when negotiating payment methods
with Argentine importers. The U.S. Export-Import Bank (ExImBank) represents
public and private sectors, and ExImBank guarantees many trade facilities from
U.S. commercial banks. ExImBank finances all types of U.S. goods and services
as long as they are not military-related and contain at least 50 percent U.S.
content. In all transactions there must be a reasonable assurance of repayment.

Marketing and Selling Factors: U.S. companies intending to export to
Argentina should consider economic, demographic, as well as cultural characteristics
that differentiate it from other Latin American countries. The population is
largely of European descent and continues to have strong ethnic, cultural, as
well as business ties with Europe. Consumer preferences tend to resemble more
those of Europeans than those of other Latin America nationals.

Eighty percent of the Argentine population is concentrated in urban areas, with
over 35% living in Buenos Aires and its suburbs, and almost 10% in three cities
Cordoba, Rosario and Mendoza and their suburbs.

Distribution and sales channels: Channel selection should be based on
the nature of the product and the company’s knowledge of the Argentine market.
Firms new to this market find it more effective to sell through a distributor,
given several advantages: 1) distributors can provide strategic support for
brand positioning through advertising and promotion, and 2) they understand
the local culture and can assist with after-sales services. Success requires
taking the time to develop a close personal relationship with your representative,
agent or distributor.

Trade promotion and advertising: Visits, trade shows and missions are
an increasingly important component of the marketing mix. Advertising in the
print media is the most widely used method, although television and radio advertising
are highly effective and most generally aimed at the Buenos Aires market. Many
daily newspapers are published in greater Buenos Aires. Industry-focused publications
are an effective mechanism for advertising.

Product Labeling and Marking: All packaged products sold in Argentina
should be in Spanish, except foreign words/phrases commonly used in trade. Imported
products may keep the original label of country/language of origin but should
have a sticker/label attached to the package in Spanish.

Electronic Commerce: E-commerce is still limited in Argentina.

Patents/Trademarks/Copyrights: Argentina adheres to most treaties and
international agreements on intellectual property. Argentina is a member of
the World Intellectual Property Organization (WIPO) and the World Trade Organization
(WTO).

Patents: Patent law is the weakest element in Argentine intellectual
property rights, and extension of adequate patent protection to pharmaceuticals
has been a highly contentious bilateral issue. The flawed patent regime hinders
Argentina’s ability to compete for new investments.

Copyrights: Argentina’s copyright law specifically makes software policy
a criminal offense in accordance with the Bern Convention. Nonetheless, 65 percent
of all software used in Argentina is pirated.

Trademarks: U.S. companies have reported continuing problems with trademark
enforcement, adversely affected by the inability to seek criminal prosecution
and monetary damages in counterfeit cases.

Key Contacts
Bryant College, John H. Chafee Center for International Business

RI Export Assistance Center, Raymond W. Fogarty, Director
World Trade Center, Edward Barr, Manager
RI State Directorate, Maureen Mezei, International Trade Director

Contact: Mary-Ruth Foley
Telephone: (401) 232-6566
Fax: (401) 232-6416
E-mail: mrfoley@itdn.net
Web site: http://www.rieac.org

U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: kyatsuha@mail.doc.gov

U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: (401) 528-4585
E-Mail: marilyn.bogue@sba.gov

U.S. Embassy in Argentina
Avenida Colombia 4300
1425 Buenos Aires, Argentina
Telephone: 54-11-4777-4533
Fax: 54-11-4777-0197

Department of Commerce, U.S. Embassy, Buenos Aires
Telephone: 54-11 4777-4533/4534, ext.2226/2227
Fax: 54-11 4777-0673
E-Mail: Buenos.Aires.Office.Box@mail.doc.gov

Embassy of Argentina
1600 New Hampshire Avenue, NW
Washington DC 20009
Telephone: (202) 238-6400
Fax: (202) 332-3171

U.S. Department of Commerce
John Andersen/MAC/ROOM 3025
14th & Constitution Ave., N.W.
Washington, D.C. 20230
Telephone: 202-482-0477
Fax: 202-482-4157