The Opportunities and Challenges of Doing Business in Argentina

I’ve written extensively about doing business in Chile, and since Argentina, the country next door, has been making a lot of noise, I decided to write up an overview of opportunities in Argentina. Argentina has the third largest economy in Latin America (after Brazil and Mexico), and the 2nd highest GDP per capita in the region in PPP terms (after Chile).

You may have heard the saying, “As rich as an Argentine,” a phrase that was coined to describe Argentina’s wealth and prosperity in the 1800s-1929. Argentina had the 4th highest GDP per capita and was one of the wealthiest countries in the world. Between 1890 and 1930, the capital city of Buenos Aires transformed from a colonial town to the sprawling, mammoth of a city it still is today.

Unfortunately, the Great Depression followed all of that prosperity and then decades of political turmoil. Over the next few decades, Argentina borrowed from foreign banks and ran hefty budget deficits. In the 1970s, Argentina’s credit rating dropped so low that leaders resorted to printing more currency, leading to the Argentinian Peso’s steady decline.

Argentina next went through a period of hyperinflation and political instability which lasted until the 1990s. By the 1990s and Dot Com Bubble era, the government launched new initiatives to reopen the country, and Buenos Aires became the birthplace of some of Latin America’s most successful technology companies. A group of Argentine Internet pioneers founded companies like MercadoLibre (the eBay of Latin America) and OfficeNet (which was eventually acquired by Staples).

But this boom didn’t last long. In 2001, Argentina defaulted on its public debts and faced another currency devaluation. Argentine entrepreneurs who lived through this period became instilled with the understanding that if you want to survive and do business, you’re going to need the right combination of patience, resilience and hustle. They also started to look at foreign markets, using Argentina as a base to go global.

The good news is that despite the constant state of uncertainty and political instability, there were Argentine entrepreneurs who persisted, churning out some remarkable companies. During the 2000s, two of the nine Latin American companies which are now in the billion dollar club were founded in Argentina — OLX (the Craigslist of Latin America) and Globant (a top outsourcing company that IPOed). I’ve found that Latin America’s best entrepreneurs generally have come from Argentina. It makes sense: you have to be a problem-solver, with the entrepreneurial spirit, who is willing to hustle, just to do many basic daily tasks in Argentina.

So what is it like doing business in Argentina today? In recent years, the growth of Argentina has been somewhat stagnant but with Mauricio Macri coming into power, Argentina is making changes that are going to impact startups and businesses, attract more investors, and restore consumer confidence. Here’s a deeper look at some of the opportunities and challenges that exist in Argentina today.

Opportunities in Argentina

The recently passed Ley de Emprendedores allows entrepreneurs to register a business 100% online in 24 hours. Previously, it took 26 days. This fast-track company registration allows entrepreneurs to register a simplified business entity (SAS), bank account, identification number, and a business temporary address.

There is a new governmental push towards Venture Capital Development. The government created a new law with the following goals:

  • Create and support accelerators and expand venture capital funds.
  • Provide tax incentives for investors to invest in new companies or venture capital funds.
  • Promote the creation of high-impact Argentine business ventures.

Argentina has the highest Internet penetration rate in Latin America (80.1%). It’s one of the largest and most technology developed populations in the world.

E-commerce is growing in the region. In 2015, the average online store grew 58%. Shipping and logistics startups are also coming in to deal with infrastructure difficulties to make online shopping easier.

The government is changing rules so that companies can import goods without the need for import licenses.

Bitcoin and other cryptocurrencies are booming in Argentina, where people were early adopters because of a lack of trust in banks and government. Argentina not only leads Latin America in bitcoin development and adoption of the digital currency, it’s also a global leader. As of June 2017, Coinmap lists 145 venues that accept Bitcoin in Buenos Aires alone. For perspective, London boasts 90 and New York 87.

According to Bitcoin Market Potential Index, which ranks the potential utility of the currency across 177 countries, Argentina is the country with the single greatest potential for digital currency. Use of Bitcoin doubled between mid-2014 and mid-2015, primarily among small businesses, and there are many interesting Bitcoin companies that have been started by Argentines, including: Xapo, Ripio, RSK Labs, and Bitex.
Challenges in Argentina

Inflation is still a problem, with an annual rate of 40%. Inflation drops consumption levels and decreases purchasing power, so doing business in the local market is still challenging. Employees have it rough; wages aren’t keeping up with inflation so it’s hard for your employees to buy anything imported, making life more difficult for everyone. The country is waiting to see how President Macri tries to solve the problem. Inflation, the commodities bust and economic mismanagement has pushed the country into a recession.

Over the last decade, Argentina has received very low levels of foreign direct investment as it isolated itself from the world’s capital markets. The new administration removed currency controls and reached a deal with the country’s last remaining creditors from the 2001 default, resolving a decade-long dispute, which will help Argentina return to international capital markets.

Navigating Argentina’s byzantine tax system in Argentina is difficult and businesses often need to hire a 3rd party to handle all of their financial reporting. Argentine business taxes are levied at three levels: federal, provincial, and municipal levels. Both the corporate income and capital gains tax rates currently sit at 35%.

Accessing traditional credit is difficult and credit card use is low due to high inflation and interest rates. According to the Central Bank of Argentina, credit card interest rates can range anywhere from 36% to 111%, however websites like and can help businesses compare interest rates for credit cards and loans from various banks and loan services. Startups like Afluenta have come on the scene to offer peer-to-peer lending to bridge the gap.

Over the past few years, it has been quite difficult to move money out of Argentina, as foreign businesses often need to do. Additional roadblocks, such as requiring companies to balance their imports with an equivalent amount of exports, have also made the country a challenging place to do business. Companies like Porsche, resorted to exporting several hundred bottles of red wine for each car it imported. Some companies end up bribing customs officials to look the other way or incorporate in Uruguay or the United States to deal with this issue.

The new governmental pushes to make starting a business easier and more profitable will help, but companies are still advised to understand the market and entrust a local when setting up shop, or look at using Argentina as a base to target foreign markets, while incorporating abroad. I personally still wouldn’t operate a business in Argentina targeting the local market yet, but the new government and entrepreneurs are starting to make things better. I would look to Argentina for top technology, design and marketing talent.


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