Overseas Business Risk – Argentina

See below for information on key security and political risks which UK businesses may face when operating in Argentina

Political and Economic

Argentina is the largest country in South America after Brazil, stretching from north to south a distance equivalent to that between London and Baghdad, and occupies a strategic location on the South Atlantic and close to the South Pacific oceans. It benefits from rich natural resources, a highly literate population of 40.5m that identifies strongly with Europe, an export-oriented agricultural sector, and a diversified industrial base.

Democracy was restored to Argentina in 1983. The current President is Cristina Kirchner who was reelected in for a further 4 years in office starting in December 2011. She was elected on a programme of "continuity and change," of continuing Argentina’s strong economic growth of 7%+ since 2003, whilst increasing social justice and strengthening institutions and international relations. Her second mandate follows the death of a heart attack in October 2010 of Nestor Kirchner, former President and husband of the current President.

The early days of the 2011 administration show a shift to reducing subsidies to public services, energy and transport in line with the objective of curbing public expenditure and to combating tax evasion. The first measures also indicate a continuation of restrictions to trade by the way of non automatic import licences and other non-tariff measures. Finally, a new law limiting the foreign ownership of land has also been approved by Congress. The main objective of this law is once again, to limit tax evasion.

Argentina has long historic links with the UK. British companies played a vital role in Argentina's commercial development during the 19th century. The railways, food processing plants and many of the financial services were developed and managed by British firms. A wide range of UK manufactured goods was exported to Argentina and the UK in turn was a major destination for Argentine products.

The UK works closely with Argentina on the international stage on human rights, sustainable development, counter proliferation and trade as well as in the G20 where both countries contribute positively and jointly to the group’s agenda. Argentine troops have been deployed on UN peacekeeping operations in Cyprus, Kosovo, the Middle East and Haiti, amongst other regions and have in some cases served together with British troops.

Diplomatic relations between both countries were restored in 1990 after an 8-year gap following the Falklands conflict. Through the 1990’s, South Atlantic issues have been discussed with the Argentine Government under a “sovereignty umbrella” arrangement, which allowed the UK and Argentina to protect their respective positions on sovereignty while seeking to make progress on practical matters of common interest such as fisheries and de-mining. In practice, relations over South Atlantic issues are difficult, but have not impacted on business.

Since 2003, the Argentine Government passed legislation aimed at preventing companies that operate in Argentina from fishing or exploring for hydrocarbons in Falklands waters without an Argentine licence. In spite of this some contact and co-operation continues, e.g. visits to the Falklands by Argentine veterans and families of Argentine servicemen who died in the conflict. The UK continues to look for areas of co-operation for the benefit of all parties. The UK has no doubt about its sovereignty over the Falkland Islands. The British Government supports the Falkland Islanders' right of self determination and will not discuss sovereignty unless and until they so wish.

There have been some recent protests against British interests in Argentina in the context of tensions over current hydrocarbon explorations off the Falkland Islands and the 30th anniversary of the conflict. In separate incidents in January and February 2012, offices of HSBC and GSK in Buenos Aires suffered some damage during protests by Quebracho, a radical left-wing activist group. Various demonstrations have also taken place outside the British Embassy in Buenos Aires.

As the 30th anniversary of the Falkland Islands conflict nears, we have been informed that the Argentine Government has been encouraging the largest importers of British goods to reduce their imports from the UK.  It is possible that this and other measures will dissuade local firms from doing business with the UK for at least the near future.

We understand that the Argentine Confederation of Transport Workers (CATT) has approved a boycott of vessels flying the British flag or the Red Ensign of other UK Overseas Territories. The boycott is reported to include delaying these vessels from entering and leaving Argentine ports. At this stage we are not advising against operating with Argentine ports, but advise that companies should make contact with their agent or local authorities before travelling or shipping cargo on the above mentioned vessels.

UK companies will need to factor in these variables when engaging in the market. The UKTI team in Buenos Aires will be glad to receive enquiries on a case by case basis as all situations will not be the same.

From 2002 to 2010, real GDP growth averaged 7.1%, bolstering revenues and keeping the budget in surplus. Growth in 2010 was 9.2% and estimates for 2011 place this figure at 6%. Growth is likely to curb down in 2012 but is still estimated to be around 4%.

The Government renegotiated its public debt in 2005 and paid off its remaining obligations to the IMF in early 2006. In June 2010, a second offer to debtors was accepted by a remaining 70% leaving approximately 7% of original debt holders as hold outs. Argentina still owes an approximate US$ 6 billion plus interests and penalties to the Paris club and although it has expressed a political will to pay, negotiations have not started.

In November 2008, the government nationalised the private pension fund system, a measure that was not well received by markets provoking a sell-off in stock and bonds on the fear that the domestic capital market dries up completely. Since then, capital from the nationalised funds has been used to invest in different companies and areas of government. While this was not market friendly, the nationalisation improved the short-term balance position of the government, reducing concerns of another debt default.

The fall in the quality of official statistics remains a concern. Initial worries were expressed in 2008 over inflation figures, which were officially 10%, but with most analysts agreeing on an annual figure of over 20%. In 2010 and 2011, inflation as reported by the Argentrine Congress was close to 25% whereas official records were roughly half that figure.

In 2011 The World Bank’s Doing Business project ranked Argentine 113 out of 183 countries, after rating regulatory costs and analysing specific regulations that enhance or constrain investment, productivity and growth. This places Argentina well below Peru (41), Colombia (42), and Chile (39) but above Brazil (126) in the region.

Despite problems the sector has faced, Argentina remains an agricultural powerhouse and one of the world’s top ten producers of 26 agricultural commodities. It is also a major exporter of biodiesel, and well placed to become a key player in the world's biofuels sector in the medium term.

More information on political risk, including political demonstrations is available in FCO Travel Advice.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In 2011 Argentina is ranked 100th of 128 countries in Transparency International’s corruption perception index. It is in a similar position to Mexico behind Chile, Uruguay and Brazil while ahead of Paraguay, Ecuador and Venezuela.

Although the Argentine legal system can be lengthy, costly and cumbersome, Argentine courts have investigated a number of public officials on corruption charges and have imposed some to prison sentences as well as fines

Likewise, the Argentine press has investigated corruption allegations and reported on its findings in many cases generating the public condemnation of public figures and officials even before the courts have concluded on the cases.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in China and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

There is an underlying threat from international terrorism. Attacks, although unlikely, could be indiscriminate, including in places frequented by expatriates and foreign travellers. In 1992 and 1994 there were terrorist acts against the Israeli Embassy and an Argentine Jewish Centre which resulted in many deaths and injuries.

Since 2004 there have been a number of much smaller explosions in Buenos Aires and the surrounding provinces which are believed to have been the work of local anti-globalisation groups. The targets have mostly been banks. One person was killed and another injured in one explosion in November 2004, but most attacks have caused damage to the targeted building rather than casualties.

In March 2010 a small explosion occurred outside a branch of a British Bank in Mar del Plata, and some vandalism occurred to a branch in Quilmes in the Province of Buenos Aires.

On 16 September 2010 a small explosive device was detonated outside American Airlines' downtown branch in Buenos Aires causing damage to the building but no injuries.On 30 December 2010 a small explosive device was detonated outside the Greek Embassy in Buenos Aires causing damage to the building but no injuries.

Read the information provided on our Terrorism threat page.

Businessman reading newspaper

Protective Security Advice

Buenos Aires is Argentina’s main city and entry point. Greater Buenos Aires has 12.6 million inhabitants and in many ways resembles Madrid or Paris and can give visitors a false sense of security. To avoid disappointment, it is important to leave these first impressions behind and be aware of the risks.

Traffic is probably the greatest danger to life and limb in Argentina. In 2010, more than 7,700 people were killed in traffic accidents in Argentina (compared to 1,850 in the UK in the same year). Road signs, traffic lights, even one-way-street signs, are commonly ignored, and cars often go far too fast. Seatbelts and (on motorbikes) crash helmets are widely unused. The authorities of the Greater Buenos Aires area have campaigns to improve road safety, increase the use of motorcycle crash helmets and reduce drink driving.

The most frequent incidents of crime involve distraction theft, bag snatching and armed robberies in the street, in taxis and in restaurants. Distraction thefts commonly occur in public areas such as internet cafes, train and bus stations. There has been a noticeable rise in reports of stolen passports in the last year, especially in busy public areas such as the main bus stations in Buenos Aires and Mendoza. You should keep a close eye on your personal possessions and bags at all times. Con men have been known to rob tourists while an accomplice pretends to help remove ketchup or mustard that has been “accidentally” sprayed on them. Another common occurrence is the slitting of handbags in crowded places. Be particularly attentive in popular tourist areas, such as San Telmo. You should avoid carrying large amounts of cash or wearing ostentatious jewellery.

While most victims are not physically injured when robbed, criminals typically do not hesitate to use force when they encounter resistance. Visitors are advised to immediately hand over all cash and valuables if confronted. Thieves will target visitors wearing expensive watches or jewellery.

Some travelers have received counterfeit currency in Argentina. Unscrupulous vendors and taxi drivers sometimes pretend to help tourists review their pesos, then trade bad bills for good ones. Characteristics of good currency can be reviewed at the Argentine Central Bank web site.

Kidnappings and so called 'express kidnappings' - short-term, opportunistic abductions, aimed at extracting cash from the victim - do occur in Argentina. Victims of express kidnapping are normally selected at random and held while criminals empty their bank accounts with their cash cards. Once the ransom is paid the victim is usually quickly released. It is also common for thefts to take place when withdrawing cash from ATMs. You should be alert at all times. Avoid isolated or poorly lit areas at night.

When travelling by taxi we advise that, whenever possible, you book in advance. If it is not possible to book in advance and you need to hail a taxi, you should take care only to hail a 'radio taxi'. The only noticeable difference between radio taxis and others is that they have a clearly visible company logo on the rear passenger doors of the vehicle as well as red on white “IRA” sticker on the front windshield (indicating that they have paid their radio licence fees). We advise against hailing any taxi that does not display a logo. If you are being met at the airport and you do not know your greeter, ensure you confirm their identity before accepting a lift.  Alternatively use a "remise" service from the official stand in the centre of the arrivals concourse

When travelling on local buses and trains, remain alert at all times.  Pickpockets are rife.  If you are robbed, you should inform the local police – a police report will be required by your insurers and by the Embassy if you need a new passport.  In Buenos Aires, a 24-hour police helpline in English is available on telephone number 101, to help victims.  There is also a new multi-lingual free phone number for tourist assistance: 0800 999 5000.  This goes through to the Tourist Police Station.

Passports should be left in a hotel safe or security box except when being used for identification purposes such as purchasing expensive items or cashing travellers’ cheques. Keep a photocopy of the details page of your passport with you at all times. Passports are required as identification for internal flights

Demonstrations are common in metropolitan Buenos Aires and occur in other major cities as well. Protests can block streets, highways, and major intersections, causing traffic jams and delaying travel. While demonstrations are usually not violent, they are loud and hooligans in some of the groups sometimes seek confrontation with the police and vandalise private property. Visitors should take common-sense precautions and avoid gatherings or any other event where crowds have congregated to protest. Information about the location of possible demonstrations is available from a variety of sources, including the local media.

There are occasional outbreaks of Yellow fever and Dengue, particularly in the northern parts of Argentina.

Read the information provided on our Protective security advice page

Meeting in the British Embassy

Intellectual Property

Argentina faces a serious problem with patent and copyright protection. According to the Argentine Music Industry Association, CAPIF, 60% of all CD & DVDs sold in Argentina are unlicensed and there are an annual 40 million albums downloaded illegally. The Argentine Chamber of Clothing Manufacturers states that 50% of all clothing sold in the country is counterfeit. Software piracy level in Argentina is 70% according to Business Software Alliance (2011 report).

An example of this illegal activity is the Salada” market where 30,000 stands sell legal and illegal goods side by side. The market is a cash only site in the Greater Buenos Aires area and according to argentine press sources (La Nación) is reported to attract 20,000 people per opening and is estimated to turnover over US$9m per week.

Read the information provided on our Intellectual Property page.

Organised Crime

Argentina is a transit country for drugs, especially cocaine from Colombia destined for the European market. Cocaine use among affluent young people is growing inside Argentina itself.

Read the information provided on our Organised crime page.