Doing Business in Argentina 3

7/22/2019 Doing Business in Argentina 3

1/84

M|M|BM. & M. BOMCHIL ABOGADOS

SEPTEMBER 2010

Suipacha 268, 12t h

f loorC1008AAF Buenos Aires

Argenti nawww.bomchil.com

Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

DOING BUSINESS IN ARGENTINA*

TABLE OF CONTENTS

I. THE COUNTRY AT A GLANCE.................................................................................1A. Map ....................................................................................................................... 1B. Geography ............................................................................................................1C. Population and Economy......................................................................................1D. Languages............................................................................................................2E. Infrastructure.........................................................................................................2

1. Roads ....................................................................................................................... 22. Railways................................................................................................................... 23. Ports and Waterways............................................................................................... 24. Airports ..................................................................................................................... 35. Public Transportation............................................................................................... 3

II. GENERAL CONSIDERATIONS ................................................................................3

A. Political System.....................................................................................................3B. Judicial System.....................................................................................................4C. Choice of Law - Jurisdiction..................................................................................4D. Alternative Dispute Resolution .............................................................................5E. Enforcement of Foreign Judgments......................................................................6F. Financial Considerations.......................................................................................7

1. Banking System....................................................................................................... 72. Financial Trusts........................................................................................................ 83. Leasing Agreements................................................................................................ 9

G. Insurance Entities...............................................................................................10

III. INVESTMENT REGULATION ................................................................................11

A. Foreign Investment Act.......................................................................................11

B. Bilateral Investment Treaties ..............................................................................12C. Recent Argentinean Experience.........................................................................13D. Foreign Exchange...............................................................................................13

1. General Outlook.....................................................................................................132. Inflows of Funds into Argentina............................................................................. 143. Outflows of Funds from Argentina.........................................................................15

E. Transfer of Technology.......................................................................................16F. Anti-Corruption....................................................................................................17G. Anti-Money Laundering ......................................................................................18

IV. TRADE REGULATION...........................................................................................19

A. Official Structure .................................................................................................19B. General Regulations ...........................................................................................19

C. Tariffs and Other Import and Export Charges ....................................................191. Import Tariffs .......................................................................................................... 192. Other Levies...........................................................................................................203. Export Tariffs..........................................................................................................20

D. Unfair Practices ..................................................................................................201. Argentinean Legal Framework ..............................................................................21

* M. & M. Bomchil. The information of this newsletter is not to be construed as an opinion or legal adviceand does not imply a comprehensive coverage of all the matters referred to herein.


2/84


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

2. Investigations and Claims. Proceedings...............................................................21E. Restrictions and Prohibitions on Imports ............................................................22

1. Used Capital Goods...............................................................................................232. Import Permits........................................................................................................233. Sanitary Certificates...............................................................................................23

4. Licenses and Permits ............................................................................................ 23F. Free Trade Zones and Special Customs Area ...................................................23G. Temporary Admission Regime...........................................................................23

1. Capital Goods ........................................................................................................ 242. Intermediate Goods ............................................................................................... 243. Other Goods...........................................................................................................24

V. STRUCTURES OF DOING BUSINESS..................................................................24

A. Commercial Companies and Branches ..............................................................24B. Corporation ("S.A.") ............................................................................................24C. Limited Liability Company (S.R.L.)...................................................................30D. Participation in the capital stock of a corporation or S.R.L.: registration as aforeign company......................................................................................................30E. Branch.................................................................................................................32

VI. ACQUISITION OF AN ARGENTINEAN BUSINESS .............................................32

A. Introduction .........................................................................................................32B. Legal Implications of Each Alternative................................................................33

1. Stock Purchase......................................................................................................332. Transfer of going concern (TGC)........................................................................34

C. Merger Control....................................................................................................35

VII. DISTRIBUTION AND AGENCY ............................................................................37

A. Distribution..........................................................................................................37B. Agency ................................................................................................................37

VIII. SECURITY INTERESTS.......................................................................................38

A. Mortgages...........................................................................................................381. Mortgages over Real Estate..................................................................................382. Mortgages over Ships and Aircraft........................................................................39

B. Pledges ...............................................................................................................391. Registered Pledges................................................................................................402. Pledges of Shares..................................................................................................40

C. Collateral Trusts..................................................................................................41

IX. INSOLVENCY AND BANKRUPTCY.........................................................................41

A. Reorganization Proceedings...............................................................................41B. Pre-packaged Proceedings (Acuerdo Preventivo Extrajudicial).........................42C. Bankruptcy..........................................................................................................42

X. TAX ..........................................................................................................................42

A. Federal Taxes.....................................................................................................421. Income Tax.............................................................................................................422. Double Taxation Conventions ............................................................................... 443. Minimum Deemed Income Tax (MDIT) .............................................................. 454. Value Added Tax (VAT).........................................................................................455. Tax on Bank Accounts...........................................................................................456. Personal Assets Tax..............................................................................................46


3/84


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

7. Excise Taxes..........................................................................................................46B. Local (Provincial) Taxes .....................................................................................46

1. Turnover Tax..........................................................................................................462. Stamp Tax..............................................................................................................463. Real Estate Tax......................................................................................................46

C. Local (Municipal) Taxes......................................................................................46XI. IMMIGRATION........................................................................................................47

XII. LABOR AND SOCIAL SECURITY........................................................................47

A. Introduction .........................................................................................................47B. Individual Labor...................................................................................................48C. Collective Labor..................................................................................................50D. Social Security Law ............................................................................................51

XIII. INTELLECTUAL PROPERTY AND DATA PROTECTION .................................52

A. Patents and Utility Models ..................................................................................521. Subject matter ........................................................................................................ 522. Who may seek a patent.........................................................................................523. Patentability............................................................................................................524. Rights conferred by a patent ................................................................................. 535. Remedies ............................................................................................................... 53

B. Copyright.............................................................................................................541. Subject matter ........................................................................................................ 542. Authorship .............................................................................................................. 543. Moral rights.............................................................................................................544. Term of copyright ................................................................................................... 55

C. Trademark and Trade Names ............................................................................551. Subject matter ........................................................................................................ 552. Term of trademark ................................................................................................. 553. Remedies ............................................................................................................... 55

D. Trade Secrets .....................................................................................................55

1. Subject matter ........................................................................................................ 552. Remedies ............................................................................................................... 56

E. Internet Domain Names......................................................................................56F. Industrial Designs and Models............................................................................56G. Data Protection...................................................................................................57

XIV. ENVIRONMENTAL LAW.....................................................................................57

A. National Constitution...........................................................................................58B. International Treaties and Conventions..............................................................58C. Minimum Standards for Environmental Protection Laws....................................59

1. General Environmental Policy - Act 25,675.......................................................... 592. Integral Management of Industrial and Services Activities Wastes - Act 25,612 593. Water Environmental Management - Act 25,688 ................................................. 59

4. PCBs Elimination and Management - Act 25,670................................................595. Free Access to Environmental Public Information - Act 25,831...........................606. Domestic Waste Management - Act 25,916.........................................................607. Native Forests - Act 26,331 - Decree 91/2009 ..................................................... 60

D. Hazardous Wastes - National Regime ...............................................................60E. Air Protection ......................................................................................................61F. Other National Laws............................................................................................61

1. Fostering of Soil Preservation - Law No. 22,428 .................................................. 61


4/84


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

2. Chemical Compounds - Law No. 24,040..............................................................61

XV. SELECTED REGULATED SECTORS..................................................................61

A. Electricity and Gas..............................................................................................611. Introduction.............................................................................................................61

2. The Electricity Sector .............................................................................................623. Natural Gas Distribution and Transportation.........................................................67B. Mining .................................................................................................................71

1. Mining Legal Framework .......................................................................................712. Fiscal Incentives.....................................................................................................73

C. Forestation..........................................................................................................741. Forest Wealth Defense Law No. 13,723...............................................................742. Law No. 26,331 - Minimum Budget for Environmental Protection of NativeForests........................................................................................................................74 3. The National Forest Development Project............................................................744. Investments in Cultured Forests Act ..................................................................... 755. Fiscal Incentives.....................................................................................................756. Real Right for Forested Areas Act.........................................................................76

D. Audiovisual Communication Services ................................................................761. Classification .......................................................................................................... 772. Terms and Requisites............................................................................................773. Maximum Number of Licenses..............................................................................774. Limitations to License Holders...............................................................................785. New Licenses/ Authorizations ...............................................................................786. Transfer .................................................................................................................. 787. Revocation ............................................................................................................. 788. Nationality...............................................................................................................789. Exploitation.............................................................................................................7810. Social rates...........................................................................................................7911. Programming Content ......................................................................................... 7912. Sanctions..............................................................................................................7913. Fee ....................................................................................................................... 79

14. Registries ............................................................................................................. 8015. Taxation................................................................................................................80


5/84


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

I. THE COUNTRY AT A GLANCE

A. Map

B. Geography

The Republic of Argentina is located inthe Southern and WesternHemispheres. Its relative position in

South America gives the country adiversity of land and culture. From theAntarctic regions in the south to theforested jungle regions in the north,from the ocean coastline on theAtlantic to the rugged mountainregions in the west, and bordering fiveother countries, Argentina provides animportant cultural and economicconnection for all of South America.2Itis the second largest country in SouthAmerica and eighth in the world byland area and the largest among

Spanish-speaking nations. Argentinascontinental area is 2,766,890 squarekilometers (1,068,300 sq mi), coveringthe area between the Andes mountainrange in the west and the southern

2http://www.argentina.gov.ar/argentina/portal/paginas.dhtml?pagina=1483

Atlantic Ocean in the east and south.Argentina borders Paraguay andBolivia to the north, Brazil and Uruguayto the northeast, and Chile to the westand south. Because of the ample

variations in longitude and elevationthat exist in Argentina, the country issubject to a variety of climates.Generally, the climate is predominantlytemperate with extremes ranging fromsubtropical in the north to sub polar inthe far south. 3

C. Population and Economy

The first inhabitants of the presentArgentine territory were indigenouspeople who congregated in tribes anddeveloped their respective cultures atdifferent extents.In the XV Century theSpanish conquerors brought their owncustoms and values, thus generating acultural convergence of everlastingdimensions, not without pain in somecases and cooperation in others. Spainestablished a permanent colony on thesite of Buenos Aires in 1580, and theViceroyalty of the Ro de la Plata wascreated in 1776. This area was largelya country of Spanish immigrants andtheir descendants, known as criollos,and others of native cultures. A wave

of foreign investment and immigrationfrom Europe after 1870 led to thedevelopment of modern agricultureand to a near-reinvention of Argentinesociety and economy, leading to thestrengthening of a cohesive state.

The last census carried out in 2001reported 37,282,970 inhabitants. Thisnumber is currently expected toexceed 40M.

Argentina benefits from rich natural

resources (including land suitable forlivestock and crops, fisheries, oil,natural gas, gold, silver, potassium,manganese and many other minerals),a highly literate population, an export-

3http://www.asiatravel.com/south_america/southamericainfo.html


6/84

2


SEPTEMBER 2010

Suipacha 268, 12t h


Argent inawww.bomchil.com

Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

oriented agricultural sector and adiversified industrial base. Argentina isone of the world's major agricultural

producers, ranking third worldwide inproduction of honey, soybeans andsunflower seeds and is ranked fifth inthe production of maize and eleventhin wheat. In 2007, agricultural outputaccounted for 9.4% of GDP and nearlyone third of all exports. Soy and itsbyproducts, mainly animal feed andvegetable oils, are major exportcommodities at 24% of the total.Wheat, maize, sorghum and othercereals total 8%, while. beef, leatherand dairy amount to 5% of totalexports.4

D. Languages

Spanish is the official language in theArgentine Republic. The vast majorityof the population is Roman Catholic.

E. Infrastructure

1. Roads

Since Argentina is almost 4,000kilometers long and more than

1,000 km wide, long distancetransportation is of great importance.Several toll expressways spread outfrom Buenos Aires, serving nearly halfthe nation's population. The majority ofArgentine roads, however, are two-lane national and provincial routes. In2003 there was 231,374 km of roads,of which only 30% were paved. Fourbranches of the Pan-AmericanHighway run from Buenos Aires to theborders of Chile, Bolivia, Paraguay andBrazil. 5

2. Railways

Argentina has a vast railway net that

4http://en.wikipedia.org/wiki/Argentina5http://en.wikipedia.org/wiki/Transportation_in_Argentina

represents one of the maincommunications channels between theCity of Buenos Aires and its outskirts,

favoring also the integration betweenthe capital city and the interior of thecountry. Tourist lines offer visitors adifferent way to travel around ourterritory.6

Argentinas railway system is divided indifferent lines: General Belgrano,General Roca, General BartolomMitre, General San Martn, DomingoFaustino Sarmiento, General Urquizaand Lnea Metropolitana, which controlthe railways of Buenos Aires and itssuburbs. There are direct rail links withthe Bolivian Railways network to SantaCruz de la Sierra and La Paz; withChile, through the Las CuevasCaracoles tunnel (across the Andes)and between Salta and Antofagasta;with Brazil, across the Paso de losLibres and Uruguayana bridge; withParaguay (between Posadas andEncarnacin by ferry-boat); and withUruguay (between Concordia andSalto).There are also trains to SantaFe, Santiago del Estero, Tucumn,Crdoba, Entre Ros, Corrientes,

Misiones, Neuqun and Rio Negro.

3. Ports and Waterways

Fluvial transport is not often used forpeople, with the exception of thosewho cross the Ro de la Plata fromBuenos Aires to some Uruguayancities. Other services are exclusivelyused as river crossing, such as thosein Tigre. River traffic is mostly made upof cargo, especially on the ParanRiver, which is navigable by very large

ships (the Panamax kind) downstreamfrom the Greater Rosario area. Thisarea produces and/or ships most of the

6http://www.argentina.gov.ar/argentina/portal/paginas.dhtml?pagina=2137


7/84

3


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

agricultural exports of Argentina.7

4. Airports

Argentinean airportsconnect Argentinawith all major internationaldestinations. There are 54 airports inArgentina; 90% of which areadministrated by a private operator.Airports have services to importantmetropolitan areas, regional centers,frontier towns and tourist destinations.Sixteen of the airports are consideredinternational. The most importantairports are Ezeiza, which is locatedaround 20 miles southwest of the cityof Buenos Aires, and Jorge Newbery,which is located within the city ofBuenos Aires serving domesticlocations throughout the country andinternational flights limited to Uruguay.

5. Public Transportation

A majority of people employ publictransport rather than personal cars tomove around in the cities, especially incommon business hours, since parkingcan be both difficult and expensive.Within urban areas, the main

transportation system is usually thebus or colectivo (public transportationbus); bus lines transport millions ofpeople every day in the larger citiesand their metropolitan areas. BuenosAires also has a subway system, theonly one in the country, and GreaterBuenos Aires is serviced by a systemof suburban trains. In addition, longdistance buses are fast, affordable andcomfortable; they have become theprimary means of long-distancetransportation. 8

7http://en.wikipedia.org/wiki/Transportation_in_Argentina8http://en.wikipedia.org/wiki/Transportation_in_Argentina

II. GENERAL CONSIDERATIONS

A. Poli tical System

Argentina is a Presidential Republic.The political system is formed by thethree traditional branches: the Judicial,the Legislative and the Executive.

The Legislative Branch is theCongress, formed by the House ofRepresentatives and the Senate. Theprimary function of the Congress is topass, amend, revoke and repeal laws.The Executive Branch is made up ofthe President, the Vice President,Ministers, and other officers anddirectors of administrative agencies.The president is the head of the State.

The President serves a four year termand may be re-elected only once.Election is by universal suffrage (over18 years). There is a bicameralcongress: the House ofRepresentatives and a Senate.Deputies are elected for a four yearterm, half being elected every twoyears. Currently, each province electstwo senators for the majority party and

one for the minority party, all of themserving for a six-year term. As from2001 senators are elected by directvote. The President appoints a cabinetand a chief of cabinet who can beremoved by a majority vote from eachof the two houses.

The country is divided into a FederalCapital (the city of Buenos Aires) and23 provinces. Each province has itsown Governor, legislature and

judiciary.

The major political parties are thePartido Justicialista (also known as"Peronist"), the Unin Cvica Radicaland the Coalicin Cvica (CC),although there are several moreregistered parties nationwide.


8/84

4


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

The judicial branch is mentioned inItem B below.

B. Judicial System

The National Supreme Court of Justice(the Supreme Court) is at the highestlevel of the Argentinean judicialsystem. It exercises ordinary -general-appellate jurisdiction, special appellate

jurisdiction and exclusive and originaljurisdiction.

General appellate jurisdiction isexercised when matters have beenpreviously treated by First and SecondInstance courts. Said matters arethose governed by the NationalConstitution and federal laws, such asissues related to international treaties,admiralty and maritime jurisdiction.

Special appellate jurisdiction isexercised through what is commonlyreferred to as constitutional control,since the Supreme Court has beenendowed with the power to controllegal rules and administrative acts.

The Supreme Courts exclusive and

original jurisdiction involves all mattersrelated to ambassadors, ministers andforeign consuls and those involving aprovince.

With the exception of exclusive andoriginal jurisdiction cases, SupremeCourt rulings are issued on appeal andafter a specific petition has been filed(the latter being applicable to allmatters brought before JudicialCourts). Likewise, the Supreme Courtis only allowed to pass judgment on

concrete litigation. Should this litigationbe a collective action, the effects of theres iudicata shall affect all the personsin the same situation even when theywere not a party to said litigation.

Jurisdiction over matters in the city ofBuenos Aires can be federal or

national. Federal jurisdiction dealswith cases based on federal mattersreferred to by the National Congress,

like trademarks, maritime law or patentmatters. On the other hand, nationaljurisdiction examines cases related tonon-federal matters, like torts,contractual relationships, bankruptcy,commercial papers or company law.

There is also a general jurisdictionwhich has been vested in provincialcourts and involves matters ruled bylaws dictated by both national andlocal Congresses.

Moreover, alongside theaforementioned tribunals in theprovinces presiding over ordinarymatters, there are also tribunals having

jurisdiction over controversies involvingfederal matters (i.e. federal

jurisdiction).

Regarding subject-matter jurisdiction,most courts preside over specificissues (i.e. civil, commercial, criminal,labor, etc.).

The procedure applicable before most

of the aforementioned courts is writtenand may involve any of the followingstages: complaint, answer, defenses tothe complaint, counterclaim, evidencestage and final ruling; whereas criminalproceedings are generally comprisedof two stages, a probable cause-typeproceeding followed by an oral trialbefore a three-judge court.

To take part in a judicial controversy itis necessary to act with a registeredattorney, since only the latter is

allowed to file writs before the courts.

C. Choice of Law - Jurisdiction

According to Argentinean law, partiesexecuting an agreement are entitled tochoose the law applicable to saidrelationship, but in order to choose a


9/84

5


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

foreign law the agreement must havean international connection.

If no such provisions are made, theArgentinean Civil Code establishesthat contracts are ruled by the laws inforce at the place where the contractwas signed. This statement is onlyapplicable to agreements which do notdefine a specific location for theirexecution. In this case, the connectingfactor is the place where the contractwas signed, as mentioned above. Theparties right to select the lawapplicable to a contract is only limitedby international public order provisions.

Argentinean law specifically rejects theapplication of foreign laws when theyare contrary to public or criminal law,the State-supported religion (RomanCatholic), freedom of worship, morality,and when its application is contrary tothe principles of Argentinean law,related to rules that establish arbitraryprivileges, or in case local laws whichmay contradict foreign laws be morefavorable as to the validity of the act inquestion.

As for the choice of jurisdiction,Argentinean law foresees twosituations: (i) if the contract is to beexecuted in Argentina, even when thedebtor is not domiciled therein, thecontract can be adjudicated before anArgentinean judge; and (ii) if thecontract is to be executed in anothercountry and the debtor is domiciled inArgentina, the creditor can sue thedebtor either in Argentina or in theplace where the contract wasexecuted, even if the debtor is not

located there.

Jurisdiction granted to national courtscannot be extended. However, thecourts territorial jurisdiction can beextended by agreement of the partiesonly in cases involving patrimonialissues. In addition, if the issue in

dispute is international, jurisdiction canalso be extended in favor of foreign

judges or arbitrators acting outside

Argentina.D. Alternative Dispute Resolution

The Argentinean legal systemcontemplates non-judicial disputeresolution procedures.

Within the city of Buenos Aires,Mediation Law No. 24,573 implementsa mandatory mediation proceeding totake place before publicly or privatelyappointed mediators, who are notempowered to hand down a decisionbut to bring the parties together inorder to reach an amicable settlement.As of today, no provincial jurisdictionhas established this mechanism asmandatory. In case no agreement isreached, the plaintiff is entitled to bringthe case before the Courts. If, on theother hand, an agreement is reached,its execution is compulsory for theparties, who may judicially enforce it incase of breach.

The aforementioned mediation

procedure comprises a compulsorystage prior to the filing of any suitbefore the courts of the city of BuenosAires, with the sole exception of thosetypes of cases which are expresslyexcluded by Law No. 24,573 (forinstance, provisional remedy cases).

Mediation proceedings aside, there arealso several permanent arbitrationtribunals, applying their ownprocedural rules, with the capacity ofissuing awards and to which mainly

disputes arising out of commercialagreements of some significance canbe submitted if chosen by the parties.According to the Civil ProceduralCode, only those matters which areeligible for settlement between theparties can be submitted to arbitrationproceedings.


10/84

6


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

Arbitration tribunals are notempowered to enforce their interim ordefinitive awards, which must be

executed through the assistance of ajudicial court.

The main advantage of thesepermanent arbitration tribunals is theirproficiency in the resolution of certaindisputes, the flexibility of theirprocedures and the fact that awardsare handed down in a shortertimeframe than that applicable toordinary judicial courts. Additionally,applicable expenses and taxes tend tobe lower than those -charged by

judicial courts.

The main private institutions providingarbitration services are the Tribunal

Arbitral de la Bolsa de Comercio deBuenos Aires, the Tribunal ArbitralPermanente de la Cmara Argentinade Comercio, the Tribunal General de

Arbitraje y Mediacin del Colegio deEscribanos de la Ciudad de Buenos

Aires and the Centro Empresarial deMediacin y Arbitraje Asociacin Civil,the latter not a permanent arbitrationtribunal but an entity formed by the

major law and auditing firms, whichprovide mediation and arbitrationservices and act as arbitrators only ifthe parties provide for it.

Likewise, the law accepts theformation of ad hoc arbitration courts,which may be appointed before or aftera lawsuit is filed before judicial courts.The applicable proceedings and thematters to be settled by such anarbitration court shall be decided bythe parties through means of an

arbitration agreement.

Parties are entitled to waive their rightto appeal the arbitration tribunalsaward to the judicial courts, except onappeal for the annulment of the awardbased on essential defects in theproceedings, or with regard to a

hearing the tribunal awarded on issuesnot submitted by the parties toarbitration, or on an award issued in

excess of the period of time agreed bythe parties.

E. Enforcement of ForeignJudgments

Argentinean procedural law allows forthe enforcement of judgments issuedby foreign courts, including arbitrationtribunals. Should there exist a treatybetween Argentina and the country inwhich the judgment was issued, theexecution proceeding will be that whichis laid down in such treaty.

If there is no such treaty, for theforeign ruling to be enforced byArgentinean courts, the followingrequirements must be met: The

judgment must have been issued by acompetent court according toArgentinean conflict of laws rulesregarding jurisdiction, and must havebeen final in the jurisdiction where itwas rendered, resulting from apersonal action; if the judgmentinvolved personal property, the good or

chattel in dispute must have beentransferred to Argentina during or afterthe prosecution of the foreign action.

Furthermore, the complaint must havebeen duly served to the defendantagainst whom the judgment is beingenforced and, in accordance with dueprocess of law, the defendant musthave been given an opportunity fordefense. The judgment should be validin the jurisdiction where it was passedand its authenticity ratified in

accordance with the requirements ofArgentinean laws. The judgmentshould not violate any principle ofpublic order of Argentinean laws andmust not enter into conflict with a prioror simultaneous judgment of anArgentinean court.


11/84

7


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

Argentina has entered into variousinternational treaties concerning therecognition and execution of foreign

judgments. Among those are: (i) theHague Convention of October 5, 1961,which abolished the Requirement ofLegalization for Foreign PublicDocuments, was ratified by Argentinain 1987, whereby authentication wassubstituted by the Apostille procedureforeseen in that Treaty. Thisinternational agreement hassignificantly simplified the formalitiesset forth by the previous system; (ii)the 1889 and 1940 Montevideo Treaties;and (iii) the 1958 New York Conventionon the Recognition and Enforcement of

Foreign Arbitral Awards (ratified in1988).

In 1983 Argentina signed the Inter-American Convention onExtraterritorial Validity of ForeignJudgments and Arbitral Awards(Montevideo Convention). ThisConvention recognizes foreign

judgments provided certain formalitiesare met: legalization and translation,and other procedural requirementssuch as the judge or tribunal rendering

the judgment holds internationaljurisdiction to hear the case and passjudgment on it, the parties (who musthave been appropriately summoned)were granted the opportunity topresent their defense, within the limitsimposed by the principles and acts ofpublic policy of the State in whichrecognition or execution is sought.

F. Financial Considerations

1. Banking System

Banking activities in Argentina aremainly regulated by the FinancialEntities Act (Law No. 21,526, asamended, the "FEA"), and by severalresolutions issued by the ArgentineanCentral Bank (Banco Central de laRepblica Argentina, the Central

Bank). The FEA provides that theCentral Bank is responsible for theregulation, control and supervision of

financial entities, for the various typesof financial entities that may operate inArgentina, and the relevant scope ofpermitted activities. The Central Bankhas discretionary authority to authorizethe establishment of new financialentities, their merger or consolidation,and to authorize the transfer of, orchanges to, their banking businesses.

Neither the FEA nor any regulationissued by the Central Bank preventsforeign investors from participating infinancial entities in Argentina. Anynegotiation of shares or participationinterests in a financial entity must benotified to the Central Bank, which mayreject or approve on a discretionarybasis. In addition, any transfer ofinterests in a financial entity that mayproduce changes in the entitysbanking risk (CAMEL system) or in itsshareholding structure must be pre-approved by the Central Bank. TheCentral Bank also supervises theappointment of the entities officers,the opening of branches and other

agencies in Argentina and abroad, andthe participation of local financialentities in foreign financial or bankinginstitutions.

The establishment of representativeoffices of foreign banking institutions inArgentina is subject to the CentralBanks approval. Representativeoffices may neither act as financialintermediaries nor effect exchangetransactions. Representative officescan provide advice and other technical

assistance in connection withinternational transactions.

Central Banks regulations alsocontemplate general banking rules,including limits on credit,indebtedness, capital requirement,reserves, liquidity, and net worthrequirements. Many of the


12/84

8


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

requirements of the Central Bankmirror the risk-weighted criteriaprovided in the Basel Committee on

Banking Supervision guidelines.The FEA provides the regulatoryframework for commercial banks,investment banks, mortgage banksand finance companies. It alsoregulates savings and loan companiesfor housing and other real estate(sociedades de ahorro y prstamopara la vivienda y otros inmuebles)and credit associations (commonlyknown as "Cajas"), which generallyhave limited functions and a smallerimpact on the market.

The FEA sets out the scope ofpermitted activities that may beperformed by each type of financialentity. All financial entities may receiveterm deposits, make temporaryinvestments in high-liquidity assets,and act as dealers or agents intransactions within the scope of theirpermitted business activities.Commercial banks may engage in anyfinancial or banking activity that is notprohibited by the FEA or by the Central

Banks regulations, and are the onlytype of financial entities that mayaccept sight deposits and offerchecking accounts.

2. Financial Trusts

The enactment of Law No. 24,441 inDecember 1994 introduced a newalternative for the granting ofguarantees in Argentina, with thecreation of financial trusts. A trust isdefined as the situation whereby a

person (creator) conveys the trustownership (fiduciary ownership) ofspecific properties to another (trustee)that binds itself to hold said propertyfor the benefit of the person specifiedin the trust agreement (beneficiary)and to transfer said trust once aspecified period of time has elapsed or

upon the happening of a certaincondition, to the creator, thebeneficiary, or the final recipient.

Section 19 of Law No. 24,441 createdthe financial trust, which is defined asthe trust agreement subject to thegeneral rules of a trust in which thetrustee is a financial institution or abusiness organization speciallyauthorized by the Argentine SecurityExchange Commission (CNV) to actas financial trustee, and thebeneficiaries are holders of certificatesof participation in the ownership of thetrust estate or of debt securitiesbacked by the properties sotransferred. Said certificates ofparticipation and debt securities shallbe deemed securities and may beplaced by public offering.

The CNV is the enforcement authorityin matters relating to financial trusts,having the power to establishregulations. Pursuant to CNVregulations, the following are theentities allowed to act as financialtrustees: (i) financial institutions; (ii)holders of marketable bonds

representatives; (iii) securitiesregistries; and (iv) corporationsregistered before the Registry ofFinancial Trustees held by the CNV.

The issuer of the certificates ofparticipation or debt securities mayrequire authorization for a publicoffering to the CNV. The issuer mayrequire authorization for theimplementation of a global program upto a maximum amount. To obtain saidauthorization, the issuer shall file a

prospectus with information on thetrustee, conditions of issuance, adescription of the certificates ofparticipation or debt securities,subscription period, the assets put intrust and the price of subscription,among other items.


13/84

9


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

The certificates of participation shall beissued by the trustee. Debt securitiesbacked by the properties held in trust

may be issued by the trustee or bythird parties, as the case might be. Thecertificates of participation and debtsecurities must be issued in registeredform, transferable or not, or in book-entry form. It is worth mentioning thataccording to current Argentineanregulations, it is not possible to issuebearer securities. Said instruments areused for the securitization ofmortgages, chattel mortgages andother securities.

The main differences between thefinancial trusts and common trusts arethe following: (i) the fact that thetrustee in a financial trust is a financialinstitution or a business organizationspecially authorized by the CNV; and(ii) certificates of participation and debtsecurities can only be issued withrespect to financial trusts.

On August 1, 2008 Decree 1207eliminated the tax benefit consisting ondeducting distributed earnings from thetaxable base of the income tax for

financial trusts and closed-end mutualfunds. However, financial trusts relatedto infrastructure works for publicservices will continue to hold suchbenefit.

Additionally, there is an exemption ondebits and credits banking accountsestablished for financial trusts andcommon investment funds.

3. Leasing Agreements

In May 2000 Law No. 25,248,regulating leasing agreements, wasenacted. Under a leasing agreement, aperson (lessor) conveys the right touse a specific property to anotherperson (lessee), against payment of arent and grants to the lessee apurchase option for a specified price.

The object of the leasing agreementmay be personal or real property,trademarks, patents or industrial

models and software, owned by thelessor or with respect to which thelessor has the authority to lease andsell.

The amount and frequency of eachrental payment shall be determined byagreement between the lessor and thelessee. The price at which thepurchase option may be exercisedshall be specified in the leasingagreement or set in accordance withagreed procedures or guidelines.

The property object of the leasingagreement may be: (i) purchased bythe lessor from a person indicated bythe lessee; (ii) purchased by the lessorfollowing lessees specifications,catalogues, brochures or descriptionsidentified by the latter; (iii) owned bythe lessor prior to entering into theleasing agreement with the lessee; or(iv) purchased by the lessor from thelessee under the same agreement orprior to its execution.

The leasing agreement shall beexecuted by means of a public deed ifits object is real estate property,vessels or aircraft. In all other cases, itmay be executed by means of either apublic or private instrument. In order tohave effects vis--vis third parties, theleasing agreement must be registeredin the appropriate registry according tothe nature of its object.

The lessee may use the property inaccordance with its purpose, but it may

not sell, encumber, or dispose of theproperty. Expenses for its maintenanceand use, including insurance, taxes,and charges imposed on the propertyand the penalties resulting from its useare the sole responsibility of thelessee, except otherwise agreed.


14/84

10


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

G. Insurance Entities

Insurance and reinsurance activities in

Argentina are mainly regulated by LawNo. 20,091, as amended, and by thevarious resolutions issued by theNational Insurance Agency(Superintendencia de Seguros de laNacinor SSN).

Insurers and reinsurers must belicensed and authorized to operate bythe SSN, which is a federal agency incharge of regulating and supervisingthe insurance business and theoperation of insurance companies inArgentina. Argentinean residents maynot contract policies provided byinsurers or reinsurers that are notauthorized to operate by the SSN. Aninsurance contract executed with aninsurer not authorized to operate bythe SSN is void and unenforceable inArgentina.

The SSNs supervisory authorityincludes:

(a) authorizing insurers to conductspecific types of business, their

insurance plans, and the terms andconditions of their policies;

(b) evaluating the solvency andinsurance expertise of the insurersshareholders, directors and syndics;determining the applicable minimumcapital requirements; overseeing theinsurers financial condition; regulatingthe categories and amounts ofpermitted investments; and authorizingmergers and transfers of portfolios;and

(c) the ability to impose fines on, orsuspend or revoke licenses of, insurersand oversee their liquidationproceedings.

Transfers of participations in insurersare also subject to the prior approval of

the SSN, unless it involves less thanfive per cent (5%) of the insurerscapital stock. In addition, the SSN

regulations contemplate certainrequired minimum capital that insurersmust comply with. Currently, theminimum capital requirement for a lifeinsurer ranges between AR$ 2M andAR$ 4M, depending on whether itincludes a mathematical reserve ornot.

Only the following types of entities maybe authorized to operate as insurers orreinsurers in Argentina:

(a) corporations (sociedadesannimas), cooperatives(cooperativas) and mutual insurancecompanies (mutuales);

(b) branches or agencies of foreigncompanies, cooperatives and mutualinsurance companies; and

(c) state-owned entities.

If an insurer breaches the applicablelaw or regulations or does not complywith the SSNs directives, the insurer

may be subject to the followingpenalties: (a) oral warning; (b) writtenwarning; (c) a fine ranging from 0.01per cent to 0.1 per cent of the totalamount of premiums and additionalsums accrued in the previous fiscalyear, subject to a minimum of 0.5 percent of the minimum required capital;and (d) suspension of its license tooperate for up to three (3) months inone or more lines of business or therevocation of its authorization tooperate as an insurer, in case of

adverse developments in theinsurance business or a decrease in itseconomic or financial capacity.

The authorization granted by the SSNto operate as an insurance companymay be revoked by the SSN when:


15/84

11


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

(a) the insurer does not commenceoperations within a term of six monthsafter the relevant authorization was

granted;(b) the insurer does not takeappropriate measures in case of a lossof the required minimum capital;

(c) the insurer does not comply with itsby-laws, or appoints unsuitablepersons as directors, syndics,administrators, etc.; and

(d) in case of the insurers dissolutionor liquidation.

Insurers liquidation may be voluntaryor involuntary. A voluntary liquidationtakes place at the insurers request.The procedure is carried out by theinsurers management and overseenby the SSN. An involuntary liquidationresults from the revocation of theinsurers license by the SSN and maybe ordered by the courts. In such case,the SSN acts as liquidator and theprocedure is carried out in accordanceto the provisions of the BankruptcyLaw No. 24,522, as amended.

III. INVESTMENT REGULATION

Argentina has established severalregulations in order to promote foreigninvestment. These regulations includeseveral Bilateral Investment Treaties(BITs). Each regulation providescertain guarantees, and together theyare directed to provide foreigninvestors with adequate protection fortheir local interests.

A. Foreign Investment Act

Foreign investment is regulated inArgentina by Law No. 21,382 enactedin 1976 ("FIA") as amended by LawNo. 22,208 enacted in 1980, Law No.23,697 of 1989 and Law No. 23,760 of1990. In September 1993 the

Executive Power enacted Decree1853/93, approving the new updatedtext of the FIA.

The FIA carries three basic principleswhich are highlighted by Decree1853/93. Foreign investors may investin the country in any economic activity-industrial, mining, agricultural,commercial, financial, provision ofservices or others related with theproduction and exchange of goods andservices- without the need of any typeof prior approval, and under conditionsequal to those applicable to domesticinvestors (FIA section 1, Decree1853/93, sections two and four). Thereare no activities excluded from thisprinciple -except for certain specificexceptions such as broadcasting or theacquisition of real estate in borderareas- nor is there any type ofobligation of being associated withdomestic investors or other type ofrestriction or condition.

Foreign investors have the right torepatriate their investments and toremit profits abroad at any time (FIAsection five, Decree 1853/93, section

five). In this connection it must benoted that capital repatriation ispresently limited due to Central Bankforeign exchange regulations limitingthe purchase of foreign currency bynon-Argentinean residents to amonthly cap, among other restrictions.Please refer to Chapter V to this effect.

The principle of equal treatmentbetween domestic and foreigninvestors is reaffirmed (FIA sectionsone and nine, and Decree 1853/93,

sections seven and eight). Thoseforeign investors making capitalinvestments in Argentina for thepromotion of economic activities, or theextension or improvement of thosealready existing activities, have thesame rights and obligations which areconferred by the National Constitution


16/84

12


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

and local legal provisions to domesticinvestors.

Decree 1853/93 eliminated the formerneed of prior approval of thoseagreements concerning transfer oftechnology and licensing oftrademarks, patents and industrialdesigns, executed between a localcompany of foreign capital and theforeign company directly or indirectlycontrolling it. Said agreements must befiled with the National Institute ofIndustrial Property (INPI) forinformation purposes so that taxeffects established by local acts andthe treaties ratified by Argentinarelated to the avoidance ofinternational double taxation apply.

B. Bilateral Investment Treaties

All guarantees available under the FIAhave been reinforced and improved bythe Bilateral Investment Treaties (BITs)entered into by Argentina during the90s9.

BITs have been designed toencourage foreign investments,

providing investors with a safeenvironment in which to develop theirbusinesses, through severalguarantees and commitments whichare voluntarily assumed by the hostState. These guarantees deal bothwith foreign investor protection issuesand dispute resolution clauses,

9 Thus far, Argentina has signed BITs with thefollowing list of countries/regional blocks: Algeria,Armenia, Australia, Austria, Belgium, Luxembourg,Economic Union, Bolivia, Bulgaria, Canada, Chile,

China, Costa Rica, Croatia, Cuba, Czech Republic,Denmark, Ecuador, Egypt, El Salvador, Finland,France, Germany, Guatemala, Hungary, India,Indonesia, Israel, Italy, Jamaica, Korea, Lithuania,Malaysia, Mexico, Morocco, Nicaragua, Panama,Peru, Philippines, Poland, Portugal, South Africa,Romania, Russian Federation, Spain, Sweden,Switzerland, Thailand, The Netherlands, Tunisia,Turkey, Ukraine, United Kingdom, United States,Venezuela and Vietnam. BITs concluded withSenegal, Greece and New Zealand have beenapproved but are not yet in force.

providing for an international arbitrationfora, at the investors option.

BITs generally include the followingrelevant principles:

- Fair and equitable treatment, fullprotection and legal security, whichrequire the host State to provideforeign investors with a stable andpredictable investment environment.Government measures challenging thestability of the investment environmentby changing the rules and creatinguncertainty, for example, mayconstitute a breach of the referred tostandards of treatment, particularly ifthey contradict the reasonableexpectations based of which investorswere induced to act

- The exclusion of arbitrary ordiscriminatory measures, whichprevents the host State from impairingthe management, use and enjoymentof foreign investments

- National treatment, which assuresthat the foreign investor shall besubject to a treatment not less

favorable than that granted to domesticinvestors, and the most favored nationtreatment, by means of which the hostState shall recognize any bettertreatment which was previouslygranted to third State investors andinvestments

- Prompt, adequate and effectivecompensation in case ofnationalization, expropriation ormeasures tantamount to expropriation,regardless of the form, intent or

purpose of such measures

- Free transfer abroad of liquid assetsbelonging to foreign investors,comprising dividends and other currentprofits, loans and capital repatriations


17/84

13


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

- Some BITs include the obligation torespect specific undertakings inconnection with foreign investors of the

other contracting party (the so-calledumbrella clause), elevating the hostStates breaches of contractual rightsto the level of breaches of aninternational obligation under the B-Neutral forum for investment disputes,consenting the submission of allcontroversies which may arisebetween the investors and thecontracting party to the treaty to the

jurisdiction of an internationalarbitration court or tribunal, at theinvestors choice. The main aim ofBITs protections and guarantees is to

prevent or overcome any prejudice orrestrictions which the host State mayimpose on foreign investment in itsterritory, either by means of particularor regulatory measures. For thispurpose, it must be noted that thatBITs supersede domestic acts,according to both international anddomestic rules

Internationally, the principle has beenincorporated into Section 27 of theVienna Convention on the Act of

Treaties, which states that aparty maynot invoke the provisions of its internallaw as justification for its failure toperform a treaty. The ViennaConvention was ratified by Argentinaby means of Law No. 19,865.Internally, this principle can be found inthe Argentinean Constitution (Section75 paragraph 22) and has beenrepeatedly acknowledged by theArgentinean Supreme Court.10Accordingly, in case of conflict, BITsand international law should prevail.

C. Recent Argentinean Experience

10Argentinean Supreme Court, in re: Ekmekdjian v.Sofovich, decision dated July 7, 1992, Cafs LaVirginia S.A., decision dated October 13, 1994,among others.

In recent years Argentina has adoptedcertain measures that have impairedthe use, management or enjoyment of

foreign investments made in itsterritory since the late 1980s (most ofthem in the context of the massiveprivatization program implemented inthe 90s).

Some foreign investors affected bysaid measures have invoked theapplicable BITs framework in searchof protection. Accordingly, they havebrought their investment disputesbefore international arbitrationtribunals, either under UNCITRALArbitration Rules, or, more frequently,before the International Center forSettlement of Investment Disputes(ICSID).

The ICSID is an institution designed tofacilitate the settlement of disputesbetween States and foreign investors,under the system established by theConvention on the Settlement ofInvestment Disputes between Statesand Nationals of Other States. ICSIDdepends on the World Bank and hasits seat in Washington D.C. The

Convention has been ratified byArgentina by means of Law No. 24,353and entered in force on November 18,1994. The ICSID Convention providesfor a neutral and effective jurisdictionalforum to solve investment disputes.

A large number of such proceedingsagainst Argentina are currently underway.

D. Foreign Exchange

1. General Outlook

Following the 2001 economic andfinancial crisis, Argentina implementedstrict control over foreign exchangetransactions that entailed restrictionson the acquisition of foreign currencyby Argentinean and non-Argentinean


18/84

14


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

residents and on the inflows andoutflows of capital from Argentina (bothregulations are related since there are

no transfers abroad in Argentineanpesos). Decree 260/0211established asingle free exchange system wherebyexchange transactions can be made atthe parties' freely agreed uponexchange rate, subject to therestrictions established by theArgentinean Central Bank.

Pursuant to the Central Banksregulations, exchange transactions canonly be effected by entities authorizedby the Central Bank to operate inforeign exchange (Authorized FXTraders). In addition, all exchangetransactions require an exchangecontract to be executed with therelevant Authorized FX Trader in whichthe parties must disclose the purposeof the underlying transaction. Copies ofthe exchange contracts must be madeavailable for the Central Bank, which isable to analyze them and to requestinformation from the Authorized FXTraders and the customers in order toverify whether the funds were in factused for the purpose disclosed there

under. Exchange contracts areconsidered sworn statements.

The underlying principle of exchangeregulations is that no transaction maybe made if it is not expresslyauthorized by those regulations, andthat all transactions must be supportedby relevant documentation which mustallow the Authorized FX Traderinvolved in the transaction to verifywhether exchange regulations arebeing complied with. Transactions not

complying with exchange regulationsare reached by the Criminal ExchangeLaw No. 19,539, as amended.

2. Inflows of Funds into Argentina

11Issued on February 8, 2002.

Pursuant to Decree 616/200512, asregulated by the variousCommunications issued by the Central

Bank, funds entering into Argentinamay only be transferred abroad after a365-day term counted from the datethe funds were converted into Pesoshas elapsed13. Accordingly, financingsmust typically have a minimumduration of one year. In addition, allinflows and outflows of currencies fromthe Argentinean exchange marketmust be registered with the CentralBank by the Authorized FX Traderinvolved in the transaction.

Decree 616/2005 also subjects fundsentering into Argentina to a 30%withholding that must be transferredto registered non-transferable interest-free deposits with Argentinean bankingentities during a 365-day term (i.e.,30% of the funds entering intoArgentina must be automaticallywithheld by the Authorized FX Traderand allocated to this mandatorydeposit). Pending such term, fundsheld in deposit cannot be disposed byany means nor used as collateral forany transaction.

This mandatory deposit is generallyapplicable to the followingtransactions:

1. External financings, i.e.,financings granted to Argentineanresidents by non-Argentineanresidents to be repaid abroad. Themandatory deposit is not applicableto the primary issuance ofsecurities, external financings withcertain multilateral and bilateral

lending agencies and with officiallending agencies, and externalfinancings aimed at the acquisitionof certain non-financial assets orrelated with imports and exports.

12Issued on June 9, 2005.13 Decree 285/03, issued on June 26, 2003, hadpreviously stated a 180-day term.


19/84

15


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

According to the Central Banksregulations, only assets that areregistered in the balance sheet of

the companies as durable goodsmachinery and equipment(bienes de uso) or inventory(bienes de cambio) andexploitation rights (derechos deexplotacin) qualify as non-financial assets for purposes ofthis exemption. In addition, externalfinancings aimed at the acquisitionof non-financial assets must have aminimum duration of two years onaverage considering principal andinterest payments.

2. Transfers by non-Argentineanresidents except for directinvestments (as this term is usedinternationally14), which comprisethe acquisition of participations inlocal companies15 and assets

14 The concept and characteristics of directinvestment is detailed in point 359 of the FifthEdition of the Balance of Payment Manual of theInternational Monetary Fund: Direct investment isthe category of international investment that reflectsthe objective of a resident entity one economy

obtaining a lasting interest in an enterprise residentin another economy. (.) The lasting interestimplies the existence of a long-term relationshipbetween the direct investor and the enterprise and asignificant degree of influence by the investor on themanagement of the enterprise. Direct investmentcomprises not only the initial transactionestablishing the relationship between the investorand the enterprise but also all subsequenttransactions between them and among affiliatedenterprises, both incorporated and unincorporated.15 Pursuant to the Central Banks regulations, themandatory deposit must remain until the capitalcontributions are capitalized or the shares acquiredare transferred to the investor, which must beproven to the Authorized FX Trader in charge of thetransaction. In addition, said regulations provide

that in order to be exempted from the mandatorydeposit, local companies must prove the finalcapitalization of the contributions within 190 daysas from the date in which the relevant filings withthe Public Registry of Commerce are made. Incase the final capitalization of the capitalcontributions does not take place within theaforementioned term, the companies shallconstitute the mandatory deposit within tenbusiness days following a 180-day period countedas from the date in which the relevant filings withthe Public Registry of Commerce are made.

located in Argentina that qualify asdirect investment.

3. Repatriation of capital byArgentinean residents for thesurplus exceeding USD 2M percalendar month.

Inflows by non Argentinean-residentsthat are applied to the payment ofcertain taxes and contributions areexempt from the mandatory deposit.

3. Outflows of Funds from Argentina

The various regulations issued by theCentral Bank have relaxed restrictionsimposed on outflows of funds fromArgentina, particularly regardingfinancings repayments, and paymentsof services, commercial debts anddividends.

Repayment of external financings isgenerally permitted provided that therelevant financing complied with theapplicable exchange regulation (theminimum duration and the 30%mandatory deposit) and was disclosedby the debtor pursuant to a certain

information regime established by theCentral Bank. In addition, prepaymentof debts with non-residents domiciledabroad is permitted provided thatcertain conditions are met16.

Payment of profits and dividends toforeign shareholders (or other foreignpartners) resulting from financialstatements certified by externalauditors is permitted, irrespective ofthe sums involved. Services renderedby, and commercial debts owed to,

16The financing must have been outstanding duringthe applicable minimum duration and the paymentto be made must not exceed the then debts presentvalue. The debts present value is calculated bydiscounting the future principal and interestpayments at an annual effective interest rate equalto the implicit interest rate of the 180-day-U.S.Dollars-futures in the Argentinean self regulatorymarkets (according to Communication A 4354,issued on May 26, 2005, as amended).


20/84

16


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

non-Argentinean residents, may bepaid with no limitation.

The Central Banks regulations allowrepatriations of capital by non-Argentinean residents resulting fromthe disposal of direct investments inthe Argentinean non-banking sectorprovided that the relevant directinvestment has been maintained bythe by non-Argentinean resident for atleast one year17. Capital repatriationsare subject to a USD 2M monthly capwhen they result from the winding-upof a company and to a USD 500,000monthly cap when they result from theliquidation of portfolio investments.Except for these exceptions,purchases of foreign currency by non-Argentinean residents are subject to amonthly cap of USD 5,00018.

Consequently, as of the date of thisdocument:

1. Inflows of funds are typicallysubject to a 30% mandatorydeposit, including externalfinancings.

2. External financings aimed at theacquisition of certain non-financialassets, related with imports orexports, or granted by multilateraland bilateral lending agencies orofficial lending agencies aregenerally exempt from themandatory deposit.

3. Transfers of funds into Argentina bynon-Argentinean residents aresubject to the 30% mandatorydeposit unless they are aimed at

direct investments.

4. Transfers of money abroad for therepayment of interest and capital of

17Pursuant to Communication A 4129, issued onJune 9, 2005 and regulated by communication A4359, as amended.18According to Communication A 3661.

external financings are subject tono restrictions provided that therelevant financing was taken, and

disclosed to the Central Bank, inaccordance with the applicableforeign exchange regulations.

5. Transfers of money abroad for thepayment of profits and dividendscorresponding to financialstatements certified by externalauditors are subject to norestrictions.

6. Purchases of foreign currency byArgentinean residents are limited toa monthly cap of USD 2M.

7. Purchases of foreign currency bynon-Argentinean resident arelimited to a monthly cap of USD5,000 except in certain cases ofcapital repatriation in which highercaps are applicable.

E. Transfer of Technology

All agreements signed between alicensor domiciled abroad and alicensee domiciled in the country which

have effect in Argentina and in whichthe main or incidental objective is thetransfer, assignment or licensing offoreign technology or trademarks inexchange for valuable compensationare governed by Law No. 22, 426.

The term "technology", as defined bythe Law, encompasses all patentableinventions, industrial models anddesigns and any other technicalknowledge applicable to themanufacturing of a product or the

rendering of a service. Transfer oftechnology agreements must be filedwith the INPI for information purposesonly.

There are no limitations concerningany of the following issues: the amountof royalties which can be paid, terms of


21/84

17


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

duration, clauses limiting the licenseeslevel of exports or excluding thelicensor's product liability, submission

to foreign jurisdiction, etc. However,terms and conditions of theagreements between related parties(mainly between controlling andcontrolled companies) should be inaccordance with the arms lengthprinciple.

The proceeding of registration with theINPI should be initiated by the localparty. For that purpose three copies ofthe agreement must be filed, togetherwith a sworn statement containing,among other information, the following:name and domicile of the parties,licensors participation in the licenseescapital stock, description of thetechnology and/or trademarks whichare being licensed or transferred,number of employees of the licenseeand estimated payments which shallbe made under the agreement.

Agreements which are not filed withthe authorities are, notwithstanding therequirement of filing, valid andenforceable. However, the licensee will

not be able to deduct royalties paid asexpenses for income tax purposes andthe total amount of royalties will beconsidered taxable income withrespect to the licensor and thereforesubject to a withholding of 35%according to articles 92 and 93 of theIncome Tax Act.

If the agreements are registered thusfiled with the INPI, payments made bythe licensee will be deductible forincome tax purposes and only a

portion of such payments will beconsidered income taxable in thecountry: In agreements dealing withtechnical assistance, consulting andengineering services which are notobtainable in Argentina as judged bythe INPI, only 60% of the valuablecompensation will be considered netincome subject to a withholding of

35%. Consequently, the effective taxrate will be 21% on the gross amount.

In the case of all other transfer oftechnology agreements (sale orlicensing of patents, trademarks,industrial models and designs andknow-how), 80% of payments will beconsidered net income subject to awithholding of 35%. In this case, theeffective rate will be equal to 28% onthe gross amount.

Argentina has entered into doubletaxation agreements with severalcountries (See X. A.2). Agreementssigned with European countries andthose signed with, Canada andAustralia foresee fixed withholding taxon royalties paid to residents of thosecountries which are lower than thoseestablished by the Argentinean incometax law.

F. Anti-Corruption

Argentina is a Member State of: (i) theInter-American Convention againstCorruption ; (ii) the OECD Conventionon Combating Bribery of Foreign

Public Officials in InternationalBusiness Transactions; and (iii) theUnited Nations Convention againstCorruption. The main laws andregulations are:

- Criminal Code, sections 256 to 259

- Law No. 25,188 (Ethics within theexercise of Public Duties)

- Decree No. 41/99 (Ethic Code ofPublic Duties)

- Law No. 25.164 (Rules of NationalPublic Employment)

- Decree No. 1162/00 (Liability ofPublic Employees to Report PublicCrimes in the exercise of their duties)


22/84

18


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

- Decree No. 1023/01 (Regime ofNational Administrative Contracts)

- Decree No. 436/00 (Rules For ThePurchase or Sale of Property And TheHiring of Public Services)

- Ministry of Economy Rule No. 834/00(General Rules and Conditions for theHiring of Public Property and Services)

- Rules or conduct codes applicable tospecific governmental entities (taxauthority, police, nuclear regulatoryauthority, etc)

In particular, it must be noted that theCriminal Code criminalizes active andpassive bribery to local or foreignpublic officials, with imprisonment from1 to 6 years. If the recipient is a judge,the maximum punishment for theofferor shall be 12 years, while thepunishment for the public official shallbe from 4 to 12 years. In all cases,disqualification from public service mayalso apply.

In addition, the Criminal Codesanctions illicit enrichment crimes with

imprisonment of up to 6 years andfines of up to 100% of the value of theenrichment, and disqualification frompublic service.

A bill has been recently introduced inCongress, inter alia (i) extendingcriminal liability to companies forunlawful acts committed by itsemployees, proxies and other personsacting in the entitys benefit; and (ii)clarifying the definition of foreignofficial in corruption crimes.

G. Anti-Money Laundering

Anti-Money Laundering is regulated byLaw No. 25,246 (the Anti-MoneyLaundering Act). Money laundering isdeemed a criminal offense and isdefined as the exchange, transfer,

administration, sale, encumbrance orany other use of money or assets withan aggregate value of more than AR$

50,000 obtained through a crime, by aperson who did not take part in suchcrime.

The Anti-Money Laundering Actcreated the Financial Information Unit(Unidad de Informacin Financiera orUIF) which is a special governmentalagency responsible for monitoringcompliance with the Anti-MoneyLaundering Act. In addition, the Anti-Money Laundering Act imposed aseries of obligations to certainindividuals and legal entities includingfinancial entities, exchange agencies,broker-dealers, insurance companies,brokers and agents, and several publicagencies.

In accordance with the Anti-MoneyLaundering Act, those persons areobliged to:

(i) request from their customersdocumentation proving theiridentity, domicile and other basicdata;

(ii) report to the UIF any suspicioustransaction, which is consideredany transaction that is unusual,lacks economic or legal

justification or involves anunjustified complexity, taking intoaccount market practice; and

(iii) refrain from disclosing to thecustomer or third parties anyinformation concerning suchsuspicious transactions and any

proceedings carried out under theAnti-Money Laundering Law.

The UIF has issued several resolutionsregulating activities such as the scopeof key terms contained in the Anti-Money Laundering Act (such ascustomer), guidelines identifying


23/84

19


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

unusual or suspicious activities,internal policies to be implemented bythe obliged persons, and a non-

exhaustive list of unusual or suspiciousactivities, which is regularly updated.

IV. TRADE REGULATION

A. Off icial Structure

The main authority governingArgentinean trade policy is theNational Secretariat of Industry, Tradeand Small and Medium SizedCompanies (the ITSMC Secretariat).

The tax authority, AFIP, drafts customsrules, regulations, and tariff schemes,and supervises the Customs Office inorder to make tax evasion policiesmore effective.

The Customs Office is responsible forthe administrative application of theCustoms Code19, which establishesspecific policies and proceduresgoverning foreign trade, including theentry, exit, transportation, and controlof goods and international transport.

Other agencies relevant to theimporting process include: (i) theMinistry of Public Health and SocialWelfare, which handles the registrationof pharmaceuticals and other healthproducts, prior to importation; (ii) theIndustry Under secretariat, whichsupervises the automobile industry andimportation of vehicles; (iii) theSecretariat of Agriculture, Cattle,Fishing and Food, which regulatesagricultural, cattle, fishing and foodimports; and (iv) the National Foreign

Trade Commission (NFTC), whichinvestigates dumping and unfairimports.

B. General Regulations

19Law No. 22,415, as amended.

Argentinean customs procedures havetraditionally been extensive and time-consuming. In order to change this

situation, the local Customs office hasintroduced a data processing systemallowing for quick cargo clearance andpayment of duties referred to as"Sistema Mara".

Furthermore, Argentina hasimplemented an automatic system forthe selective control of merchandise. Inthis direction, goods may go throughone of three different channels: greenchannel (no inspection), orangechannel (documentation inspection)and red channel (subject to physicaland documentation inspections).

The channel assignments are madeaccording to the goods involved. Forinstance, if the goods are subject tospecific controls (i.e. pharmaceuticaldrugs, guns, etc.), they will besubmitted to the "red channel". On theother hand, if the goods are notnecessarily subject to specific controls,then the channel will be assignedrandomly among the three.

C. Tariffs and Other Import andExport Charges

1. Import Tariffs

Basic tariff rates applied to the CIF(cost, insurance, and freight) value ofimports, for most of the tariff lines,range from 0% to 35% (ad valoremduties).

In all cases, duties are established byidentifying goods in accordance with

their respective harmonized codesunder Mercosur Common Codeprovisions, which are based on theHarmonized Commodity Descriptionand Coding System for classifyinggoods and assigning tariffs.


24/84

20


SEPTEMBER 2010

Suipacha 268, 12t h



Tel.: (54-11) 4321-7500Fax: (54-11) 4321-7555

[email protected]

An additional 0.5% is imposed asstatistical tax on all products originatedin countries not belonging to the

Mercosur, including MercosurAssociated Countries Bolivia, Chileand Venezuela.

2. Other Levies

Additional charges on imports includea 21% value-added tax (VAT)applicable to CIF values, in addition totariff and statistical tax (VAT is appliedto all products regardless of whetherthey are imported or produced inArgentina). A 10 % advance paymenton VAT (except for capital goodsimported by final users) must beeffected on the date of entry, which iscredited upon final payment. Likewise,there is a 3% anticipated profit tax onall consumer goods (deductible fromnet profit tax).

According to section 3 of Decree618/1997, AFIP is entitled to enter intocollecting agreements with provincialtax authorities, as well as to act in finalimports of goods as a collector agent(agente de percepcin) of local taxes

levied on the consumption orcommercialization of goods. Inaccordance with these agreements,AFIP, through the Customs Office,must collect the turnover tax upon finalimports carried out by importersdomiciled and registered as directtaxpayers in a given jurisdiction.As a result of these agreements, AFIPGeneral Resolution No. 1,408/2003states that importers registered in

jurisdictions that have collecting

agreements with the AFIP are subjectto an advance turnover tax of up to 1%of the VAT taxable base.

Excise taxes may also apply to specificproducts such as cigarettes, whisky,hard liquor, beer, soft drinks, etc. All

taxes must be paid for and registeredbefore Customs grants clearance.

3. Export Tariffs

Basic tariff rates applied to FOB (freeon board) value of exports for mosttariff lines range from 5% to 40%. Inthe case of imports, duties areestablished by identifying goods bymeans of their harmonized codescontained in the MCC.

D. Unfair Prac

Date post:	10-Feb-2018
Category:	Documents
Upload:	vskywokervs
View:	218 times
Download:	0 times