The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
These statements highlight persistent barriers to further U.S. investment. Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy.
Executive Summary
Argentina presents investment and trade opportunities, particularly in agriculture, energy, health, infrastructure, information technology, and mining. However, economic uncertainty, interventionist policies, high inflation, and persistent economic stagnation have prevented the country from maximizing its potential.
The Government of Argentina identified its top economic priorities for 2022 as reaching an agreement with the IMF to renegotiate the 2018 Stand-By Arrangement, controlling inflation, and continuing the post-pandemic economic recovery. The government met some of these goals as Argentina finished 2022 with better-than-expected economic growth at 5.2 percent, but with high poverty (over 43 percent), high inflation at 95 percent (the highest rate in over 30 years), and mounting exchange rate pressure. On March 25, 2022, the IMF Executive Board approved an Extended Fund Facility (EFF) program for Argentina. The EFF contains quantitative targets for continued compliance with the program that include a reduction in the primary fiscal deficit, progress toward elimination of monetary financing of the deficit, and the accumulation of foreign reserves. Argentina has been able to meet the IMF program targets in the first four reviews despite its heterodox economic measures. However, meeting the targets has not helped to rebalance the economy or set it on a sustainable path. Macroeconomic imbalances persist, fueled by weak confidence, low policy credibility, high inflation, and uncertainty ahead of national elections in 2023.
In August 2022, in an effort to address the ongoing economic issues, President Fernandez combined the previous ministries of economy, productive development, and agriculture, along with the energy and mining secretariats, and relations with international financial institutions (IFIS) and bilateral and multilateral lenders into a more powerful Ministry of Economy. Former President of the Chamber of Deputies, Sergio Massa, assumed control of the expanded ministry.
Even as the pandemic receded and economic activity rebounded, the government cited increased poverty and high inflation as reasons to continue, and even expand, price controls, capital controls, and foreign trade controls. Agricultural and food exports such as beef, soy, and flour were frequent targets for government intervention. Beginning in May 2021, the government introduced bans and other limits on beef exports to address increasing domestic prices. The ongoing conflict in Ukraine disrupted some trade with Russia and higher natural gas prices negatively affected Argentina’s balance of payments due to the need to import natural gas for the austral winter. However, the conflict also opened new demand and higher prices for key Argentine agricultural exports.
The Argentine government offered preferential exchange rates to promote soy exports and eliminated export taxes for specific businesses and industries, including small and medium sized enterprises; auto and automotive parts exports over 2021 volumes; and information technology service exports from companies enrolled in the knowledge-based economy promotion regime. There were also investment promotion incentives in key export sectors such as agriculture, forestry, hydrocarbons, manufacturing, and mining.
The high cost of capital affected the level of investments in developing renewable energy projects, despite the potential for both wind and solar power. In an effort to expand production of oil and natural gas, the current administration provides benefits to the fossil fuel industry in an attempt to improve the cost-competitiveness of renewable energy technologies. The government has encouraged the use of biofuels and electric vehicles.
Both domestic and foreign companies frequently point to a high and unpredictable tax burden and rigid labor laws as obstacles to further investment in Argentina. In 2022, Argentina ranked 69 out of 132 countries evaluated in the Global Innovation Index, which is an indicator of a country’s ability to innovate, based on the premise that innovation is a driver of a nation’s economic growth and prosperity. In the latest Transparency International Corruption Perceptions Index (CPI), Argentina ranked 94 out of 180 countries in 2022, dropping 2 places compared to 2021.
As a Southern Common Market (MERCOSUR) member, Argentina signed a free trade and investment agreement with the European Union (EU) in June 2019. Argentina has not yet ratified the agreement. In 2022, Argentina and MERCOSUR concluded negotiations with Singapore. During 2022, there was little progress with ongoing trade negotiations with South Korea, Canada, and Indonesia. Argentina ratified the WTO Trade Facilitation Agreement on January 22, 2018. Argentina and the United States continue to expand bilateral commercial and economic cooperation to improve and facilitate public-private ties and communication on trade, investment, energy, and infrastructure issues, including market access and intellectual property rights. More than 265 U.S. companies operate in Argentina, and the United States continues to be the top investor in Argentina with more than USD $12.5 billion (stock) of foreign direct investment as of 2021
To access the ICS, visit the U.S. Department of State Investment Climate Statement website or view the ICS for Argentina directly.