Doing Business in ArgentinA - camaradanesa.org.arcamaradanesa.org.ar/Doing_Business_2007.pdf ·...

Doing Business in ArgentinA the hAnDBook

A publication by the Argentine-Danish Chamber of Commerce & Industry

Disclaimer: This publication is designed to provide accurate information in regard to the subject matter covered. It is distributed at

no charge with the understanding that neither the publisher nor the institutions that have contributed to this handbook are engaged

in rendering legal, accounting or other professional services. The articles presented by the companies and the text in this report may

be reproduced in whole or in part whenever the source is mentioned.

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Acknowledgements

The Argentine-Danish Chamber of Commerce & Industry would like to thank the following people, organisations and companies without whom the first edition of this handbook wouldn’t have been a reality:

CMD (Centro Metropolitano de Diseño), Estudio Rossi, Camilión & Asoc., Fundación Habitat & Desarrollo, GL Marketing Global, SMS & Asoc., Sustentable SRL., Vestas Argentina S.A., Andrés Albertsen for their hard work and intellectual collaboration; Arla Foods Ingredients S.A, Estudio Rossi, Camilión & Asoc., Estudio Willa, Feir’s Park Hotel, Hempel Argentina SRL, Maersk Argentina S.A., MGI Jebsen & Co, SMS & Asociados and Vestas Argentina S.A. for their financial contribution; Graciela Luzuriaga, Carolina Levy and Rune Harritshøj for their continued support and encouragement, and finally María Valeria Buquiere, Santiago Farrell, Pierre Dumas, María Cecilia Sáenz and Berenice Schmittendorf (Zettel Diseño) for the coordination, edition and talented artwork of this book.

Doing Business in Argentina The Handbook

Danish Argentine Chamber of Commerce & Industry Av. Leandro N. Alem 1074, 12th floor C1001AAS, Buenos [email protected]

Doing Business in Argentina - The HandbookPrinted in Buenos Aires, Argentina - September 2007 by RivolinJournalist responsible for interviews: Rune V. Harritshøj, [email protected] Edition: María Valeria Buquiere, Santiago Farrell, Pierre DumasDesign: Berenice Schmittendorf, María Cecillia Sáenz (Zettel Diseño)

Executive Committee members and management of the Argentine-Danish Chamber of Commerce & Industry

PresidentBjarne Petersen (Mercotuc SRL)Vice PresidentPeter Hald (Viking Life Saving Equipment -America- Inc.)Honorary SecretaryJosé Pascar (Comtradex S.A.)Honorary Deputy-SecretaryJorge Albertsen (Estudio Rossi Camilión & Asoc.)Honorary TreasurerRichard Christensen (Christensen SRL)Honorary Deputy-TreasurerVagn Pedersen (Maersk Argentina S.A.)DelegateAage Jacobsen (Chr-Hansen Argentina S.A.I.C)Accounts CommitteeFernando Moretti (Hempel Argentina SRL)Bjarne Pedersen (Arla Foods Ingredients S.A.)ManagerJorgelina [email protected]

The cover reproduces part of a painting by Micaela Nuñez, self-taught painter from Uruguay who is the only woman that has been working in Argentina developing marine art and the painting of the sea and its environments. We would like to thank very specially Chamber member Graciela Luzuriaga for kindly donating this art piece that portrays the new Chamber logo.

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Useful Websites

• About Argentinawww.argentina.gov.ar • Ministry of Foreign Affairs, International Trade and Cultwww.mrecic.gov.arTrade helpdesk: www.argentinatradenet.gov.ar• Fundación Export.Ar(Export Promotion Agency)www.exportar.org.ar • Secretariat for SMEs and regional developmentwww.proargentina.gov.ar • Ministry of Economywww.mecon.gov.ar • Argentine Chamber of Commercewww.cac.com.ar • Brand Argentina (Marca País)www.marcaargentina.gov.ar • National Institute for Statistics and Census www.indec.mecon.ar • National Secretariat for Tourismwww.turismo.gov.ar • Ministry for Education, Science & Technology www.me.gov.ar • Argentine Exporters Trade Associationwww.cera.org.ar

Danish Presence in Argentina (Websites)

• Royal Danish Embassy in Buenos Aireswww.buenosaires.um.dk • Argentine-Danish Chamber of Commerce & Industrywww.camaradanesa.org.ar • Danish Churchwww.iglesiadinamarquesa.com.ar • Danish Community in Argentinawww.dkargentina.com.ar • Danish tourist corridorhttp://www.inta.gov.ar/barrow/ins/cambiorural/corredor_danes.htm

Newspapers (some)

• La Nación: www.lanacion.com.ar• Clarín: www.clarin.com • Infobae: www.infobae.com • Ambito Financiero: www.ambitoweb.com • Buenos Aires Herald:www.buenosairesherald.com • Argentinisches Tageblatt:www.tageblatt.com • El Cronista Comercial: www.cronista.com • Página/12: www.pagina12.com.ar

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TABLE OF CONTENTS

This publication is presented under the following chapter headings and contents

Chapter I: page 14 An Overview of ArgentinaLocation and languageGeography and climateLandscapeDemographicsPolitical system

Chapter II: page 18Economic structureGeneral Overview – Economic ProfileAgriculture and livestockOther primary sectorsIndustryConstructionFinancial servicesOther servicesThe 1990’sEvolution of the Argentine Economy during the first quarter of 2007

Chapter III: page 26Legal Framework and settingup a companyCommercial LegislationCorporation - Sociedad Anónima (S.A.)Limited Liability Partnerships - (S.R.L.)General Partnership - (Sociedad Colectiva)Non Commercial General PartnershipsLimited Partnership - (Sociedad en comandita)Joint Ventures

Books and RecordsOversight AgenciesCorporate alternatives for Investing in the countryLabour systemGeneral requirementsLabour contractCollective bargainingRemunerationLeavesGuiding Principles on Environmental Law

Chapter IV: page 40The Argentine Tax SystemDistribution of taxing powerBrief description of the tax systemInternational tax coordinationFederal and local taxes

Chapter V: page 45Further considerationsTransport and CommunicationsOil & GasElectricity & Nuclear PowerWind Energy - The marketThe MercosurCreating a brand for Argentina Creative Industries Environmental Regulations• Civil and Criminal Code• International framework

Chapter VI: page 61Interviews

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A mESSAgE FrOm THE CHAmBEr PrESIDENT

During the last few years, Argentina has gone through a series of economic changes that, together with other factors, such as a highly qualified labour and an abundance of natural resources, has made the country an attractive destination for business and investment.

Although the trade balance between Denmark and Argentina, historically has been in Argentina’s favour, with Denmark accounting for 0. 62% of total Argentine exports during the last years, Danish investment and presence is quite strong, totaling us$ 1.15 million.

In 2003, Argentina was the second largest supplier of honey to Denmark, after Germany, accounting for 23% of total Danish imports.

This handbook is aimed at the foreign business-, and investor community, who see Argentina as a potential market.

The Chamber of Commerce is a non-profit organisation, whose primary mission is to facilitate trade relations between our two countries, and provide its members with a business forum, and services of value. Having this objective as our top priority, we invited some of our members, experts in their respective fields, to put together this user-friendly handbook, whose main purpose is to offer a wide range of basic information to the foreign businessman.

We are also busy revitalising our institutional links with the local export and trade associations, as well as with the other binational Chambers of Commerce, in order to provide our members with the widest possible range of business contacts. During the next few months, there will be various new initiatives taken by the Chamber, to make it more responsive to and representative of its members.

Like Argentina, the Chamber is now preparing for a future, in which a stronger bilateral trade relation between our two countries is a reality. Don’t hesitate to contact us for further guidance, and access to our networking base.

Bjarne PetersenPresident

This map has been published merely for ilustrativepuposes.

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The Argentine Danish Chamber of Commerce & Industry was founded in 1992 to promote relationships between the Argentine and Danish business communities. The Chamber’s primary mission is to facilitate bilateral trade and provide its membership with value services.

Whenever necessary, it provides support to the Danish Embassy in Buenos Aires as well as to the Argentine Ministry of Foreign Affairs and local export promotion agencies.

The Chamber can also provide tailor-made services such as agendas and business rounds for businessmen visiting the country as a way to support companies who wish to set up in Argentina.

Become a member and make the most of the Chamber!

Key eventsIndustry sector seminars and working breakfasts and luncheonsDebates with specialist speakersHigh level of speakers from business and politicsTargeted networking opportunitiesSpecial interest presentations

Key contactsThrough the Chamber you can gain extended networking and immediate access to the following:• Other binational Chambers of Commerce

THE ArgENTINE-DANISH CHAmBErOF COmmErCE & INDUSTry

(European and non European)• Local trade associations• A wide range of general professional services including tax, financial, language and market research, among others• Other Danish organisations

Working groupsVery soon the Chamber will be launching key working groups in• Environment & CSR• Social and Cultural events• International trade

Learn more in k@mmer-tjenesten or our website: www.camaradanesa.org.ar

PublicationsIn February, the Chamber launched its first electronic publication: k@mmer-tjenesten which is circulated among its members and subscribed companies. The aim is to keep a close contact with members offering snapshots on: member news, legal updates, chamber developments, business and finance, as well as cultural life and Danish presence in Argentina.

If you want to know more about us or subscribe to k@mmer-tjenesten do let us know at: [email protected]

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Location and LanguageThe Republic of Argentina is located in South America. It is the 7th largest country, with a surface of 3,761,274 km² (including the Antarctic territory). From North to South it is 3,700 km long, whereas from East to West the maximum extension is of 1,425 km.Argentina borders on the Republics of Chile, Bolivia, Paraguay, the Federal Republic of Brazil, the Oriental Republic of Uruguay and the Atlantic Ocean. It is made up of a Federal District (Cuidad Autónoma de Buenos Aires) and 23 provinces. The official Language is Spanish (English also spoken at managerial levels).

geography and climateArgentina’s topography is highly varied, ranging from fertile plains in the central region to mountains in the west and a semi-arid zone in the south. Argentina’s wealth has always been in the land. The huge expanse of flat grasslands, known as the pampas, stretches 2,000 kilometers across the middle of the country. The soil is ideal for both raising cattle and growing many crops. Today Argentina is one of the largest exporters of beef and wheat. Other important crops include maize and sorghum whilst the area sown to oilseeds such as sunflowers is now greater than that sown to wheat. Further south, in Patagonia, the land is less fertile and sheep farming is the most viable enterprise, except in the protected valleys of the

AN OVErVIEW OF ArgENTINA

province of Río Negro, where apples and other soft fruit are grown. In the countryside around the city of Mendoza the altitude, plentiful water from the mountains and settled weather make an excellent area for growing vines. Argentina is now the fifth largest wine producer in the world. Other Mediterranean fruits are also grown in this area. In the Andean region to the north of Mendoza, much of the land supports subsistence farms with fruit, maize and peppers being grown on the fertile soils in the river valleys of Salta and Jujuy provinces. To the east of the Andes, there are largely uninhabited subtropical marshlands. Within this region there are some areas of forest and other areas in which cotton, tea and the mate bush are cultivated.To the south of Rio de la Plata a large coastal area provides rich fishing although certain species such as squid and hake have been over fished.

LandscapeArgentina is enormously varied in types of land and climate. The country can be split into four main geographical areas • The Andes, which stretch the whole length of the country. They are low to the south but high and dry in the northwest.• The North and Mesopotamia, principally made up of vast plains and gently rolling land.• The Pampas, which makes up the middle of the country, also made up of vast flat plains. The western part is often referred to as the Dry

CHAPTEr I • AN OVErVIEW OF ArgENTINA

CHAPTEr I

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Pampa while the eastern part, which receives more rain and is more productive, is known as the Humid Pampa.• Patagonia, which lies in the south and is an arid plateau. It is swept by almost continuous winds, which are stronger in the south.To the south of the mainland is the cold, wet and mountainous Tierra del Fuego. The Atlantic coastline of Argentina is more than 2,500 kilometers long. Temperature and rainfall:Argentina experiences a wide range of climate. The climate varies from the subtropical to the sub-Antarctic. Between these two extremes lies a wide temperate belt well suited to agriculture.The north is subtropical with temperatures reaching 40ºC from December to February. The central Pampa region, where the majority of the population lives, is temperate. However, summer temperatures in Buenos Aires can reach 35ºC with very high humidity. Temperatures in wind-swept Patagonia rarely creep above 20ºC while the climate in Tierra del Fuego is cold temperate.

Demographics

The population is mainly of Spanish and Italian descent, although it also includes people from many other national origins. Different ethnic and religious groups coexist peacefully. The middle class accounts for most of the population. The literacy rate is high, as well as the enrollment rate in primary, secondary and higher education. Labour is comparable in skills and aptitudes with that of most developed countries, especially at technical and professional levels.The total population in 2001 was 36.260.130 inhabitants: 17.659.072 men and 18.601.058 women. Density: 13,0 inhabitants per km2.

Form of government and Political SystemSince 1853, the Argentine Republic has adopted a representative, republican andFederal form of government thus it is a presidential republic. Each president serves a four-year term and may be re-elected only once. Election is by universal suffrage (over 18 years). There is a bicameral Congress; a Chamber of Deputies with 257 members and a 72-member Senate. Deputies are elected for a four-year term, half being elected every two years.

National HolidaysThere are 11 national Holidays. Four of them are moved to the prior Monday if they fall on Tuesday or Wednesday or to the next Monday if they fall on Thursday or Friday (April 2, June 20, August 17, October 12). Seven are not moved (January 1, Good Friday, May 1; May 25, July 9, December 8 and December 25).


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Danish community and Danish immigration to Argentina

Between 1857 and 1930, about 18,000 Danes came to Argentina. Most of them established in the South of Buenos Aires province to work the land, mainly in the cities of Tandil, Tres Arroyos, Necochea, Coronel Dorrego and Bahía Blanca.It all began when in 1860, Juan Fugl, after having lived in the borders of Tandil for about 14 year, went back to Denmark where he not only obtained the tools and materials to build the first flour mill in Tandil, but also married a niece and convinced a few old neighbours and friends to emigrate to a pampa full of promises, fertile land and guaranteed prosperity. The information from the letters that these settlers sent to their families and friends in Denmark, convinced many others to follow the same destiny.

The impact by the Danish presence in this area of Buenos Aires is seen not only in the contribution to agriculture and cattle raising but, also in the formation of cooperatives, education of children, culture promotion, assistance to the elderly and the alternative to a dominant roman-catholic religion.There were Danes among the founders of most of the cooperatives in the area. The “Asociación Mutual Dan” in Tres Arroyos is a renowned entity that offers health coverage and insurance against hail. The Necochea Danish-Argentine school called “Alta Mira” is amongst the most prestigious schools in the city and has a well-known choir, whereas the Micaela Cascallares Danish-Argentine school, set in the middle of the camp, struggles to survive with its old building that every year also houses the event known as the “Ocho Días” (Eight Days) which, like in the Danish højskoler, gathers Danish-argentine people from all the country to conferences, singing and other activities with a special figure from Denmark as guest of

Further information at www.indec.mecon.ar (INDEC - National Institute for Statistics and Census)www.turismo.gov.ar (National Secretariat for Tourism)www.me.gov.ar (Ministry for Education, Science and Technology)

Currently, each province elects two senators for the majority party and one for the minority party, all of which serve for a six-year term. The President appoints a cabinet and a chief of cabinet who can be removed by a majority vote in each of the two houses.The country is divided into an autonomous city

(Ciudad Autónoma de Buenos Aires) and 23 Provinces. Each Province has its own Governor, legislature and judiciary.Judicial power lies with the Supreme Court and other competent courts. The nine Supreme Court judges are chosen by the President with the approval from the Senate.


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Further information at: www.sorenkierkegaard.com.ar - Kirkegaard Library (Argentina) www.dkargentina.com.ar - Danish Community in Argentina www.iglesiadinamarquesa.com.ar - Danish Church in Buenos AiresDansk Club (Buenos Aires): Av. Leandro N. Alem 1074, 12th floor. Tel: (54-11) 4312-9266.Scandinavian Rowing Club, in Tigre (northen Buenos Aires): Tupac Amarú 1046.Necochea: Alta Mira Argentine-Danish School, Dansk Klub, Danish Danevirke Society, Argentine-Danish Cultural Centre.Tres Arroyos: Danish Centre, Asociación Mutual DAN, Danish Union, Argentine-Danish School.Coronel Dorrego: Club Danés del Sud. Tandil: Danish Church, Dansk Klub. Bariloche (Patagonia): Dansk Klub.

honour and speaker. The old people’s home, “El Atardecer”, a private joint-effort between the Danish and Dutch communities of Tres Arroyos, is an institution that has nothing to envy the best European institutions of the kind. The Danish Church in Tandil is the oldest in the city. The Danish Churches is the city of Necochea, and in the small towns of La Dulce and San Cayetano, are impeccable buildings that draw the attention of all visitors. The Danish Cemetery in Tres Arroyos is one of the very few of its kind outside Denmark. Sponsored by INTA (National Institute for Agricultural Technology) and aiming at revitalizing, a group of Danish farms, clubs and the aforementioned Micaela Cascallares school have launched the first “Corredor Turístico Danés” (Danish Tourist Corridor) to offer their “Danish touch” to those who still don’t know them.Since the middle of 19th century, there have been Danes in Buenos Aires, with their own institutions which long ago discovered that opening up to non-Danish people helped preserve their singularity. The Danish Beneficent Association was the traditional institution that during decades helped the new comers, especially those coming outside their family circles, to find a job in Danish farms or through the Danish newspapers published in the capital. There are small groups of Danish people and descendants who have their own clubs in cities like Bariloche, in Río Negro, and Eldorado in Misiones, but in almost every corner of the country one will be surprised to find that a Dane left his imprint, even in a remote place like El Chaltén, in the province of Santa Cruz, where everybody will speak wonders of the Danish pioneer Andreas Madsen.

By Andres Albertsen.


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general Overview - Economic ProfileArgentina has traditionally based its economic structure on its magnificent natural resources and highly qualified human resources. The country’s agricultural products have for many decades been the sole source of its export policy and the mainstay of the economy. After World War II there was a long period of protectionism with the idea to develop a manufacturing industry. Many manufacturing industries were created without economic sustenance and have disappeared, but others have survived and become competitive in international markets.The Argentine economy had for years and until 1990 continuous macroeconomic imbalances, with high inflation rates, devaluations, fiscal deficits, protectionism and government intervention. During the decade running from 1991 to 2001 most state-owned companies were privatised, many economic sectors were deregulated, the economy was opened to foreign trade and a convertibility regime (currency board) was implemented. This regime ended in a new crisis by the end of 2001 since it was inconsistent with continuous and high fiscal deficits and also a high an increasing internal and foreign debt.As from 2002, and after a severe devaluation, a floating exchange regime was initiated -though sustained by the government- which up to date has been maintained in the context of increasing primary fiscal surpluses and a relatively prudent monetary policy.

ECONOmIC STrUCTUrE

Agriculture and livestockAgriculture, livestock and agro-industries, play a leading role in the Argentine economy. The sector produces mainly cereals and oilseeds. Argentina’s cattle herds and sheep are raised on the fertile plains of the central region and in other suitable areas.Sugar, fruit, honey, wine, tea, tobacco, cotton and other internationally marketable products are also produced.Despite Argentina’s natural competitive advantage in agriculture, the development of the sector has been for years below its potential and investment has fluctuated considerably. As a general rule, agricultural policy has been dominated by macroeconomic imbalances mainly frequent changes in export taxes and unstable exchange rates.During the period 1991-2001 agricultural production increased by about 70 %. During these years, which coincided with the convertibility regime, the sector benefited from low prices for inputs and the exchange stability; the other side of the convertibility was an increasingly overvalued peso and high interest rates which coincided with lower international prices since 1996.This expansion of the agricultural sector drove the livestock production to more marginal areas and the production of meat decreased. This process was also affected during those years by a shift of consumer preferences away from red meat and also outbreaks of foot and mouth disease that limited exports to European

CHAPTEr II • THE COUNTry´S ECONOmIC STrUCTUrE

CHAPTEr II

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countries, the largest clients.As from 2002 the agriculture in general has benefited from the increase in international prices and the significant devaluation, though the government introduced export retentions that reduced the exchange rate received by producers.

Other primary sectorsFishing. The continental shelf covers about 1 million square Kms. (about 385,000 square miles). The annual catch has more than doubled since the 90s but, its development is subject to the restrictions in order to preserve the stock from depletion and the barriers to exports, since a large proportion of the catch is exported mainly to Spain, Brazil, US, Italy and Colombia.Forestry. Most of the original hardwood forests have been cleared, but extensive areas are being renewed to provide raw material for the paper and cellulose industries. There is great potential for the increase in current timber production and since 2001 a tax incentive scheme is in force to promote investments in this sector.Mining. Mineral resources, mainly located in the Andes, have so far been insufficiently explored. Deposits of copper, gold, molybdenum, potassium, lithium, silver, zinc, lead, marble and granite are the most important potential products. Mining activities have increased significantly during the last decade, mainly through foreign investments. This sector also has an incentive tax scheme to promote investments; approximately 70 % of the

extraction volume is exported.These primary sectors together with agriculture and livestock represent more than 8% of GDP.

IndustryIndustry has become increasingly important since World War II and currently represents over 16% of GDP. Major manufacturing industries include agro-industries and food processing, automobiles and trucks, chemicals, machinery and equipment, metallurgy (including steel and aluminium), petrochemicals, paper and cellulose (including newsprint for internal consumption) and textiles.During convertibility, the industrial sector was the most affected because of an overvalued peso and the recession that started in 1998 and which through 2002 originated a 20% decrease in the GDP. Industry’s participation in the GDP fell from 17.5 % in 1997 to 15.4 % in 2001. Since 2002, the manufacturing sectors had in the areas of exports and imports substitution the largest opportunities to recover volumes and profitability. Currently, it is estimated that this sector has recovered the levels achieved in 1998, though not necessarily in all sectors.

ConstructionConstruction represents more than 4 % of GDP. It reached 5.9 % in 1998 and afterwards started falling as a consequence of the 1998 recession, accounting for 4.8 % by 2001. During this period, most of the investment was made by the private sector, both in relation to residential


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and non-residential construction, given the budget restrictions by the national and provincial governments. Availability of mortgage loans, which disappeared after the crisis, was one of the factors that helped the sector recover.Even though this-type loans are not available as before, the construction has shown the highest growth and has already surpassed the record levels achieved back in 1998.

Financial servicesThe financial, insurance and real estate sectors represent more than 19% of GDP. During the first part of the 90´s, their expansion was significant, driven by the deregulation, foreign investment and an increasing consumption.The banking system went through an important consolidation at the time of the Tequila, reducing the number of mainly local private entities. Nevertheless, the convertibility crisis made an important negative impact in the system. In 2001, banks suffered the withdrawal of a significant amount of deposits, due to the uncertainties on the continuation of the convertibility plan and in 2002 the freeze on deposits and the asymmetric “pesification” (convertion into the peso) of assets and liabilities impacted negatively on both the entities and the availability of credit.As a consequence, the system had to restructure and little by little it began to show some positive results.

Other servicesService industries are a significant growing share of the economy. Advertising, software and computer services, Internet, and management consultancy among others, are highly developed and sophisticated reaching the highest

international standards.Wholesale and retail distribution is organised in a variety of ways. There are large local and international organisations with nation-wide distribution, depending on the line of industry, and a very large number of individually owned businesses. Argentina has a very large proportion of retail outlets per inhabitant, which is due mostly to an increasing number of self-employed individuals. During the last decade, shopping centres and supermarket chains have been developed in major cities with considerable foreign participation.Tourism is a developing industry, with great potential for growth. The country has many beautiful areas still untapped and is in the process of enlarging the necessary infrastructure to make them available to tourists.The ski industry is one that has grown rapidly, and today it attracts visitors from many parts of the world. The Iguazú waterfalls on the northeast, the glaciers and lakes in the south, the Andean region and the Atlantic beaches and coastline with its whales and other animal species, are also areas very attractive to the foreign visitor.During the 90´s there was a significant focus on Media. Today local and international companies are involved in TV, radio and newspaper development.

The 1��0´s.After the hyperinflations of 1989 and 1990, the country entered into a stage of stability and structural reform that lasted several years. The main elements that made this change possible were:• A convertibility plan that pegged the peso to


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the US dollar• The opening of the economy and the growth in foreign trade• The deregulation of the dominant government structure• The privatisation of the main state-owned companies.The program was greatly successful during the first years, notwithstanding the negative external factors such as the crises in Mexico, Asia and Russia. The positive results were the inflow of foreign direct investment, the increase in GNP and the control on inflation that had been negative for several years.The principal negative consequence was an overvalued peso that affected the country’s competitiveness and the increasing unemployment rate that reached worrisome figures. The Brazilian crisis and devaluation also had serious negative effects on the economy due to the important trade that had gone on with the country and the further loss of competitiveness.During the second half of the decade, revenues from privatisations ceased and the fiscal discipline lacked a clear course. The government chose to finance its deficit with a heavy increase in its foreign and internal debts.This situation, plus the incapacity of the new government that had taken office by the end of 1999 to make the necessary reforms, led to a new political and economic crisis in December 2001, time when Argentina defaulted on its foreign debt to private creditors and the currency board was abandoned. In 2005, Argentina put into order its international financial situation with the restructuring of its external debt. By the end of the same year, the country had settled its entire debt to the

International Monetary Fund, and in 2006 the economy grew by 8.5%

Evolution of the Economy in the first quarter of 2007 The year began with a trend similar to that observed during the previous four years: a steady economic growth, an improvement in the social situation associated to the unemployment and income indicators, and both fiscal surplus and positive results in the external sector.The economic activity shows high rates. During the first quarter, GDP showed an increase by about 8% (official data not yet available at the time of this report) accounted by an increase in the investment of about 15%, almost doubling the GDP growth, which eventually would raise the investment rate of the economy. The acceleration of the investment is due to the purchase of equipment reflected on the renewed influx of imports of capital goods observed during the first quarter, and which would compensate the deceleration observed in the construction sector as a consequence to climate factors. Private consumption would seem to continue increasing in line with the economic growth.Industry continues to lead the growth, expanding at interannual rates of about 7%, which combines with important investments in several sectors. Even though during the first quarter the impact is not fully observed, harvest 2006/7 records will be shown in the next few months. Finally, services, particularly private ones, stimulated by a certain recovery of relative prices, are beginning to soar due to a robust demand. Apart from Transport and Communications, Trade is expanding steadily at


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rates higher than 10%; Hotels and Restaurants by 7.2% and professional services by 7.3%.At the social level, a systematic improvement in the employment as well as in real income is observed. Unemployment, after reaching, in more than a decade, the lowest level at 8.7% in the fourth quarter of 2006, showed a seasonal increase in the first quarter of 2007 reaching 9.8%, 1.6 points below the same period the previous year. In line with the observations during the last four years, full employment, without taking into account employment programmes, grows at a higher rate of total employment, indicating an improvement in the quality of employment in terms of a larger number of genuine full-time employees and a reduction in the rate of non-registered workers. The annual growth of registered employment during the first quarter of 2007 was 6.3%, and at the same time salaries experimented an interannual increase higher than 7%.The employment steady growth together with the family programme “Plan Familias” for social inclusion benefited the lower income groups of the population, as it was reflected in the continuous improvement of the income distribution in comparison to previous years. The average real income for the first quintile grew by 19.5% in the second semester of 2006. Meanwhile, the Gini coefficient went from 0.503 in the second semester of 2005 down to 0.486 in the same period the following year. Finally, the average income gap was reduced by 1.3 times. This continuous betterment in the income distribution was observed from the second semester of 2003, in all regions of the country.The fiscal situation remains solid. The National primary surplus continued at around 3.5% of

GDP if the last twelve months are added to the first quarter. The recent acceleration of tax collection, especially motivated by a strong income into Social Security, enabled the state to cope with higher pension expenses, which include a notorious recovery in pensions and an increase in the number of people covered near the age of retirement, who due to being unemployed over the last decade, could not meet the necessary requirements to receive a pension. The recovery in the average pension income is higher than 30% in nominal terms since March 2006, whereas the number of beneficiaries has grown over one million since the same month. Among the important decisions taken in relation to social security, there is the new reform approved by law N° 26.222, which defined a wider scope of reforms affecting the way the system works; the most important among these, is the introduction of the freedom to choose between the private and the public system. Other important reforms were also introduced such as: the increase in the maximum limit of computable salary for personal contributions which went up from ARS 4,800 to ARS 6,000; the increase from 0.85% to 1.5% per year of service rendered for remaining in the system; and a steep reduction in the private pension funds managers (AFJPs) commissions, which shall not be higher than 1% of the salary.The pensions law reform as well as the Programme for Pension Inclusion “Plan de Inclusión Previsional” passed in 2006, will represent in fiscal terms a wider participation from the State in the Economy. During the first quarter, there has been a significant growth in the expenses in social security as a


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consequence of the increase in the number of beneficiaries. During the following months, however, the IRS will begin to receive resources through the automatic shifting from the private to the public system (education workers, indecisive ones, registered in pension fund managers with low capitalisation, plus some officials). By the beginning of 2008, more the system will receive a higher income from the workers who shifted to the public system. The rate of inflation continues with a deceleration trend. In March, the interannual inflation reached 9.1%, 0.7pp below 2006 inflation and 3.2pp below the highest peak in December 2005 (12,3%). The increase in the prices observed during the last year has a not less important component in relation to the evolution of the international commodities price, whose important impact on the consumption of Argentines can still be perceived, particularly in the case of the least privileged. Notwithstanding, the trend at the wholesale level has gone downwards, and for quite a few months the wholesale index has shown interannual variations below the CPI, even in the price of manufactured products.The prospects of the evolution of inflation for the following months are reasonably challenging. To the fact that the second quarter shows a lower inflation pattern, it should be added that there is a reduction in the increase of international prices of primary products, and also softening of wholesale prices, which leave room for a recovery of retail trade margins. The deceleration of MIPI matches the new investments in the majority of the industrial sectors in which there is no limit to production capacity in the short run.In monetary and financial terms, it is worth noting a) the expansion in the credit which is

rapidly growing, b) stable rates, and c) a new betterment in the financial system solvency. In a context where transactional money (measured in M2) is growing below the product, the economy’s interest rates have remained relatively stable, even when the BCRA (Central Bank) applied a new 0.75pp increase in the short term reference rates. Passive rates remained at approximately the same level as in 2006, 7.3% for the retail segment of private banks. Active rates showed a mild decrease in mortgage loans, by 0.8pp, and reached around 11%. On the other hand, rates for business financing remained high showing an average of 16.8% by March 2006.Although its share in the product is still low both at historical and international level (about 10.5% of GDP in March 2007), credit to private sector continued growing at around 40% interannual rates. Although mortgage loans are to be highlighted, credits to consumption and personal loans (mainly for the purchase of automobiles) lead the upturn with interannual rates reaching 60%.The external sector situation remains positive, even though in the first quarter of the year there was a deceleration of exports. The net balance in the current account could be kept, during the first quarter, above 3% of GDP if the last four quarters are to be considered, where as the commercial balance shows a surplus of 1,817 million dollars in the same period representing 3.3% of GDP (official data is not yet available). During the first quarter, exports grew at a 10.8% interannual rate, quite below the increase in imports whose growth reached 24.2% interannual. The increase in international prices of raw materials and manufactured agriproducts (MOA) managed to compensate the interannual falls in the volumes exported. Industrial exports


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consolidate as the sector with the higher improvement in the last three years. On the other hand, imports during the first quarter, maintained rates near 24.2% interannual, led by a new acceleration in imports of capital goods and spare parts which grew by 32.8% and 21.4%, respectively. A steady increase in the importation of automobile and consumption goods is also observed, with rates that crept at 26.6% annually during the first quarter.According to preliminary estimations, the financial account will show in the first quarter of

the year a new influx of capital due to the high level of liquidity in international markets, as well as the favourable expectations of rentability generated by the current macroeconomic situation. As a result of the surplus in both the current and financial accounts, the international reserves continue growing exceeding, in the first quarter, US$8, 864 million reaching US$ 36.849 million. Accumulated reserves cover a year of imports, representing approximately 15% of GDP.

Source: Ministry of Economy - Argentina.


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Commercial legislation Business in Argentina may be conducted by, incorporated companies, partnerships, individuals and branches of foreign enterprises. In all cases, pertinent information must be registered with the Public Register of Commerce. Conduct and behaviour of the entities are governed by the Commercial Code (Law Nº 19.550), supplementary laws and regulations. In the case of a general partnership of a non-commercial nature, or not covered by the Commercial Code, the Civil Code applies. Foreign investors generally choose either the form of a Limited Liability Company or of a Branch to start operations in the country. The former may be a Sociedad Anónima (Corporation) or a Sociedad de Responsabilidad Limitada (Limited Liability Co). The Branch has certain advantages, especially in the initial times of an investment. It is mandatory for foreign companies operating in Argentina to name legally responsible individuals and to keep separate accounting records for their Argentine operations.

Corporation (Sociedad Anónima - S.A.)Owned by shareholders with limited liability, they are similar to the incorporated “limited liability companies” of the United States, the United Kingdom and elsewhere. There must be at least two shareholders and in the case of foreign companies, and also local ones,

this requirement was many times met with a shareholder having 99.99 % and another with 0.01 %. In these cases the Companies Inspection Board has started to reject these applications and to require that the shareholder use a branch as a vehicle, or that more significant shareholders be included.The shares of the corporations may be privately held or quoted publicly. Their operation is governed by statutes in which the name, object, duration, capital, election and powers of the board of directors, and all other rules are established. The board may have one or more directors but the absolute majority must be domiciled in Argentina. The term “sociedad anónima”, which may be shortened to S.A., must be included in the corporate name.

All corporations are subject to certain supervision and control by government entities, as follows:

• Publicly held quoted corporations - by the Comisión Nacional de Valores (National Securities Commission).• Banks - by the Argentine Central Bank; insurance companies by the Superintendence of Insurance; AFJP (pension funds managers) by the Superintendence of AFJP-Other types of business organisations are mostly under the supervision and control by the Companies’ Inspection Board (locally, the IGJ)

LEgAL FrAmEWOrK - SETTINg UP A COmPANy

CHAPTEr III • LEgAL FrAmEWOrK - SETTINg UP A COmPANy

CHAPTEr III

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CapitalThe corporate capital must be fully subscribed and at least 25% must be paid at the time of incorporation. But, when the subscription consists of non-monetary assets it must be fully contributed before approval is requested to the controlling authority. The remaining subscribed capital must be paid in within 2 years by the stockholders, who are held responsible for interest and damages arising from any default in payment thereof, and all voting and other rights corresponding to shares whose payment is in default are automatically suspended. Minimum capital: ARS 12,000.A stockholders’ meeting may decide to increase the corporate capital fivefold followed by appropriate publications and registrations, without having to obtain official approval, provided this possibility has been included in the bylaws and all previous issues have been fully subscribed. In all other cases, official approval is required and the corresponding publication and registration must be carried out.The corporate capital may be reduced by the decision of an extraordinary meeting of stockholders, which must be supported by a special report from the syndic, and entails fulfilment of certain formalities in order to safeguard creditors’ rights.

Stockholders’ MeetingsFinancial statements, distribution of profits and

the appointment, removal and compensation of directors and syndics must be dealt with by an annual general meeting of stockholders that must be convened within four months of the annual financial closing date. A general meeting may also be convened (at any time) if it becomes necessary to determine the responsibility of the directors and control bodies or for increasing the capital within the fivefold limitation. Extraordinary meetings of stockholders are required to deal with all matters not incumbent on ordinary meetings. The directors and syndics have the right and duty to attend stockholders’ meetings.

Management and RepresentationManagement is vested in a board of directors composed of one or more directors (in the case of corporations subject to permanent government supervision there must be at least three) who are appointed by the stockholders’ meeting or the syndics, as applicable. Their terms of office are limited to 3 years, but they may be re-elected. The board must meet at least once every three months, except for publicly held companies and certain others that must meet monthly; a simple majority of the board constitutes a quorum. The president of the board of directors normally represents a corporation; however, its bylaws may authorize the vice-president and/or one or more directors to represent it.


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Private supervisionIt is normally vested in one or more syndics (statutory auditor) appointed by the stockholders’ meeting, which must also appoint a similar number of alternate syndics. It is optional for corporations that are not subject to permanent government supervision the use of syndics. The function of syndic may be exercised by an individual holding a degree as a lawyer or public accountant. The law also contemplates the option of another control body, the Surveillance Committee. Its purpose is ample and must be defined in the statutes, but could include:• electing the directors;• substituting the syndics (statutory auditors) in which case they must name auditors;• supervise the directors and requesting and controlling all the information they consider necessary;• calling for stockholders’ meetings when considered necessary;• other supervisory and reporting duties. Controlling, Controlled and related CompaniesAnnual financial statements must show separately relations with: controlling corporations (those who hold sufficient participation to entitle them to the voting rights necessary for taking decisions, either directly or through another controlled corporation); controlled corporations (those controlled on the above basis); and, related corporations (in which the controlling corporation holds more than 10% of the capital of the other). Controlling corporations are required to file consolidated annual financial statements as supplementary information.

Limited Liability Partnership (“Sociedad de responsabilidad Limitada S.r.L.”)These companies are similar in all respects to corporations except that:• A company must add the term “sociedad de responsabilidad limitada” or S.R.L. to its name.• The number of quota holders may not exceed 50.• A corporation may not be a quota holder.• They are always privately held.• Any change in quota holders requires an amendment to the incorporation deed.• Formation procedures are simplified.• Greater flexibility is permitted in the deed.

CapitalSubscription rules are the same as for corporations. The partnership deed may allow the issuance of additional capital quotas, only with the consent of partners representing more than half the partnership capital, followed by publication and registration formalities. Quotas must be of equal value and equal voting right, but partners may hold more than one quota. Law does not restrict transmission but it may be restricted under the partnership agreement.

Partners’ MeetingsThe rules set for corporate stockholders’ meetings must be applied if the partnership contract does not contain specific rules for meetings. Notices convening the meetings must be sent to the partners at their addresses.

Management and RepresentationManagers have the same rights and duties as the directors of corporations, but their terms of office are not subject to the 3-year limitation.


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Partners must appoint one or more managers to assume direct responsibility for the business operations.

general Partnership (“Sociedad Colectiva”)The Commercial Code considers partnerships those in which there is a joint and/or multiple responsibilities of all the partners. The name of the general partnership must contain the words “sociedad colectiva”. Corporations may not be partners.

Non commercial general PartnershipsGeneral partnerships not engaging in commercial activities (“sociedad civil”) are subject to the Civil Code. A “sociedad civil” is a matter of private agreement among the persons involved, and is generally found among professional groups.

Limited Partnership (Sociedad en comandita)A limited partnership is subject to the Commercial Code, and has two categories of partners: “silent” partners (“comanditarios”), whose responsibility to third parties is limited to the capital subscribed by them, and “active” partners (“comanditados”), who do not enjoy a similar limitation of liability.There are two classes of limited partnerships: “sociedad en comandita por acciones” where the capital subscribed by the “silent partners” is divided into nominative shares of equal par value, and “sociedad en comandita simple” where the capital is proportionately divided, but, shares as such may not be issued. The appropriated description must be shortened to

S.C.A. and S.C.S. respectively.Except where otherwise stated, the requirements established by the Commercial Code for corporations are applicable to “sociedades en comandita por acciones”, and the requirements for private companies are applicable to “sociedades en comandita simples”.

Joint VenturesTwo types of contractual joint ventures are recognised by law: temporary partnerships (“agrupaciones de colaboración”) and temporary union of companies (“uniones transitorias de empresas - U.T.E.”).Temporary partnerships embody joint organisations for renewable periods of up to a maximum of ten years, to provide or develop certain stages of the business activity of their partners or to improve and develop their mutual activities.Temporary unions of companies are allowed to develop or execute a specific task, service or supply, and/or any extension thereof, both locally and abroad. Their duration is therefore limited to that particular task or service. In this contract, the bankruptcy of the members or the disability or death of the individual entrepreneurs does not in itself lead to the extinguishing of the U.T.E. contract.Both types of joint ventures must have the following characteristics:• They are not separate legal entities in their own right.• Agreements are entered through private or public deeds.• Participants may be resident businessmen, locally constituted entities, or non resident


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companies that have established a separate branch or other type of presence in Argentina.• Agreements must be registered with the Public Register of Commerce and must include their objectives, term of duration, name and other particular information on their partners’ responsibilities, financial contributions and other legal implications.Joint ventures may also exist under private agreements not registered with the Public Register of Commerce, when they do not fit exactly in the two types mentioned above. These joint ventures enjoy similar rights and obligations and have the same tax requirements as those described above.

Books and recordsAll business enterprises domiciled in Argentina are required to carry accounting records of their transactions. The mandatory books of account are the Journal and the Inventory and Financial Statements book, as well as the subsidiary books that complement them.Corporations are also required to keep books containing the minutes of directors’ and shareholders’ meetings, the record of attendance at shareholders’ meetings and the shareholders’ register. These books are required to be bound, paginated and individually identified by the Public Register of Commerce. However, business associations, cooperatives and civil associations and foundations using mechanized or electronic data processing methods may request the appropriate regulatory entity to exempt them from these formal requirements with the exception of the Inventories and Financial Statements books, and the Book of Minutes of

Shareholders’ and Directors’ Meetings.Under the Argentine Commercial Code, all “merchants” are required to prepare within three months after the end of each fiscal year, a balance sheet and income statement, which must be transcribed into the “Inventory and Financial Statements Book”. The Business Associations Law contains provisions relating to financial reporting requirements to be included in the financial statements. In addition, the control agencies have specific regulations in this connection, which complement the Business Associations Law.The financial statements of stock companies and foreign branches must include the report of an independent public accountant expressing his/her opinion on whether the financial statements taken as a whole present fairly the financial position and the results of operations (and. as the case may be. the changes in working capital or cash flows) in accordance with generally accepted accounting principles in Argentina.

Oversight AgenciesThe most significant aspects of the controls by legal authorities are described below:

Inspección General de Justicia (IGJ)This is the agency through which the Argentine Government exercises control over certain business organisations domiciled in Argentina (publicly or closely held corporations and branches of foreign corporations, savings and loan associations, civil associations and foundations).There is an IGJ in every jurisdiction. It is empowered to examine books and records,


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request whatever information and documents it may deem necessary, attend meetings and file charges with administrative authorities and courts of law.Control is permanent over stock corporations that:a) Make public offerings of their stock or bonds.b) Have a capital exceeding ARS 2,100,000.c) Engage in managing investments or savings or obtain money or securities from the public against promises of future consideration or benefit.d) Exploit concessions of public utilities.e) Are mixed companies (capital held by the government and private shareholders) in which the government is the major shareholder.f) Are parent companies or subsidiaries of another company subject to control by virtue of any of the abovementioned.In the city of Buenos Aires, control over publicly-held corporations is officially exercised by the Comisión Nacional de Valores (“CNV”. Argentine National Securities Commission).

Further information atwww.cnv.gov.ar/LeyesYReg/Leyes/19550.htm (Partnerships Commercial Law Nr 19.550)www2.jus.gov.ar/minjus/ssjyal/IGJ/Inicial.htm (IGJ - Companies Inspection Board)www.afip.gov.ar (AFIP – Federal Revenue Agency)www.bcra.gov.ar (Central Bank of the Republic of Argentina)

Comisión Nacional de Valores (“CNV” Argentine National Securities Commission)The Comisión Nacional de Valores is the regulatory agency that authorises and controls corporations that wish to make a public offering of their shares or other securities.

OtherThere are other specific control agencies who have oversight powers by virtue of the business that is carried on by the corporation, such as the Banco Central de la República Argentina (“BCRA”, Central Bank of Argentina) that governs financial and banking operations; the Superintendencia de AFJP (“SAFJP”. Superintendence of Pension Fund Managers) that oversees pension fund managers; and the Superintendencia de ART (“SRT” Superintendence of Workers Compensation Insurance Companies) that controls workers compensation insurance companies.


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The corporate vehicles for setting up a foreign company in the Argentine Republic are the following: (i) creation of a Branch; (ii) creation of a special or limited partnership or (iii) a corporation. Creation of a Branch Concept: The Branch is a center of business exploitation or operation empowered to link its Head Office with third parties. It lacks own legal status, as it is the extension of the company created abroad. Branches are set up in order to carry out the purpose of the Head Office on a regular basis.Applicable Corporate Regulations: Section 118, paragraph 3 of the Law of Commercial Partnerships and General Resolution of the IGJ (Companies Inspection Board) No. 7/05.Main features:• It must be stable and ready to respond to the assumed obligations as well as independent to assume them on behalf of its Head Office. • Its Head Office may appropriate capital suitable for the activity, which the branch is going to carry out. • It has to comply with the following formalities: separate accounting, annual presentation of its balance sheets before the commercial partnerships controlling entity, annual proofs–through the presentation of the Financial Statements of its Head Office- that the main activity of the foreign company is carried outside the Argentine Republic, compliance with all applicable tax obligations.

Scope of liability: Risks between the branch and the Head Office as to the obligations assumed by the branch set up in our country are not separated.Representation: The Head Office must designate a physical person (representative) who shall be in charge of the Branch to carry out the economic, financial and commercial activities.Formalities to be fulfilled in order to start operating: In order for a foreign company to operate as a branch in the Argentine Republic it is necessary to register it with the IGJ (Commercial Partnership Controlling Entity) and to that end, the branch should meet the following requirements: • Present the foreign company’s bylaws• Prove that at the time of applying for the registration with the IGJ, the foreign company has its main activity abroad by submitting an accounting certificate and a certification confirming that its Financial Statements have been approved.• Individualization of the foreign company’s shareholders• Settle domicile in the Argentine Republic • Resolution of the Board of Directors justifying their decision to crate a Branch in Argentina.• Power of attorney in favor of the representatives of the foreign company empowering and authorizing them to register the branch • Designate a representative• Appropriation of capital

Different Corporate Alternativesto invest in Argentina


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See Special or Limited Partnerships and Corporations covered in Chapter 3.Convenience of each of the alternativesAbove and former page: we include a Table with a simplified analysis of the main aspects to be considered when weighing the convenience of each of the alternatives.


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general requirements for hiring personnel: According to Argentina’s labour laws, the employer has the following obligations:• Register as Employer with the AFIP (Federal Revenue Agency);• Early registration of hired workers with the AFIP (notice of workers to be hired, identifying them individually);• Registration of both employer and employees with ANSES (National Social Security Administration);• Keep Labour Books (Book of wages and salaries or equivalent payroll) which must be signed and approved by the Labour Ministry;

• Registration of employees in the National Health Insurance Programme and in the Trade Union, according to their activity.• Affiliation by employer to an ART (Workers’ compensation insurance);• Taking out obligatory life insurance for workers (optional for Employer).

Labour Contract As a general principle, Argentine laws state that a labour contract is entered into by an indefinite period of time. This means that as a rule, this type of contract lasts until the employee is eligible for pension benefits. Likewise, the labour contract for an indefinite

Labour System


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period of time has a fist leg called “trial period”, which extends up to three (3) months. During this period either party –employee or employer- may terminate the labour relationship without cause, without no obligation of any compensation whatsoever, by giving notice of the intent and will to terminate the contract in advance (15 days) according to the law.In some exceptions, the national regulations provide for fixed-term contracts. Generally, it can be said that their approval is subject to the existence of an objective reason grounded on the kind of duties to be fulfilled or an activity that justifies this method of hiring.

Collective bargaining agreementsPursuant to Section 14 of the National Constitution, entering into collective agreements is a right exclusive to Unions. Generally speaking, it can be said that Collective Bargaining Agreements are written agreements relative to work and employment conditions agreed upon between an employer or a group of employers and a professional workers association with a union legal status approved by Labour Ministry. The peculiarity of these regulations lies in the fact that if approved by the Ministry of Labour, they have effects not only in respect of the parties signing the Agreement but, also in respect of all the employees and employers in the activity insofar as they fall under the scope of application of the respective CCT.In actual fact, the objective of the collective bargaining agreement as a source of rights is

to grant the possibility of negotiating with the unionised workers the creation of better working conditions than those stipulated by law.

remunerationPursuant to the Contract Law, there is a floor (minimum wage) established for all industrial and office workers, determined by the Employment Council (Consejo del Empleo), an entity composed of the employees and the entrepreneurial sector, Productivity and the Minimum Wage. Collective bargaining agreements establish also minimum salary tables which are the ones most often used.

Statutory Annual BonusThe statutory annual bonus (thirteenth salary) is a mandatory additional salary (equivalent to half a monthly salary) paid in two semi-annual payments in June and December.

LeavesAccording to the national legislation, there are three types of leaves: daily leave, week leave and holiday leave. In regard to holidays, a worker is entitled to 14 running days when his/her seniority dos not exceed 5 years; 21 running days when seniority is over 5 years and less than 10 years; 28 running days if seniority is over 10 and less than 20; and 35 days if seniority exceeds 20 years.


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Holidays and Working HoursEmployees are entitled to an annual holiday at slightly over their normal pay rates when their length of service with their employer is over six months. The holiday is compulsory and the employer must grant it between October 1 and April 30; its duration ranges from 14 days for employees with less than 5 years’ service to 35 days for those with over 20 years’ service.The normal working hours for employees and labourers are limited to 8 per day or 48 per week. Night-time work is limited to 7 hours.Overtime on week days is paid at a rate of 150 % of the normal pay. Overtime worked on Saturdays after 1 PM, Sundays and feast days is paid at a rate of 200 % of the normal pay.It should be noted that there are regulatory limits regarding overtime: a maximum of 3 hours per day or 30 hours per month or 200 hours per year.


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irreversible damage is reasonably expected.3.- Principle of intergenerational equity and sustainable developmentBoth are closely linked. Sustainable development is that carried out in such a manner as to satisfy development needs, i.e. economic and environmental improvement for present and future generations. Such satisfaction must be fair and equitable. 4.- Principle of progressivenessAccording to this principle, environmental objectives should be reached gradually through interim and final goals projected in a time schedule, which facilitates the corresponding adequacy to the activities related to those objectives.5.- Principle of responsibilityIt establishes that whoever generates present or future environmental degrading effects is responsible for the costs of the preventive and corrective measures of restoration, notwithstanding the validity of any environmental responsibility system. 6.- Principle of sustainability It points out that sustainable exploitation of natural resources and the preservation of natural and cultural heritage are key necessary elements for economic and social development. Sustainable management of the environment must guarantee the use of natural resources for present and future generations.

Different Corporate Alternativesto invest in Argentina, Labour system, Guiding Principles on Environmental Laws are contribution made by Estudio Rossi ,Camilión & Asoc.

1.- Principle of PreventionThe Principle of Prevention is aimed at adopting preventing measures to hinder negative effects on the environment by anticipating the actual occurrence of environmental damage. This principle is expressed in Section 41 of the National Argentine Constitution, after the amendment thereof in 1994. “Section 41.– All inhabitants enjoy the right to a healthy and balanced environment, fit for human development in such a manner as to allow productive activities to satisfy the present needs without involving future generations; all inhabitants also having the obligation to preserve it. Environmental damage shall - first and foremost – give rise to the obligation of restoration as provided for by law.The authorities shall protect this right by the use of rational natural resources, the protection of the natural and cultural heritage and biological diversity, as well as the delivery of environmental information and education.The Nation is obliged to enact all rules containing the minimum protection guarantees, as well as the provinces to enact all supplementary rules without the former altering any local jurisdictions.The entry into national territory of actual or potential dangerous refuse and/or radioactive waste is hereby prohibited.”2.- Precautionary Measure PrincipleThe Precautionary Principle is intended to avoid the appearance of a risk with unknown, and therefore unpredictable, effects. The principle implies taking action even when no tangible scientific evidence exists and whenever the probability of serious or

guiding Principles on Environmental Law


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THE ArgENTINE TAx SySTEm

Brief description of the tax system The description that follows does not include certain taxes of a specific nature, such as taxes on fuel, natural gas, electric power generation and distribution, etc.

1. FEDERAL TAXESCurrent legislation is consistently applied throughout the country. Federal taxes include:

1.1. Income TaxIncome tax is applied to the worldwide income of companies and individuals residing in the country, as well as to the income obtained from Argentina by foreign residents.The tax base for taxpayers residing in the country is determined by deducting from their income the cost and the expenses necessary to obtain, maintain and keep such income. In the case of interest, there are restrictions for their tax deduction. The relationships of branches and affiliates with their head office and other related companies are governed by the arm’s length rule principle.The losses from one year may be carried forward until the next fifth subsequent year.

There are restrictions to the computation of losses from the sale of shares, other corporate participations and foreign losses. Dividends distributed by local companies, irrespective of the beneficiary thereof, are exempted from this tax, except when the amount of the dividends distributed is higher than the tax profit.The tax rate for both the residents in the country and foreign residents is 35%. A progressive rate is applied to individuals residing in the country in a progressive scale ranging from 9% up, asymptotically, to 35%.

International Tax CoordinationTo avoid double or multiple international taxation, a number of tax treaties have been signed with the following countries:A) General agreements with: Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Great Britain and Northern Ireland, Italy, the Netherlands, Spain and Sweden.B) International carriage agreements with: Belgium, Canada, Denmark, Finland, France, Greece, Italy, Venezuela and Paraguay.Due to the creation of the Mercosur trade treaty, Argentina is now dealing with the task of harmonizing its tax system with that of the rest of the member countries: Brazil, Uruguay and Paraguay and most recently Chile and Bolivia.

Given the overlapping of the different tax jurisdictions and in order to overcome the problems of double or multiple domestic tax imposition, two multi-jurisdiction agreements have been made, one between the nation and the provinces, and the other between the provinces.

CHAPTEr IV • THE ArgENTINE TAx SySTEm

CHAPTEr IV

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Taxes paid abroad may be computed as paid on account of Argentine tax up to the increase in payable tax generated by the incorporation of foreign income.Income tax is paid by fiscal year, which will coincide with the financial year or a calendar year depending on whether the taxpayer is or is not required to prepare Annual Financial Statements. In the case of foreign beneficiaries, a final payment is made via a withholding of tax made by the payer of benefits or otherwise at the time of remitting payment abroad.

1.2. Minimum presumptive income taxThis tax charges corporate assets located in the country or abroad and rural properties belonging to individuals or undivided estates, valued pursuant to the legal provisions. Liabilities are not deductible.The following properties, among others, are exempted from the tax:• Shares and other equity interests in companies subject to the tax.• The units from mutual funds provided they comprise public bid marketable securities, precious metals, currencies, rights and obligations derived from future and option agreements, instruments issued by financial entities and money.• The properties from the assets imposed in the country, the value of which shall not exceed $200,000 in the aggregate. Provided it does not exceed such amount, the tax shall apply to the total assets.

The following shall not be computed for the tax calculation:

• Depreciable new movable assets, except for first use automobiles, in the year of acquisition and in the next.• The value of investments in the construction of new buildings or improvements, in the year of investment and in the next.The taxable rate amounts to 1%, but the following should be considered:• The income tax determined for the fiscal year for which the tax on the minimum presumptive income is being determined may be computed as payment on account of the latter. The excess of income tax shall not generate a balance in favor of the taxpayer.• If the income tax shall be insufficient to absorb the minimum presumptive income tax, the payment made for this last tax may be computed as a payment on account of income tax in any of the following ten (10) fiscal years, always provided that there shall be, during those periods, an income tax excess with respect to the minimum presumptive income tax up to the amount of the aforementioned excess.In the event of real estate not devoted to the company’s operations (investments, etc.)• The minimum of $200,000 is not computable.• The resulting tax is not cancelled against the income tax assessed for the fiscal year for which the tax on minimum presumptive income tax is being assessed.


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1.3. Personal assets taxPersonal assets tax is applied to:• All property owned by individuals as of December 31 of each year, except rural properties subject to the Minimum Presumptive Income Tax.• Real estate that is vacant or held for lease or recreational purposes owned as of December 31 of each year by companies organised abroad.• Stock and other securities held as of December 31 of each year, issued by individuals domiciled in the country or abroad and by companies domiciled or established abroad. In this case the local company itself shall be the person subject to the tax regarding the shareholdings or partners mentioned.All Argentine residents pay tax on all their property independently of their location. Foreign residents pay tax on any of their property located in Argentina. A tax credit may be claimed in respect of taxes paid in other countries, up to the increase in payable tax generated by the inclusion of any property located in such foreign countries.The taxable rates are as follows:• For property owned by residents in the country:

Local residents have a taxable minimum of $102,300. • For property owned by non residents: • In general: 0.75%

• Property in Argentina owned by companies located abroad. Negotiable securities and mutual funds owned by companies established in tax havens: 1.50%• Shares and other corporate holdings held as of December 31 of each year: 0,50%• The Company itself shall be the person subject to the tax regarding the shareholdings and other corporate holdings belonging to • individuals and undivided estates domiciled in the country or abroad • companies and/or any other kind of artificial person domiciled abroad For that reason, the Company is entitled to reimburse itself the amount paid, and also retain or execute the property that originated the payment of the tax.

1.4. Value Added TaxThis is a multiple, non-cumulative tax on sales on the value added at each stage of production and commercialization of goods and services. It normally arises from the difference between the tax invoiced to customers (tax debits) and the tax invoiced by suppliers (tax credits), tax credits being financially allocated, even when arising from the purchase of fixed assets.VAT applies to the sale of movable assets, construction work, leases and services conducted within Argentine territory. Real property sales are VAT exempted, with the exception of the sale of constructions done by a construction company on its own property.Regarding the treatment of international trade, this tax has adopted the criteria of taxability in the country of destination, which involves a border fiscal adjustment that translates into:• Taxing the definitive imports of goods and


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the services rendered abroad and used, for an economic benefit, in the country.• Exempting definitive exports of goods and the services rendered in the country but yielding an economic benefit abroad. The exempting criteria include the refund of local tax paid for inputs used in the production of goods and “exported” services.VAT is levied at a general 21% rate, with:• A differential tax rate of 27% applicable to sales of gas, electric power, running water, telecommunication services, sewage and drainage services, as long as they are utilized during productive stages.• A differential tax rate of 10.5% on (between others):Primary production (including cultivation labors related thereto) of:1. Livestock2. Fruits and vegetablesWork construction on property belonging to third parties and used for housing purposes.Work construction on owned property and used for housing purposes, carried out by building companies.Bank interest and fees originated from loans granted by:1. Financial entities governed by the respective law2. Bank entities settled in countries where their Central Banks have adopted international standards of bank supervision established by the Basle Committee.Public transportation of passengers for more than 100 kilometers (for less than 100 kilometers is exempted).Sanitary assistance, medical and paramedical services rendered by co-operatives, mutual

associations or pre-paid medicine companies, which do not become exempted.

1.6. Excise taxesIt is a mono-phase sales tax applicable in the production stage and in the import of the following goods and services: tobaccos, alcoholic beverages, beers, non-alcoholic beverages, syrups, extracts and concentrates, automobiles and diesel-run engines, mobile and satellite telephone services, champagne, luxury goods and automobiles and engines, recreational and sportive vessels and aircraft and certain electronic products as specifically detailed in the legal provisions. Excise taxes are levied at different rates that vary depending on the type of goods or services taxed.

1.7. Tax on debits and credits in checking accountsThis tax is applied to the following financial transactions: 1. Credits and debits in checking accounts; 2. The following operations carried out by financial entities not involving a checking account: 2.1. payments made for the account and/or in the name of a third party, with some exceptions2.2. renderings of collection proceedings, except certain cases;2.3. renderings of collections; 2.4. money orders and transfers of funds, except certain cases;2.5. payments made for own account or for the account of a third party to establishments which operate through purchase and/or credit card systems; 3. Every movement of own funds or third party


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funds made for own account or for the account of a third party which implies the intention of replacing the use of checking accounts. Cash payments for individual consumption and payments made via petty cash or fixed funds are exempted from the tax.

general rateDebits in current accounts: 6.0 ‰ Credits in current accounts: 6.0 ‰ A portion of this tax can be used as tax credit for Income Tax or Minimum presumptive income tax since May 2003.

Special rate1. For the cases described in 2.2 (collection proceedings), 2.3 (collections) and 2.5 (payments to establishments adherent to purchase and/or credit cards), when the rendering or payment is not charged to current accounts held by the beneficiaries: the tax rate increases to 12 ‰.

2. For debits and credits in certain intermediaries’ current accounts (grain commission agents, livestock consignees, stockbrokers, etc.) the tax rate is reduced to 0.75 ‰, for each one of them.

2. LOCAL TAXESLocal taxes are independently enacted by each of the Provinces and by the City of Buenos Aires.

2.1. Turnover taxA multiple, cumulative tax on sales of goods and services. In general terms, the legislation of the different jurisdictions varies only in respect of their applicable tax rates.

2.2. Stamp taxThis tax is levied by the provinces on documents supporting legal transactions, for example: contracts, letters accepting proposals. The rates and rules for assessment are determined in each jurisdiction, in Buenos Aires province the general tax rate is 1%. This tax is not applied in Buenos Aires City (except in the case of the transfer of title to real estate).

2.3. Real property taxReal estate is levied on urban and rural land, irrespective of the legal personality of the owner. Both the tax base and rates are determined by each incumbent jurisdiction.

2.4. Automobile taxThis tax is levied on automobile property, irrespective of the legal personality of the owner. Both the tax base and rates are determined by each incumbent jurisdiction.

2.5. Municipal ratesMunicipalities do not charge their own taxes. They do charge rates for services that are generally not cost-based, and are used to fund the operation of the Municipality government. The main municipality rates are: Safety and health care (generally imposed on taxpayer’s turnover), City road maintenance (In general imposed on the value of rural land located within the territory of the Municipality), Public cleansing and lightning (imposed on urban real property).

The Argentine Tax System is a contribution made by Estudio San Martín, Suarez & Asoc.


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FUrTHEr CONSIDErATIONS

Transport and communications Railways cover about 40,000 Km, were built between the second half of 19th Century and 1930, and is the largest system in Latin America. During the 90's most of these services were privatised or given in concession.The road system consists of around 70,000 Km of paved roads and an additional 960,000 Km of gravel roads. At present, highway maintenance and expansion is needed, and a number of concessions (toll gates) have been granted to the private sector. Even so, the road network carries approximately 80% of the freight tonnage and medium and long-distance passengers. Road transportation dominates the long, medium and short distance transportation of the country and is mostly in private hands.The rivers on Argentina’s northern and eastern borders provide a water transportation system with Paraguay, Uruguay and Brazil, as well as direct access to the Atlantic Ocean. The “Colorado” and the “Negro” rivers in the Northern Patagonian area are navigable only by very small vessels.Argentina’s top four seaports are Buenos Aires, La Plata, Rosario and Bahía Blanca.Coastal transportation, principally to the South, is important only for specific goods,such as coal or oil. Vessels are mainly privately owned. Port services, which weretraditionally very inefficient and costly, have been privatised and have become farmore efficient.The telephone service in Argentina was started

in 1880 and remained under privatemanagement until 1946. At the end of World War II, the telephone network was the largest ‘per capita’ in Latin America. However, a long and steady deterioration featured this service until 1990, when it was chosen as the leading case for the new privatisation policy. Almost total renovation of all equipment took place and now Argentina is a country with updated communication service.The postal system was privatised in 1998 by a concession granted for 30 years butboth the State and the concessionaire did not comply with the conditions of theagreements. In 2003 the government annulled the abovementioned concession, tookover the operation of the company and re privatisation of the postal system is notexpected in the short term. Most of the airlines are privately owned. The national airline was privatised in 1990 and the airports system in 1998.Urban and suburban transportation is generally privately owned. Since 1910 the city ofBuenos Aires has had a subway system, also privatised and it is in the process of modernisation and expansion. Most major cities have a reasonably efficient and privatelyowned taxi system.As from 2002, privatised public utilities companies working under a tariff or toll scheme have seen their revenues “pesified” (converted into pesos at the old exchange rate, that is $ 1 = US$) The present government is in the process

CHAPTEr V

CHAPTEr V • FUrTHEr CONSIDErATIONS

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of revising the existing concession contracts but in general has restricted tariffs´ adjustments.The transport and communications sector represents nearly 9% of GDP. Oil and gasThe share of private companies, local and foreign, in the sector has been encouraged through the privatisation of the originally

State owned companies. Due to its low cost, the use of natural gas as an efficient fuel for transportation has increased and it is estimated that approximately 10 % of the motor fleet use compressed natural gas. Argentina has become a supplier of natural gas to neighbouring countries. In a joint venture with Argentine, Chilean and other investors, a gas pipeline across the Andes was completed

Wind Energy – the market

Latin America is an emerging market. Countries such as Argentina, Brazil, Mexico and Chile are starting to be attractive markets for wind developers.A very important advantage is the liberalisation of the wholesale energy market in the region. There is also an increase in the energy consumption. The climatic change is generating consciousness amongst investors, developers and people in general and the need of reducing the fossil fuel consumption supports the development of the use of renewable sources.As regards the legal aspect in Argentina, there are two laws, the 25.019 Law (Wind & Solar Power National Law) that provides a subsidy of 1¢usd/kWh per every kWh dispatched into the grid and the 26.190 Law which provides an incentive for the use of Renewable sources for electric production. It requires 8% of the country’s

energy consumption to be from renewable sources in ten years. This law also states tax reductions (VAT & Income Tax). Besides, Energy Plus, is a new programme that the government has introduced with the idea that the increase in the demand will be fulfilled through new generating power units. The PPAs are negotiated between the generators and consumers without the intervention of the government. Under this programme the first phase of this project in an open season reached agreements around 350MW with an average price of U$D 60/MWh. Therefore, wind energy may be an important player for new investments.The near future for Latin America is very promising because the energy demand is increasing year by year, and the conventional energy sources do not fulfil the demand increase. For this reason, it is accurate to think that for the years 2009, 2010 and 2011, 300 to 500 MW will be installed in Argentina. Source: Vestas Argentina


47

to supply gas to Santiago de Chile and other cities. Nevertheless, the lack of sufficient investments as from 2002 endangers the expansion of reserves.

Electricity and nuclear powerThe generation, transportation and distribution of electricity were for years in government hands. After deregulation and privatisation during the 90’s, the sector received significant investments from major European and American companies. Between 1990 and 2001, demand increased over 60 % and capacity was expanded, eliminating the shortages experienced before.Generation is approximately 56 % thermal, 40 % hydroelectric and 4 % nuclear. Electricity generation until 2003 exceeded the country’s demand, therefore exports weremade to Brazil and Chile. During 2004 and 2005, the scenario changed due to the lack of investments as a result of the “pesification” of tariffs and the increase in demand.Hydroelectric generation, on the other hand, has great potential and it is estimated that only 20% of its capacity is being exploited. One of the largest hydroelectric developments isYacyretá, a joint effort by Argentina and Paraguay, which started to operate in 1994.As for nuclear power, Argentina was the first country in Latin America to achieve this.Today, two nuclear plants are in operation. The natural uranium system was chosen togenerate nuclear electricity, instead of the enriched uranium widely used in the rest ofthe world. This choice had two effects: on the one hand it forced the country to a substantial investment effort to carry out its nuclear

program, and on the other, it required further education and training of nuclear scientists who eventually enabled the country to supply with nuclear material, mainly for medical and training uses, to other countries.

The mErCOSUrFor several decades different countries in South America have tried to establish regional trading blocs similar to those now in force in many parts of the world. Most of the Andean countries have formed part of the Andean Pact, while countries in the Southern Cone have been members of ALALC, ALADI or partners in bilateralagreements. In most cases success has been limited, but valuable experience hasbeen gained.The four original signatories of the Mercado Común del Sur Treaty (Mercosur) were Argentina, Brazil, Paraguay and Uruguay and had the several reasons for doing so, including:• the formation of an economic bloc, following the global trend in this respect, toimprove the possibility of increased trade in a larger market;• the possibility of increasing the negotiating power of each individual country;• the opportunity to compete more efficiently in international markets;• the necessity of complementing national policies amongst member countries toallow them to increase productivity and reduce internal costs.In sum, the countries that created Mercosur decided to initiate a process towards economic, political and social integration in order to make their relationship stronger and promote growth through more efficiency in their respective


4�

economies. The main objectives of the Mercosur treaty, signed in Asunción Paraguay on March26, 1991, may be summarised as follows:• to obtain the free transit of production goods and services between the four countries, with the elimination of all duties and non-tariff restrictions;• to establish a common external tariff (CET);• to set common trade policies with respect to non-member countries;• to agree on similar positions with respect to regional or international meetings of a commercial or economic nature, and to achieve free competition in the region by working towards the adaptation of similar policies in different areas, such as trade, agricultural and industrial production, taxes, customs, financial services, communications, etc.The idea of a full common market has been postponed to allow member countries to harmonize their legislation and make the necessary adjustments to their economic structure. Nevertheless, most tariff and non-tariff restrictions have been eliminated, and the objective is for the remainder to gradually disappear.Mercosur has made a significant progress since its inception, the reduction of import tariffs and the elimination of many non tariff barriers has resulted in a growing trade among members countries. Despite the progress in this matter, Mercosur has not been able to attain full maturity. Its development has been hampered by both internal and external factors. There are many aspects to be dealt with or harmonised from a macroeconomic viewpoint as well as from specific sectors.

Although the Mexican, Asian and Russian crisis had little impact on the Mercosur, Brazil’s devaluation in 1999 or Argentina’s recession between 1998 and 2001, left significant negative effects. Brazil´s devaluation in 1999 caused several instances of friction between Braziland Argentina, due to the decline of the industrial output in both countries and thedisparity between exchange rates. Consequently certain industries tried to obtain some protection by way of extraordinary temporary trade barriers or higher duties, which in turn originated a series of unilateral changes to the common external tariff.After Argentina’s abandoning convertibility, and during most of 2002, recession grew worser but exporters found a more attractive exchange rate. Nevertheless, the recession in Brazil reduced trade between both countries and this situation continued through 2003 with a favourable balance of trade for Brazil.During 2004 and 2005 Argentina and Brazil continued their economic recovery and bilateral trade increased.In 2006 Venezuela joined the Mercosur as a full member. Venezuela is the third economy of South America and with its incorporation the Mercosur represents 75 % of the region´s GDP. Venezuela has the largest oil reserves of the continent and the largest gas reserves of South America; its incorporation means an improvement in the complementation of the region’s economies and in its diversification.Uruguay and Paraguay, the two smaller partners of the Mercosur, have claimed that their interests are not completely taken into account by the larger members, and asked the matter to be taken care of in order for them to continue as


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full members (and not change to an associate status, like Chile or Bolivia). Moreover they have stated their intention to negotiate Free Trade Agreements with the U.S.which would mean abandoning the Mercosur as full members.Notwithstanding, the governments of the largest countries have expressed that oneof their main priorities is the strengthening and expansion of the Mercosur to foster not only trade but also cultural, social and political aspects. They have also agreed that it is essential to act jointly and in a coordinated manner in trade negotiations within the World Economic Trade Organisation, or when discussing agreements with the European Union or the U.S. regarding the Free Trade Area of the Americas.

Creating a brand for Argentina In 2004, President Néstor Kirchner appointed the Secretariats for Tourism and Media to develop a country brand strategy. The Ministry of Foreign Affairs also cooperated in the project and summoned all the institutions representing sectors such as industry, science and culture. After agreeing on the new strategy, a contest was organized with the most important Argentine designers to develop a visual identity for Argentina.“Marca País” (Brand Argentina) is a national policy whereby the State develops a strategic programme to promote the quality of its products, outlining the positive values and differentiators of the country. A reality that begins to be promoted at local and international levels.Marca País is a group of communicational elements developed through a series of actions and experiences that eventually will serve the

country to stand out to compete at international level. A Country Brand Strategy (CBS) is the ruling principle by which a country coordinates its differentiators to successfully reach specific markets promoting exports, tourism and investments. The country strategically promotes its best features such as culture, science or sports. The Country Brand Strategy does not set the profile of the country, nor its identity and ideology. CBS is about a strategic tool to better compete in international markets; it is about encouraging regional, provincial, municipal, sector and/or private brand strategies. The Argentine brand is then built up from true, longstanding differentiators with the concept of diversity, actually “diversity that creates value”. Thus, tourism, goods and services; culture and science combine the essential components into a focused action aimed at attracting investments and obtaining international recognition: eventually translating into better opportunities for all Argentine nationals.

Source: http://www.marcaargentina.gov.ar/See logo (colour) in page 74.


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Creative Industries

In August 2005, within the network of “Global Alliance for Cultural Diversity’s Creative Cities, Buenos Aires was appointed first “City of Design” by UNESCO (The United Nations Educational and Scientific Organization). Buenos Aires was appointed city of design because of the strong public/private collaboration in the discipline. Furthermore, the city has been able to harness the energy and innovation of its design sector for developing initiatives in the fields of fashion, architecture, industrial, interior and urban design with a keen focus on incorporating the latest technology and know-how. Buenos Aires is a city that inspires design.This dynamic accounts for the improvement in the income and expectations in the segments more inclined to the consumption of these products, as well as for the growth in the exports of goods and services (books, copyrights, translations, cover designs and editorial services in general, among others) In figures CI represent the following shares of the geographic gross product in the City of Buenos Aires: direct activities – 6.8% (including editorial and graphic activities with 4.8% and audiovisual with 2.0%); related activities – 1.0% (including Advertising with 0.8% and others with 0.2%); and cultural activities and entertainment with 0.6%. In sum, the CI represent 7.8% that amounts to 8.4% if entertainment is taken into account. These activities account for almost 5% of the employment generated in the City of Buenos Aires. In 2004, the contribution to GDP and GGP– last information available– and to the sectors where design adds value, is the following: manufacturing industry in the City of Buenos Aires - 15.5%, manufacturing industry in the country 15.9%; trade in the City of Buenos Aires - 11.5% and in the country as a whole: 12.94%. (in the comparison values are expressed in constant pesos values in 1993).

Source: excerpt from information provided by Daniel Krupa, Centro Metropolitano de Diseño.

Environmental regulations Argentina has passed many environmental regulations, many of which have already been exposed in previous chapters. In addition we can mention:

- The Civil Code Liability: Article 902 of the Civil Code establishes that whenever there is more of a reason to work

with prudence and to be aware of the risks inherent in that work, the greater the liability that will be imposed on a party in the event of any mishap that may arise connected with that work. Articles 902 and 903 of the Civil Code impose liability on anyone who has acted with impudence or negligence and not prevented effects which, though abnormal and out of the ordinary, could have been foreseen in the context of the actions that were carried out.


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- Criminal Code Activities punished as criminal offenses:• The usurpation of water and the intentional interference with or alteration of water works (Article 182); • The intentional infliction of damages which include, by implication, environmental damages (Articles 183 & 184); • Setting intentional fires, causing explosions or floods (Articles 186 through 189); • The manufacture, supply, acquisition, theft, or possession of bombs, materialor appliances capable of generating nuclear energy, as well as explosive, inflammable, suffocating, or toxic materials (Article 189 bis); • The poisoning or adulteration of drinking water (Articles 200 and 203); • The spreading of a disease that is both contagious and dangerous for human beings (Article 202). Finally, national Law No. 22,241 on Wildlife makes it a crime to hunt for reasons that are either purely furtive or predatory in nature.

Provisions on minimum environmental standards are set by the following federal laws:

Law 25.675 - General Environmental Law Law 25.612 - Overall industrial solid waste managementLaw 25.670 - Minimum standards on PCBs management and eliminationLaw 25.688 - Regime on environmental management of water

- Environmental Impact Statements There are national laws that require the preparation and submission of an environmental impact statement with respect to specific activities such as the construction of dikes, reservoirs, and hydroelectric dams, the final storage of hazardous wastes, and mining and petroleum activities. All these obligations are administered at the provincial level. In addition, national Law No. 24,354 requires that all proposed investment projects involving a public entity or the private sector but with some type of public support whether in the form of a subsidy, loan, guarantee or any other type of benefit, must be accompanied by a preliminary environmental impact or viability statement.

- Provincial LegislationThe Province of Buenos Aires is the most important industrial center in the country, and any company establishing in the province is required to comply with provincial Law No. 11,723 on the Protection, Conservation, Improvement, and Restoration of Natural Resources and the Environment in General. This law grants the executive branch of the Province the right to set the Province’s environmental policies. The law further imposes an obligation on the provincial government to guarantee to all its citizens the right to a safe environment, access to adequate information, and the right to participate in all procedures involving the use of natural resources and the protection, conservation, improvement, and the restoration of the environment. At the same time, it imposes an obligation on citizens to protect, conserve, and improve the environment and its related


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Other Environmental Legislation • The Argentine Mining Code, imposes certain obligations on companies involved in the exploration or exploitation of mines. In addition, the Mining Code imposes safeguard measures and an express obligation to ensure preservation of the environment. Argentina has created an attractive environment for this type of foreign investment. The Mining Investment Law provides a type of long- term fiscal stability to long-term resource development.

• Article 69 of national Law No. 17, 319 (i.e., the Law on Hydrocarbons), contains norms related to the preservation of the environment, while Article 100 of the same law imposes on anyone that searches for or exploits hydrocarbons an obligation to compensate the landowners for damages that may arise in relation to the activities on their property; • Labour laws impose on employers the obligation to comply with certain health and safety standards in order to protect employees from environmental hazards they may be exposed to while at work. National Law 19,587 of 1972 gives the national government the power to regulate work-related environmental hygiene and safety standards; • National Law No. 2797 of 1981 prohibits the discharge of household and industrial sewage that have not been previously purified into rivers and streams, while National Law No. 20,094 of 1973 prohibits the contamination of navigable waters. National Law No. 22,190 prohibits the contamination of all water by petroleum products • Various national laws regarding the protection of animal and vegetable life give enforcement functions to the national authorities. (e.g., National Laws No. 3708, 4863, 3595, 4155, 12,566 and 12,732.).

elements. It also requires that citizens abstain from carrying out any activities or work projects that could result in the environmental degradation of the province.

Companies operating in the Province of Buenos Aires are also required to adhere to provincial Law No. 11,720, which regulates hazardous waste produce.

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The International Framework

The main MEA (Multilateral Environmental Agreements) have been signed by the Argentine government. • The United Nations Framework Agreement on Climate Change that was incorporated into Argentine law through Law No. 24,295. • The Convention on Bio-Diversity incorporated into Argentine law through Law No 24,375 and covering obligations at both a national and provincial level;

• The Convention on the International Trade of Endangered Wild Animal and Plant Species that was signed on March 3, 1973 and incorporated into Argentine law through Law No. 22,344;

• The Convention on the Conservation of Migratory Wild Animal Species, adopted in Bonn, Germany and incorporated into Argentine law through Law No. 23,918;

• The Basel Convention on Transboundary Movement of Hazardous Waste incorporated into Argentine law through Law No. 23,992;

• The Vienna Convention on the Protection of the Ozone Layer incorporated into Argentine Law through Law No. 23,724. The Vienna Convention was followed by the Montreal Protocol in 1987 and subsequent modifications were then enacted in Helsinki, London, and Copenhagen designed to achieve a more effective reduction in the emission of substances that destroy the ozone layer; and,

• The River Plate Basin Treaty signed in 1969 by Argentina, Bolivia, Brazil, Paraguay, and Uruguay with the goal of “promoting the harmonious development and the physical integration of the River Plate Basin and its areas of direct and potential influence”.

The production, use, sale and export of genetically modified seeds is a major issue that has received much attention from Argentine government officials and the country’s agricultural sector, particularly since the signing of the Cartagena Protocol on Biosafety in January 2000.

Source: Excerpt on Environmental Regulations from Dr. Carmen Virasoro, Sustentable Srl.

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interviews

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A.P. Moller – Maersk was established in Argentina in 1994. The growth and development has been healthy and we now operate a full scope of activities within transport and logistics:• Container Line Agency for Maersk Line and Safmarine• Port terminal in Puerto Nuevo, Buenos Aires (APMT Terminal 4)• Supply chain management (Maersk Logistics)• Forwarding (Damco)• Trucking • Container depots• Container maintenance and repair servicesClose to 500 employees are active in offices, depots and ports in Buenos Aires, Mendoza, Rosario, Mar Del Plata, Puerto Madryn, San Antonio

Este, Puerto Deseado, and Ushuaia. Maersk Group Argentina is well positioned to service all transport and logistics needs relating to international trade of both exporters and importers doing business with Argentina. Our largest export customers are active within the export of food products in refrigerated containers (fresh fruit, meat, fish, seafood) primarily to Europe, Russia, and North America. We furthermore load significant volumes of other food products such as vegetable oil, pasta, and peanuts to the same destinations as well as West Africa. Our largest import customers are car factories importing kits and spare-parts for the local car assembly industry. We also enjoy support from major importers of consumer electronics and general consumer goods. Maersk Group Argentina has developed a particularly strong presence in Patagonia which is served on a weekly basis by two dedicated Maersk Line feeder vessels increasing to four during the peak season. The establishment of own offices and container depots in a number of Patagonian ports enables us to serve the exporters of fresh fruit from the Rio Negro Valley as well as exporters of frozen fish and seafood.A.P. Moller – Maersk companies in Argentina work closely together to fulfil the company vision of “Creating Opportunities in Global Commerce”.

mAErSK grOUP ArgENTINA

For further details please contact: Maersk Argentina S.A.Bouchard 599, 19º Floor, Buenos Aires, ArgentinaTel.: +54-11-53825800 / FAX: +54-011-53825801web site: www.maerskline.com / www.maersklogistics.com

CHAPTEr VI • INTErVIEW: mAErSK grOUP ArgENTINA

CHAPTEr VI

Vagn Pedersen, Chief Director

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Vestas’ principal activities are the development, manufacture, sale, marketing and maintenance of wind power systems that use wind energy to generate electricity. Irrespective of whether aproject involves a single turbine or a turnkey wind power system, our customers will always benefit from our experience –experience built up from installing thousands of wind turbines in more than 50 countries.Vestas’ aim is to provide the best global service in the industry with the strongest local presence so as to achieve the highest level of customer satisfaction. Vestas office for Latin America & Caribbean is established in Buenos Aires since 1992. Close to 15 employees are active in offices. We work constantly on the development of new service concepts that can improve the operation of Vestas turbines and thus generate the greatest possible value for our customers – and for Vestas.

VESTAS PrOFILE

Further detail please contact: Vestas Argentina S.A.Maipú 255, 16th Floor, 1084 Buenos Aires, ArgentinaTel: +54 11 4326 1022, Fax: +54 11 4326 [email protected], www.vestas.com

CHAPTEr VI • INTErVIEW: VESTAS PrOFILE

Oscar Balestro Sales DirectorLatin America

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In August 1994 Feir´s Park Hotel opened as a 5-star hotel in the heart of Buenos Aires´ commercial and cultural heart. It is in deed still alive with a yearly updating on technology such as full wi-fi access. With its 115 rooms, many of them suites ranging from 40 m2 up to 300 m2. The hotel has also many possibilities of combining different size rooms. Their exclusive clientele are embassies, commercial chambers and corporate business. General Manager, Mr. Thomas Williams, stresses Feir´s Park Hotel for its central address in a aristocratic residential neighbourhood, surrounded by 20 art-galleries and just walking distance from the city´s financial district and the business heart of the Argentine capital. According the Mr. Thomas Williams the hotel offers excellent services, like its international

cuisine with the famous chef Director, Mr. Ramiro Rodriguez Pardo. Feir´s Park Hotel also offers friendly professional staff and free swimming-pool on the top 16th floor overlooking the city and the port, sauna, solarium and gym. A 24 hrs Business-center, for free, with pc´s, scanners, fax, internet and copy-machine. It has its own parking-lot in the basement. -“Our hotel has a very personalized attention for our guests including free after office daily activities as yoga, wine-tasting, cheese-tasting, personal trainer for the gym, gallery-nights, city tour and San Telmo-tour. Let me also stress our on-line chat on www.feirspark.com.ar where the guests immediately can get the information they may need, an book instantly their reservations on-line”, says Thomas Williams.

FEIr´S PArK HOTEL

For further details please contact: +54-11-41311900 fax +54-11-41311950 [email protected] or [email protected] http://www.feirspark.com.ar Esmeralda 1366 - Buenos Aires, Argentina

CHAPTEr VI • INTErVIEW: FEIr´S PArK HOTEL

Florencia Lerer, Reservations Manager

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Jebsen & Co. was founded by Martín Jebsen on 1st March 1971, as a firm with experience in advising foreign companies investing in Argentina, that is to say a so called “one-stop-company”.The management is carried out by its three partners: Martín Jebsen as founding partner, A. Rafael Faillace (44 years old) since 1986 in Jebsen & Co. and Luis Uncal (40 years old) since1990.From the very beginning, the economic aspects were unified together with the law-related issues. Nowadays, the firm is subdivided in three different areas of practice: Jebsen & Co. Corporate Lawyers; Jebsen & Co. Consulting and MGI Jebsen & Co. Auditors Tax Consultants, being the latter a member of the worldwide association MGI, with its main Secretariat in London, and currently represented by 260 offices in 75 countries.

The team of Jebsen & Co. is formed by 7 different proffesions with a total of 46 staff members.Jebsen & Co. renders its services not only in Spanish, but also in English and German. Additionally, it has proven skills in French, Italian and Portuguese. A significant part of the tasks performed at present are mainly comprehensive due diligences, contemplating at the same time the legal and economic aspects; tax planning and tax strategy, cooperating as well on the outsourcing of payroll and IT tasks and furthermore advising and helping its clients in the obtention of financing tools in the capital market.The origin of its clients are the following: 48% European capitals, 25% Argentine companies, 15% from USA and 12% from Latin American countries.In line with the composition of the services rendered: 29% legal advise; 28% auditing; 28% tax planning and tax advise; 10% consulting/payroll/IT and 5% capital markets.Even though Jebsen is a surname from Bergen in Norway, Martin’s father came to Argentina when he was 23 years old, in 1926, from Aabenrå (south Denmark) with a labor contract for six months, and he decided to stay in Argentina forever.

JEBSEN & CO

For further details please contact: +54-1143159304 FAX [email protected] Web-site: www.jebsen.com.ar

Dr. Martin Jebsen, Partner

CHAPTEr VI • INTErVIEW: JEBSEN & CO

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Accounting and consulting, SMS - San Martin, Suarez & Associates The firm has been around since 1987 and nowadays has more than 300 clients, many of these multinationals operating inside Argentina. With a staff of 150 professionals and an extensive network throughout Argentina and Latin America, SMS - San Martin, Suarez & Associates offers services according to the highest international standards. Mr. Pablo San Martin, partner in SMS - San Martin, Suarez & Associates, describes the Buenos Aires-based accounting and consulting firm, SMS - San Martin, Suarez & Associates as “a firm that facilitates the development of business in Latin America thanks to their bilingual professionals thouroughly trained at the firm´s Professional Development Center.”

According to Mr. Pablo San Martin, the firm has implemented the outmost technology following an ISO 9000-certification of their processes which qualifies the firm internationally for multilateral organisms and national concerning accounting. -“Our professional quality combined with our honesty and cordiality makes SMS - San Martin, Suarez & Associates your best alternative,” says Mr. Pablo San Martin. The firm offers so-called integrated solutions in all branches of industry, business and services. They also work with smaller firms.

SAN mArTIN, SUárEz & ASSOCIATES

For further details please contact: [email protected] and/or [email protected] Tel: +5411-43001026 web-site: http://www.sms.com.ar

Pablo San Martín, Partner

CHAPTEr VI • INTErVIEW: SAN mArTIN, SUárEz & ASSOCIATES

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Danish know-how and Argentine Raw Materials at their Best: Arla Foods Ingredients S.A. As a joint venture between Arla Foods Ingredients amba (Denmark, pioneers in commercial use of whey) and SanCor CUL (the biggest dairy in Argentina), the Argentina-based company, Arla Foods Ingredients S.A., produces dairy products of the finest quality, called functional milk proteins (FMP) and whey powder concentrate (WPC). These proteins produced in Argentina are used for the production of soft drinks, infant nutrition, sports nutrition, soups, sauces, bakery products, sweets, snacks, dairy, meat and dressings. The state-of-the-art processing plant, which was opened in September 2002 after a total initial investment of USD 60 million, is located in Portena, in the Province of Córdoba. It has about 60 employees and an annual production

capacity of 800.000 metric tons of cheese-whey. The administration and sales office is placed in Martí¬nez, in the Norhtern part of Buenos Aires. It has 20 employees covering the areas of general administration, marketing and sales, IT,finance, foreign commerce and logistics and the applications centre and customer service department (a pilot-plant opened in June 2002). Markets covered: Argentina, Brazil, Peru, Chile, Venezuela, Colombia, Mexico, Japan, Israel and Saudi Arabia. Annual sales: USD 50.000.000. Arla Foods Ingredients S.A. offers technical guidance by their Danish and Argentinean experts. The pilot-plant in Martínez, Buenos Aires, offers personlized technical assistance. Their excellence is based upon years of customer experience all over the world and an intensive research of the functions of the dairy proteins. -”Every customer gets the proposal of an individual solution. When they need to cut down costs of production and put up profit margins, we make sure the solution will not put quality at stake. Our mission is to offer consumers modern dairy products which inspire safety and well-being,” says Mr. Bjarne Schack Pedersen, General Manager of Arla Foods Ingredients S.A.

ArLA FOODS

For further details please contact: Arla Foods Ingredients S.A.Dardo Rocha 3234 (B1640FTX) Martinez, Buenos Aires, AgentinaTel.: +54-11-47170555 / FAX: +54-11-47175551web site: www.arlafoodsingredients.com

Bjarne Pedersen, Chief Director

CHAPTEr VI • INTErVIEW: ArLA FOODS

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HEMPEL’s core business is the supply of marine and protective coatings, an area where the company has gained a successful track record which is very well known among the most important fleets as well as oil companies, power generation plants, infrastructure constructors, windmills and container factories around the world.For 60 years, HEMPEL’s presence in Argentina was led by commercial representatives serving only ship-owners, until in 1995 HEMPEL opened its own office in the country to better assist customers and to introduce industrial products.HEMPEL Argentina maintains a leading position in the marine sector. Its major customers include the Maruba Group, Antares Naviera, Ultrapetrol and ARS shipyard —the only shipyard that has been

building cargo vessels in the last years. At the same time, HEMPEL Argentina has become an important player in the industrial market, to become the preferred choice for the Oil&Gas sector.Repsol-YPF, Petrobras, Chevron, Pan American Energy, Plus Petrol, Techpetrol, Total Austral and large paint applicators like Arpin, Lupat and Reves-Pint are some of the companies that have trusted in HEMPEL’s quality and expertise. At present, HEMPEL Argentina has 45 employees and, due to its growth, enjoys a leading position in South America, reporting to the Regional Director located at North Houston, Texas. The main office is in Buenos Aires and there are two additional branches with stocks —one in Mar del Plata to serve the fishing sector and one near the province of Neuquén for the Oil&Gas sector. There are two stock points, namely, Buenos Aires and La Plata. The company has a professional sales department and a technical department equipped with high-technology tools for providing technical assistance on site.

HEmPEL ArgENTINA

For further details please contact: Hempel (Argentina) SRLBuenos Aires Office: +54-11-48163137 / Mar del Plata Office: +54-223-4805320 Cipolletti Office: +54-299-4775805web site: www.hempel.com.ar

CHAPTEr VI • INTErVIEW: HEmPEL ArgENTINA

Fernando Moretti, Regional Sales Manager

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For 9 years now, in Estudio Willa we have answered to the same philosophy: to be close to the people. We believe that this is the only way to offer comprehensive consultant services. To this end, we have gathered an interdisciplinary team integrating all related areas – from company law to accounting and taxation planning. (Theirs Professional CV are available in our web site www.estudiowilla.com) We offer out-of-the-box and efficient solutions, being flexible with our fees to meet the client budget. We are aware that our clients want results, so we work to avoid any type of concern. Our clients range from important local and foreign companies, involved in international trade and transnational investment. In Estudio Willa we are prepared to listen to your problems, advise you in your business issues.

Estudio Willa is counsel to local and foreign clients in corporate matters, including a broad variety of services, such as organization of Argentine companies and foreign holding companies, draft of operational and financing contracts, shareholders agreements, incorporation and operation of companies in Argentina as web as abroad, reorganization and restructuring of companies, protecting your investment.Estudio Willa also works with foreign clients, consisting in the relocation of business with high levels of intensive manual labour in those countries that offer high quality at low price. We offer, for example, the relocation of the accounting area of a company in our country, motivated by the best costs, skilled manual labour and a convenient time zone.We also provide, through legal and tax advices, access to the relocation of different industries such as call centres, finance and accountancy, advice as regards taxes and connection with customers. Furthermore, the concept of “service in real time” that we are able to offer the citizens, industries and Danish business in Argentina.

WILLA LAW FIrm

Further detail please contact:Dr. Andres Willa (Estudio Willa Abogados & Consultores Tributarios)[email protected], [email protected]

CHAPTEr VI • INTErVIEW: WILLA LAW FIrm

Dr. Andrés Willa, Partner

70

Arla Foods Ingredients S.A.Dardo Rocha 3234 (Martinez)Tel: (54-11) 4717-0555E-mail: [email protected] Contact: Bjarne Schack Pedersen

Centro Metropolitano de Diseño(Metropolitan Centre of Design)Villarino 2498Tel: (54-11) 4126-2950E-mail: [email protected] www.cmd.org.ar Contact: Daniel Krupa

Estudio Rossi, Camilión & Asoc.LawyersLavalle 462, 1st floor. Buenos Aires, Argentina.Tel: (54-11) 4393-1438 E-mail: [email protected]: Sebastián Rossi and Soledad Dopazo

Estudio Willa Lawyers and ConsultantsParaguay 541, 2nd floorTel: (54-11) 4314-8100E-mail: [email protected] [email protected]: Andrés Willa

Feir’s Park HotelEsmeralda 1366Tel: (54-11) 4131-1900 / 4327-1931E-mail: [email protected] or [email protected] www.fierspark.com.ar Contact: Thomas Williams

(GL) Marketing GlobalPR and Marketing specialised in Artsand EducationMiñones 2386Tel: (54-11) 4787-1849E-mail: [email protected] or [email protected] www.glmarketingglobal.com Contact: Graciela Luzuriaga

Fundación Habitat & DesarrolloAv. L. N. Alem 36, 1st floorTel: (54-11) 4342-7207 / 5300-9000 (ext 122)E-mail: [email protected] www.habitatydesarrollo.org.ar Cont: Sergio Recio

Maersk Argentina S.A.Bouchard 557, 19th floorTel: (54-11) 5382-5800www.maersksealand.com/argentina

We deeply wish to thank the following companies and individuals for their contributions

72

Hempel Argentina SrlLibertad 1213, 2nd floorTel: (54-11) 4816-3137 / 3139E-mail: [email protected] www.hempel.com.ar Contact: Fernando Moretti

MGI Jebsen & CoL. N. Alem 693, 3rd and 5th floors “A”Tel: (54-11) 4315-9304E-mail: [email protected] www.jebsen.com.ar Contact: Martin Jebsen

Sustentable SrlEnvironmental ConsultantsParaguay 577, 6th floorTel: (54-11) 4543-1800E-mail: [email protected] Contact: Carmen Virasoro

Vestas Argentina S.A.Maipú 255, 16th floor, “B”Tel: (54-11) 4326-1022E-mail: [email protected] [email protected] www.vestas.com Contact: Oscar Balestro and Emilia Sedrán

Pastor Andres AlbertsenDansk Kirke (Buenos Aires)Carlos Calvo 257Tel: (54-11) 4362-9154E-mail: [email protected] www.iglesiadinamarquesa.com.ar

Carolina LevyDesignerE-mail: [email protected]

San Martín Suarez & Asoc.Auditing and Accounting Firm, Tax advisorsBernardo de Irigoyen 972, 7th floorTel: (54-11) 4300-1026E-mail: [email protected] and [email protected] www.sms.com.ar Contact: Pablo San Martín and Roberto Burgwardt

marca país. www.marcaargentina.gov.ar

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