One needs to analyze the particular places or country before entering into a new emerging market
(locally or abroad). As global competition increases, large companies from different states and
regions, and operating across different industry sectors, rush to achieve strategic positioning in
markets across the world. Different countries have different types of risk. The risk in host
country may differ from the risk of home country and the amount of those risks is higher in host
country. In today’s dynamic business world, organizations are prone to risks. It is imperative for
organizations to evolve efficient risk management frameworks. Everyone needs to investigate the
country’s risk in order to enter into a particular market.
The large and liberal free-market economy makes Argentina an attractive target for
market by allowing cent percent foreign ownership, liberalizing its capital market investment and
reducing taxes on foreign owned capital by revising its tax code. Well, as those factors give a
positive motive for investment, Argentina possesses some are certain risks that acts as drawbacks
for investing. Through this project we have tried to find out different problems and risk that exist
in different areas like bureaucracy, risks concerning legal safeguards, counterfeiting, mode of
operation, extremism, and personal threats and most importantly, the culture of Argentina. If one
can understand these risks and take precautionary measures to safeguard themselves from these
risks, he will surely be able to protect himself from the threats of these risks. In this report, I have
investigated the country risk of Argentina related with their business environment.
Facts
• Full name: Argentine Republic
• Main exports: Food and live animals, mineral fuels, cereals, machinery
Introduction
Officially called Argentine Republic, Argentina is the second largest country in South America
with area of 2.8 million sq. km having capital in Buenos Aires, which is the largest city of
Argentina and the second-largest metropolitan area in South America, after São Paulo. It is
located on the southeastern coast of the South American continent. It has a varied climatic
condition; predominantly temperate, with extremes ranging from subtropical in the north to
Argentines are a fusion of diverse national and ethnic groups, with descendants of Italian
and Spanish immigrants predominant. This might be the reason for the language of the country to
be Spanish. Argentina's population is overwhelmingly Catholic (92%), but it also has the largest
Jewish population in Latin America.
Population
The Argentine population despite growing at a constant rate has one of Latin America's lowest
growth rates. Eighty percent of the population resides in cities or towns of more than 2,000 and
over one-third lives in the greater Buenos Aires area. In 2009 there were 40.134 million people,
which were 39.746 in 2008. And in 2010 it was expected to become 41.02 million with an
Language
Spanish is the official language; mostly spoken dialect: Rioplatense Spanish; and is recognized
as first and second language as is spoken by 98.3%. But there are other languages of ethnic
groups/communities such as English, Italian, German, French, Yiddish, Russian, Polish, Welsh,
Arabic, Armenian and Croatian. Portuguese is used near Brazilian border and also found in use
border.Lastly, Quechua is, though is in decline, found in the northwest provinces, primarily in
Argentina benefits from rich natural resources, like Fertile plains (pampas); minerals--lead, zinc,
tin, copper, iron, manganese, oil, and uranium, a highly educated population, a globally
competitive agricultural sector, and a diversified industrial base. Agriculture accounts for 7% of
the total GDP, which includes products like oilseeds and by-products, grains, livestock products.
While on the other hand industry based product accounts for 32% of the total GDP, which
includes products like food processing, oil refining, machinery and equipment, textiles,
Movement after the 2001-2002 crisis to a more flexible exchange rate regime, along with
sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal,
and income distribution policies, and favorable international commodity prices and interest rate
trends were catalytic factors in supporting 5 consecutive years of greater than 8% annual GDP
Global financial turmoil and rapid declines in world commodity prices and economic
growth during 2008 and 2009 resulted in diminished growth in 2008 and a mild recession in
2009. The downtown was less severe in Argentina than elsewhere. The global economy’s current
Official figures show that Argentine GDP reached U.S. $306.7 billion in 2009, with real
annual growth rate of 0.9%. Its per capita income in 2009 was approximately U.S. $7,472. With
investment increasing an estimated 10% for the year it represent approximately 20.5% of GDP.
Analysts expect 2010 GDP growth in the 7% to 8% range or higher, but in 2009 the growth rate
of GDP was.
For the year 2008 the real GDP growth rate in March, June, September and December
were 1.2%, 2%, 1.5% and -0.9% respectively. While in the year 2009 the real GDP growth rate
in March, June, September and December were -0.9%, 0.4%, .04% and 2.3% respectively. And
as per the latest information, in 2010 the real GDP growth rate in March, June is 3.2% and 3%
respectively. So visibly, economy of Argentina have managed to recover from the negative GDP
growth rate in the late 2008 and early 2009 very well and also achieved the highest GDP growth
rate in 2010 of 3.2%.Thus the economy is demonstrating a positive attitude by recovering from
the recent slump in the growth rate,
Inflation
The inflation rate in Argentina was last reported at 11.10 percent in August of 2010, which has an
increasing rate from the mid of 2009 and become the 3 rd highest at present. But if we see the
trend since 2008, it can be estimated that the inflation rate of Argentina had reached its peak and
thus is more likely to go down by the end of 2010. In fact the above diagram clearly notifies a
start of the falling trend in Argentine inflation rate which is a positive indicator for making our
prediction accurate.
Corruption
Argentina is a country known for political and economic corruption. Government payments help
support corruption, and many Argentines organize their economic affairs to avoid paying taxes,
sometimes justifying their actions as reducing the support for a corrupt system. Corruption has
become a norm in Argentine culture which is seen in every facet of everyday life in terms of
corrupt judiciary, police force, and vote-buying legislature. In addition to that 75% of Portenos
(people who live in Buenos Aires) do not pay the correct bus toll, 70% have illegal cable
Argentines of all ages are very aware of the deficiencies and flaws of their political
system. Many children wanted to know why they got in trouble when they cheated but
politicians didn’t. “Why is it wrong for me to cheat on an insignificant test, when a
politician robs the country of millions and never gets prosecuted?” Good question. “Why
is it wrong for me to pay someone else to do my homework when it’s normal for my father
to pay off the police officer when he gets stopped for a traffic violation?”
the most hardest-to-eradicate forms of corruption. Foreign investors complain about widespread
for bribes. Money laundering, tax evasion plague the financial system. One further reason for
such corruption is its inconsistent and vague regulatory environment. That means corruption at
government level is intense as well. Corruption by government officials and private sector
business fraud are sometimes the subjects of worries for many foreign investors.Foreign
businesses frequently complain that “their adherence to the letter of the tax and regulatory codes
at times places them at a competitive disadvantage.”
In Argentina, it is evident from several media news that historically the presidents,
ministers and powerful officials have disguised beneficial ownership in business organizations.
And also affluent government officials hold much power in their hands. As a result they often
take advantage of it and misuse their power to take private benefits using government influence.
There are forms of nepotism also prevailing in Argentina. There is a negative perception
of this dimension of governance. People tend to be very critical on the quality of the bureaucracy
and the policy implementation. They argued that there is no merit-based system for recruitment
into the civil service. This means that family members and friends are recruited into the
government.
Bureaucracy
Argentine public policies are the victim of a non-cooperative policymaking process that lacks
professionalization. The relevant policymaking actors, such as the President, the provincial
governors, and interest groups, lack an institutionalized arena in which they can make policy
agreements to a professional bureaucracy nor or can they rely on enforcement of contracts by the
judiciary, because the Argentine bureaucracy has several weaknesses. Therefore, policymaking
becomes the outcome of a non-cooperative game in which each actor behaves opportunistically
The existence of red tape makes the environment even worse. The rule of thumb is that
if it takes 24 hours in the UK, it will take 24 days in Spain and 24 weeks in Argentina. It is
vitally important to factor this in, and make sure you pose realistic time scales for any business
venture.
Deliberate delay is also very famous in Argentina. They always make delivery delay of
their government task, which also makes inefficiency their policy and economic condition
inefficient. Therefore, the foreign direct investments enhance day by day, and it’s also increasing
The cultural practice indicates that Argentine people show quite more flexibility
towards time (P-Time). Punctuality is not a priority and more often people are late in business
functions. Argentineans also tend to do multitasking, often allowing interruptions to distract them
from the task at hand. They prefer to deal directly with issues rather than taking the time to plan
things out.
Business hours are normally from 9am to 7pm Monday to Friday. It is not uncommon
however for businesses to remain open until 9 or 10 pm. Lunch hours vary but are normally
As Argentina consists of 23 provinces and 1 federal district, local and regional interference
becomes profound in some situation. Locals are willing to take control over specific projects.
FDI
Foreign Direct Investment
(FDI) has played a major role in Argentina’s During the 1990s. Argentina was one of the main
destinations for FDI among emerging markets. There was a sharp rise in investment from 2003 to
2008. By 2008, investment rates had reached the highest levels recorded in the last 30 years (23.1%).
In 2008, USD 9,726 million of FDI flowed into Argentina, a year-on-year increase of 50%. This
placed Argentina among those countries with the greatest growth in FDI figures in 2008. However
FDI suffered from the impact of the international economic and financial crisis in the fourth quarter
of 2008 and during 2009. FDI flows to Argentina in 2009 fell by 50% while global FDI flows in the
Legal safeguards
Industrial Action
Section 14 of the Constitution establishes a number of workers' rights, including dignified and
equitable working conditions; limited working hours; paid rest and vacations; fair
remuneration; minimum vital and adjustable wage; equal pay for equal work; participation in
the profits of enterprises, with control of production and collaboration in the management;
protection against arbitrary dismissal; stability of the civil servant; free and democratic labor
union organization.
As per the industrial action is concerned, Argentine workers' right to strike is protected by
law, but unauthorized demonstrations have involved direct conflict with police in recent years.
Negotiations between unions and industry have often been involved government
intervention. The union tends to have dominance over the government. In the 2002-2004 period,
in an effort to avoid massive layoffs, a general wage increases were mandated by the
government. In 2008, the government raised the monthly national minimum wage to $354. And
in 2010 a legislation was passed, which was backed by the country's largest trade union group,
that require companies to share 10% of their annual net profits with employees.
Nationalization
If we see the trend of nationalization in Argentina it can be seen that the country is demonstrating
to be a more nationalization prone. Among many, the most well known nationalizations are:
1948 Seven British-owned and three French-owned railway companies then operating in
Argentina
As per the trend is concerned it will obviously make the foreign investors afraid of investing in
Argentina, as they will face the risk of losing their investment to the Argentine government.
Tax
Ar
gentina has relatively high tax rates. The top income and flat corporate tax rates are 35 percent,
which is one of the highest in the world. Non-resident companies are subject to tax on Argentine
source income. Income from export of goods situated in Argentina is deemed to be fully taxable.
The tax rate for corporations and branches of foreign companies domiciled in Argentina is 35%.
For other partnerships, the tax is charged to each partner according to a progressive tax rate scale
As in most occasions the corporate tax rate is relatively high in Argentina, it might act as
a barrier to enter Argentine market for the foreign investors.
Criminal activity in Argentina is concentrated mostly in major cities like Buenos Aires, Rosario,
Criminal activity can be found in several forms, each of which is detailed below:
Urban Crime
Common crimes found in urban areas include pick pocketing, purse snatching, mugging,
residential burglary, home invasion, thefts from vehicles, theft of vehicles and carjacking. Sexual
assaults and rape are also experienced in these areas. Resisting is greatly discouraged as muggers
in Argentina are known to carry weapons and will often use them at the first sign of resistance.
Rural Crimes
There have been a few reports of tourists being robbed, or resort hotel rooms being broken into
in rural, countryside regions of Argentina. These are significantly less frequent than crimes found
There are several common scams that both visitors and residents of Argentina should be aware
of. The most common is the "Flat Tire" scam. If anyone return to their vehicle to find a flat tire,
there's a good chance this was not accidental. The perpetrator will wait a moment, then approach,
offering assistance in changing the tire. The scam may end in one of several ways: robbery of the
victim, robbery of the vehicle, stealing of the vehicle or carjacking the vehicle and victim.
Another common scam is called a 'Virtual Kidnapping'. In this instance, a person will
receive a phone call gives fake kidnapping news. However, this scam works more often than not.
There is usually a small ransom, so that the victim may gather the cash immediately.This crime
Drug trafficking is an increasing issue for Argentina. Traveling back roads is highly discouraged,
especially when unfamiliar with the area. Drug use is becoming more common in middle-class
youth. Argentina's government is putting a great deal of effort into thwarting drug related crime.
Kidnapping
Kidnap people with the demand of a small ransom to be paid immediately. Both residents and
tourists in Argentina have fallen victim to this crime, though it is not a common one. Traditional
kidnappings occur as well (long-term, high ransom), but are heavily geared towards wealthy
Smuggling
It is the clandestine transportation of goods or persons past a point where prohibited, such as out
of a building, into a prison, or across an international border, in violation of applicable laws or
other regulations. There are various motivations to smuggle. These include the participation in
illegal trade, such as drugs, illegal immigration or emigration, tax evasion, providing contraband
Cyber crime
There are intellectual property laws in Argentina as it has signed TRIPS of WTO. But the reality
is enforcement of such laws is very minimal. It is found that Argentine market is full of pirated
software and brand names are replicated as if those are branded products.
cheapen brand value in the minds of consumers. It is found that lots of counterfeited products are
Fraud
Argentina actually encourages counterfeiting and fraud. As consumers get essential products at a
White collar theft refers to theft that is done by executive. In Argentina, white collar theft is
• Antitrust Violations like Price fixing, monopolies and other infractions of the Sherman
Some products are often stolen by the employee themselves in Argentina because of wide blue-
collar thefts.
Product adulteration
The demand of counterfeited product is very high in Argentina. The counterfeited products are
cheap and appealing to the Argentines. Thus it increases country risks to introduce reputed
brands
The Argentineans are very reluctant about their environment. So, in terms of causing damages to
the environment, the foreign firms will not face much restriction.
The rights of ancient people are a concern in many countries. Same, in Argentinean, the
• Animal testing
• Child Labor
Mainly in the developing countries, child labor is a big problem. In Argentina too, it is widely
practiced and it is a hot issue in the international context. If a foreign company did FDI, and use
child labor, its customers worldwide may not like it and react negatively.
• Unethical Advertising
• Human Rights
According to the report of U.S. Department of State, the human rights violation is a
commonplace in Argentina. The report says that the major human right violation is done in case
of workers, the prisoners, political activists, women and children. So, this information creates a
• Industrial Espionage
Argentina does not have the adequate laws and regulations to protect companies from industrial
espionage and so this is a risky place for foreign companies that compete particularly on the
best arriving for business on time: for social occasions. However, it is essential that you arrive
at least 30 minutes to an hour later than the stated time. Outside of the major cities, time is
circular and very polychromic. For example, dinner at home rarely starts before 8 or 9 PM and
a dinner party with guests at home will often not start until 9 or 10 PM, even though guests
may have been invited for 8 PM. Business hours are often extremely late: upper level
managers and executives can stay in the office until 9 or 10 P.M., and meetings can last well
• Personal relationships are important and must be developed before business is done.
• During business meetings, sustain a relaxed manner, maintain eye contact and restrict the
use of gestures.
• Argentines are tough negotiators. Concessions will not come quickly or easily. Good
• Punctuality valued in business appointments and patience while meeting with important
person is needed
• The pace of business in Argentina is slower than in the United States. A meeting that is
going well could last much longer than intended, even if it means postponing the next
engagement.
• Make appointments through a high-level person. Your Argentine contact can help with
this.
other languages. Spanish is different from the Spanish spoken in Spain. It has been said that
Argentines are a nation of Italians who speak Spanish and think they’re British living in Paris.
Like the Europeans, in Argentina the dates are written with the day first, then the month and then
the year, i.e. January 1st 2005 is 1/1/2005. It is important to make appointments to see
prospective clients through a third party, who acts as a middle man. Doing business in Argentina
Business dinners are generally held in restaurants. When you are the host, arrange payment
ahead of time. If this is not possible, insist on paying when the bill comes.
Don't use toothpicks, blow your nose or clear your throat at the table. To summon a waiter, raise
your hand with your index finger extended. Do not order imported liquor unless your host does.
Taxes are exorbitant. Avoid pouring wine, which is a complex ritual in Argentina.
Dress
Argentines are extremely fashion conscious. Dress well if you want to make a good impression.
Gifts
Do not give personal items, including clothing. When presented with a gift, open it at once and
be appreciative. Bring flowers, candy, pastries, chocolates or imported liquor when invited to
someone's home. Business gifts are not expected until a fairly close relationship has been
formed.
Personal threats:
These days, the greatest worldwide challenge that Argentina has to overcome is “fear”. It makes
no difference whether this fear is of terrorism, war, violent political clashes, unemployment,
Living in a suburb of Rio de Janeiro, for example, brings a great deal of daily insecurity,
especially related to the ongoing and out-of-control disputes involving drug traffickers. On many
occasions slum dwelling residents are not able to return to their homes because of the armed
In Argentina, 10% of the population is extremely wealthy and control 50% of the national
wealth. It is interesting to note that in order to be fall within the category of ‘one of the 10%
richer Argentineans’, one only needs to achieve the relatively miserable income of about US
$215.00 per month. The poorer half of the country’s population makes less than US $50.00.
According to a research published by the United Nations, 33% of Argentineans live with less
than $2.00 a day. This might be a reason for the increase in the crime rate, as the poor are feeling
The only state institution that is active in the slums is the police force, usually to threaten,
accuse, invade homes, and beat up the local population. In addition, the ‘law of silence’ prevails.
People cannot inform police about criminal activities for fear of being killed themselves. In
many circumstances, policeman act and talk like gangsters to try inspire fear and/or respect.
Environmentalist:
In recent years environmentalists have become increasingly concerned over the future of the
Amazon region, where human encroachment has threatened the world’s largest intact rain forest.
Extremism:
Extremism in the form of organized groups or anarchic mobs may target foreign businesses for
political, nationalists or religious reasons. It covers the whole range of certain actions employed
to destabilize society by wording and implementing threats, by unlawful and violent acts which
have proved to be ready to deform society and please one's personal or corporate goals.
Political Extremism:
Argentina has various political parties operating within the country. The government suppresses
them in various ways. Sometimes they revolved. Though it is not of that risky, but its existence
Precautionary measures:
• Should avoid joint ventures with the companies that do not comply with anti-corruption
• Adopt with the bureaucratic system of Argentina and do business in their way, avoid
being ethnocentric
• Try maintaining good relationship with the influential personals like political leaders,
• Try ingrain with the local and regional leaders, so that the production is not halted
• Finally in order to cut back financial, environmental and human damage from corruption
Criminal activity
• Be very careful before making any step. Think of several criminal activities that may take
• Make strict company policy, so that fraud or any kind of theft does not take place.
• Management must be strong and efficient
• Stricter policies should be implemented for checking the raw materials supplies as they
might be adulterated
International travel:
• Request a security risk briefing from your company. It is your employer’s responsibility
to provide a briefing of how to survive in the foreign country. The employers should also
provide information regarding what sort of dresses to wear, how to change currency and
whether the taxis are safe or not. If the company does not offer a security risk briefing,
• Do not discuss business identity or purpose with the fellow passengers. One should not
tell their fellow passengers about why he visits that particular country, or what sort of
meeting he will be attending etc. This is because he may not know what relationship he
has with his competitor.Avoid displaying company logo on luggage or attire. When you
are traveling, you should avoid displaying your company logo on your luggage or
clothes.
• It is better to arrange someone to pick you up at the airport. Your company should e-mail
you a picture of the person who will be coming to pick you up at the airport.
• People should refrain from carrying (or displaying) large amounts of money or flashy
jewelry.
• If possible, carry a cell phone and notify someone at a separate location of your travel
• Keep your passport, credit cards, travel documents and money separately from each
other.
• Never carry an unclosed bag, and do not keep valuables of any kind in a satchel or
backpack. If this is unavoidable, wear it on your front.
• Distribute your money in different pockets. Fold your paper money in such a way that the
• Memorize your passport details so as not to take out passport often, to fill in forms. They
• During travel time do not carry confidential company documents with yourself, since if
these are stolen from you then the company may blame you of industrial espionage. So
you should tell your employers to send the confidential company documents by DHL
Hotel safety:
• It is better to stay at reputable hotels. Reputable hotels are costly, but they are safe. It is
important to think about safety since if that employee dies, and then the company has to
• The receptionist should write down the room number to avoid other people from hearing
it.
• As a general rule, once you cross immigration do not hand over your passport unless
required by law.
• Do not carry all your money with you, but beware of leaving it in your hotel room: apart
from stealing by staff or other guests, a certain type of Portuguese burglar specializes in
In Argentina, calls to 107 would provide you with medical assistance, 100 for fire brigade
and 101 for police. The operator will put you in contact with the emergency service that you
require.
Plant security:
1. Personal Security:
• The Company should build a safe room with reinforced concrete, steel doors etc to
2. Equipment Security
• In case there is a fire and the plant equipments are damaged then the company may
not be able to continue their production for some time. To avoid this, company should
separate spare or vital equipment of the plant in a separate area so that the plant can
Transportation:
• If a person driving himself, then he should reverse into the parking position so that if
there is any problem then it is faster for him to exit the parking lot, to avoid being
kidnapped.
• Store valuables and merchandise inside the trunk of your car, out of sight. Park in well-
Street Awareness:
• It is better to keep a spare credit card or traveler’s cheque separately from your wallet or
• Ensure that the credit card you give to a merchant is yours when it is returned to you
because they may give you spare credit card instead of your credit card and whenever
you become aware of it they will charge by your credit card very high amount.
• Keep records of your credit card receipts, particularly on overseas trips. If there is any
• Keep your passport, credit cards, travel documents and money separately from each
other, we recommend keeping such things in closed, if possible zipped pockets.
Cultural Issues
• One needs to adopt with the culture of Argentina by knowing about their corporate
Others
taken.
• Thieves, carjackers and muggers are often armed and should not be resisted.
Conclusion
After analyzing all the unique risk in Argentina, we think that it is fruitful for us to enter in this
country. Although Argentina is a risky country, we have decided to enter and invest in Argentina.
This is because as we know that if there is higher risk then there will be higher return. If we can
handle all the risks very carefully there and deal with them properly, then we will be successful
in Argentina. By doing business in Argentina, though we are taking a great deal of risk but at the
same time we can expect a higher rate of return as the country is posing economical progress.
Thus by efficiently and effectively countering the threats and emphasizing on the opportunities
presented, one investor can definitely make remit sufficient profit out of the country.