International companies typically market their products through an Argentine agent/representative or a distributor. Working with a distributor has several advantages, although recent restrictions have limited the ability of distributors to import products. Distributors can provide strategic support for positioning brands in the market through promotion and advertising. Furthermore, they understand the local culture and can assist with after-sales service. This value-added service is increasingly important for customers, and contributes to a positive image of U.S. firms doing business abroad. There are, however, situations in which the best solution is a representative rather than a stocking distributor. Please contact the Commercial Service in Buenos Aires to discuss this.
The Civil and Commercial Codes govern principal-agent relations and differ from U.S. laws. We strongly recommend that an Argentine lawyer be consulted prior to entering into any type of agreement with an Agent/Distributor and engaged prior to substantive negotiation of the agreement terms. No special legislation has been enacted to regulate the cancellation of agency/distribution agreements, although a company could incur additional costs associated with the cancellation of an agency agreement due to Argentine labor laws. Given the complexity of the legal and commercial environment, contracts are generally negotiated in writing through the exchange of letters or via a basic instrument. The parties may not elect foreign laws to govern the agreement. Argentine courts will not enforce a contract executed abroad to avoid Argentina law.
U.S. companies should take time in selecting their Argentine agent/distributor. Business relationships and a good reputation are essential to an agent/distributor’s ability to reach potential customers of your product or service. Likewise, it is important to develop a close relationship with a representative, agent, distributor, or other business partner. The mutual trust that this builds will help prevent business disputes and enable the parties to resolve them amicably when they do arise. The U.S. Commercial Service of the U.S. Department of Commerce assists exporters in finding and evaluating partners in Argentina.
Contact the nearest U.S. Department of Commerce Export Assistance Center, where trade specialists can provide you with guidance on entering the Argentine or other international markets. Please call 1-800-USA-TRADE (1-800-872-8723) to locate the one nearest you or visit the U.S. Government Export Portal at http://export.gov/usoffices/index.asp. You may also contact the Commercial Service in Buenos Aires directly for additional information on partner search services, applicable fees and delivery times at http://export.gov/argentina/servicesforu.s.companies/businessmatchmaking/index.asp.
Foreign companies may carry out any single transaction. To carry on a routine activity, a foreign company must establish a branch (sucursal) in Argentina. An individual must be appointed as the company's legal representative, but assignment of capital to the branch is not necessary.
Legal Structures Commonly Used by Investors
Regardless of whether they are associated with local investors, foreign investors may do business in Argentina as individuals or through corporations, branches of foreign corporations, limited liability companies, limited partnerships, general partnerships, and joint ventures. Foreign corporations often operate in Argentina through a separately incorporated subsidiary rather than through a branch, primarily to reduce their potential liability. If a branch is used, all of the foreign corporation's assets, not only its Argentine assets, may be subject to potential liability. In contrast, if an Argentine or foreign subsidiary is used, the foreign corporation's liability generally will be limited to the assets owned by that subsidiary. However, corporate directors may become liable for unpaid tax obligations.
The law governing corporations is applicable throughout the entire country of Argentina. Corporations are set up with the approval of at least two legal or natural persons, whether Argentine or foreign.
A corporation may not be a partner in a partnership. A corporation can usually be established in three to four weeks if capital is supplied only in cash. If supplied in kind, the corporation can be established in about two months. A minimum of two founders is required with no maximum limit. Company founders must report a domicile in Argentina.
A minimum of two shareholders is required. No maximum is prescribed. Should a foreign company wish to act as shareholder of a local company, the company must be “qualified.” The cost of qualification proceedings is similar to the incorporation cost.
U.S. firms considering establishing operations in Argentina should fully investigate the tax and legal aspects of establishing a business with legal counsel before making any final decisions. (Please refer to Chapter 9 for Contacts, Market Research and Trade Events.)
The local franchising industry has mutated into a challenging and highly competitive environment for international franchisors seeking local partners. Current market size is approximately $6.5 billion, with an annual growth rate of approximately 10 percent. Franchising sales account for approximately 2 percent of Argentina’s GDP. Currently, 90 percent of local franchises are of Argentine origin and approximately 10 percent are of international ownership.
Development of franchising in Argentina has been uneven and shows a high level of concentration, as 10-15 chains handle 36 percent of the franchises and 50 percent of the total turnover. There are approximately 400 franchise brands in the market. Tourism and aesthetic centers are two new segments in which franchising is growing.
The most popular areas for international franchisors are fast food, foreign language training, dry cleaning, hotels, and car rental services. Local franchises have been particularly successful in apparel, food, ice cream, "empanada" pastries, fitness/health clubs, and education, but apparel franchising has lately suffered due to import restrictions. Coffee shops and stores are currently going through a growth stage, with local brands such as Havanna and Bonafide having more than 120 stores each. Starbucks entered the Argentine market in 2008, opening more than thirty stores since entrance. Other significant U.S. market players include Kodak Express, McDonald's, Burger King, Wendy’s, Cartridge World, Kentucky Fried Chicken, and Re-Max.
Franchise contracts are generally protected under the Argentine Commercial Code and are not governed by specific legislation. The scope of the service, commercial trade market/name, expertise, and shared production elements are covered by contractual obligations on both franchisor and franchisee. Elements of the contract include the license, methods/systems or proprietary information transferred to a franchisee, inputs supply, sales methods, quality standards, and ultimate control by franchisor of the contract elements.
Franchises have been successfully used in Argentina, but the obligations of the franchisor must be clearly established in the contract to avoid potential liabilities related to the operator, in case of default, bankruptcy, etc. There are initiatives to advance a franchising law to fully formalize the industry, but legal counsel should be sought prior to entering the Argentine marketplace and appointing a franchisee.
E-commerce is increasingly a part of daily life, particularly given a higher penetration of home broadband connections. Traditionally, local companies that sell cosmetics and personal care products, kitchenware, and books have been most likely to utilize direct marketing tools. However, the increasing use of the Internet has enabled other firms/sectors to penetrate the market. Companies selling household consumer goods, electronic devices, merchandising, , computer hardware, tourism services, and even cars publish their product catalogs on-line. Some imported products are marketed directly through cable and satellite TV programs.
However, restrictions apply to importing products purchased online. Those online purchases of foreign products valued up to $3,000 and delivered through the Argentine postal service or courier are levied a 50 percent charge on the value of the goods. Those goods exceeding the $3,000 value may not be sent through the Argentine postal service.
A regulation by AFIP, Argentina’s IRS equivalent, dated January 2014 (Resolution 3579), modified the retail mail order system, limiting imports of products via courier, and restricting duty free imports to $50 per year (in two mail order transactions) delivered to homes and requiring a 50 percent tariff on any shipment over $25. Courier shipments require the consignee to register as an importer, complete Form 4550 prior to importing, and retrieve the product at the main international airport known as Ezeiza (near Buenos Aires). In addition, there are restrictions on imports of printed material.
Argentine legislation permits the establishment of temporary associations, equivalent to joint ventures, known as UT (Unión Transitoria). This is an association of two or more individuals or companies that contribute assets to develop or perform a particular transaction in Argentina or outside the country using Argentina as its base of operations. UTs are not considered companies or legal entities in their own right. Participants may be resident businesspeople, locally constituted entities, or non-resident companies that have established a separate branch or other type of Argentine presence.
A contract must be signed and registered with the Public Commercial Registry at the Office of the Inspector General of Justice (Inspección General de Justicia) in the Federal Capital, or its provincial equivalent. The contract must contain the objective, duration, name and other specific information regarding the partners' responsibilities, financial contribution, and many other specific clauses. It must also provide for the appointment of a legal representative in charge of management.
Decrees 436/2000,1023/2001 and 1818/2006 together with Resolution 515/2000, Decree 893/2012 and Decree 1039/2013 establish the rules applicable to federal government purchases. They can be downloaded (in Spanish) from the following web site: https://www.argentinacompra.gov.ar/.
These regulations apply to all federal public agencies (including autonomous or decentralized institutions), but exclude federal banks. They also establish the amounts determining the selection process. Government purchases of less than AR$200,000 undergo direct purchase. Purchases between AR$200,000 and AR$800,000 undergo private bidding, but purchases over that amount must have an open public tender. Advertising and publishing procedure terms apply regarding important contracts in main publications and Internet sites such as ONC as well as in the Official Bulletin and publications of suppliers associations. Requirements for first-time sales to the government depend on the type of provider.
The National Contracting Office (Oficina Nacional de Contrataciones - ONC) is the agency supervising procurement for the National Public Administration. This office is part of the Secretariat of Public Management, Chief of Cabinet.
Most provincial governments have their own web sites with procurement information. A prominent NGO looking out for the interests of companies participating in national, provincial, and municipal procurements is the Unión Argentina de Proveedores del Estado (UAPE). UAPE has a database of government procurements. More information can be found at http://www.uape.org.ar/.
Procurement from Local Companies (“Buy Local” Regime)
Law 25551, issued on November 2001 and implemented by Decree 1600/2002, established the “Buy Argentine” Regime. The "Compre Trabajo Argentino" regime affects national treatment in that it obligates all government agencies, public and privatized utilities, and concessionaires to purchase domestic materials, goods and products, provided that the price is "reasonable" (precio razonable) and the performance is identical or similar (idénticas o similares prestaciones) to that of the imported/foreign goods offered, as defined by regulatory Decree 1600/2002 of August 28, 2002. In March 2011, the Argentine Senate approved an amendment to Law 25551, expanding the entities subject to the “Buy Argentine” regime. The draft law is still pending in the Argentine Congress.
Goods: Preference is given to domestic goods. The origin of the goods shall be determined by the nature/composition of the goods themselves, not based on the nationality or ownership of the manufacturing company. Goods containing imported parts shall be considered domestically produced when the value of the imported parts is no more than 40 percent of the sales value of the finished good, or when the imported product undergoes substantial in-country transformation such that the MERCOSUR tariff classification code of the transformed item differs from that of the imported part.
Services: Preference will be given to bids submitted by a domestic company or consultant.
Public Works: Preference will be given to domestic materials and to domestic services (i.e., project design, management, and construction services) as defined above.
In cash payment conditions, when the cost of the domestic good is up to five percent (for small firms) to seven percent higher than the cost of the imported/foreign good, the contracting party should select the domestic good. In the case of deregulated markets, the contracting party should select the domestic goods when the value quoted is equal to or lower than that of the imported/foreign goods. This requirement applies only when the domestic goods meet all the requirements set forth in contracting documents and can fulfill expected functions (idénticas o similares prestaciones).
When a bidder offers to supply foreign goods not available in country, he/she must guarantee "nationalization" of the goods by depositing a bond on behalf of the contracting party. In addition, the Secretariat of Industry will issue a certificate verifying the value of the goods to be purchased abroad at the request of the contracting party within 96 hours of receiving said request. To obtain the Certificate of Verification (Certificado De Verificación-CDV), the contracting party must submit a sworn statement declaring (1) that it has complied with the Compre Argentino regime; (2) the end price or value of the foreign goods; and (3) that said price or value is lower than that of domestic goods offered or that no domestic goods were offered.
When the selection of imported/foreign goods is challenged, the Secretariat of Industry will determine if the domestic goods offered meet all the requirements set forth in the contracting documents and can fulfill the expected functions (idénticas o similares prestaciones) in the same manner as the imported/foreign goods selected. The Secretariat may request the advice of the National Institute of Industrial Technology (Instituto Nacional de Tecnología Industrial-INTI) or any other body accredited by the Argentine Accreditation Organization (Organismo Argentino de Acreditación -OAA). If the challenge fails, the challenging party pays the costs of the Secretariat's intervention; if the challenge succeeds, the bidder offering the imported/foreign goods pays the costs.
Argentina is not a signatory of the WTO Agreement on Government Procurement, but it is an observer to the WTO Committee on Government Procurement.
Ninety percent of the Argentine population is concentrated in urban areas, with over 40 percent living in Buenos Aires and its suburbs, and approximately another 30 percent in the cities of Córdoba, Rosario, and Mendoza combined.
Channel selection should be based on the nature of the product and the company's knowledge of the Argentine market. Generally, firms new to this market find it more effective to sell through a distributor, although recent restrictions have made it more challenging for distributors to import products. Large firms generally buy directly from overseas suppliers, while smaller firms prefer to buy through intermediaries. Industrial equipment is sold by sales agents or through trade fairs, while consumer goods are increasingly sold through large outlets such as supermarkets and hypermarkets. Argentine distribution channels have gained increased efficiency through merging and streamlining as a result of the increased competition and changes in the consumer buying process.
Warehouse and distribution
Distribution in Argentina tends to be radial, with all roads converging on the Port of Buenos Aires. This dates back to the turn of the century, when Argentina's rail and road systems were developed by the British to bring products to the Port of Buenos Aires to satisfy the foreign demand for commodities. The hub-oriented distribution approach used in the U.S. does not yet exist in Argentina.
Argentina stretches 4,000 km (2,500 mi.) from north to south, an expanse crossed by only a few major highways. Argentina's 208,350 km (129,462 mi.) road network carries 85 percent of domestic freight traffic. Argentina has over 35,000 km (21,000 mi.) of railroads, but quality and speed vary widely. In general, the rail network requires significant investment to bring it up to international standards of speed and reliability. Renewal of one major freight and passenger line (the Belgrano) has been awarded to a Chinese company.
River and Maritime Transportation
Almost 70 percent of Argentina’s foreign trade is carried by ship, and about 80 percent of the import/export transactions are carried out through the ports of Buenos Aires and La Plata. The waterways on the Parana and Uruguay rivers are well-dredged and maintained. These rivers link the port of Buenos Aires to internal Argentine ports, as well as to Paraguay and Brazil.
Terminal de Cargas Argentina (TCA) was created as a concessionary partnership established by the GOA for the operation of airfreight terminals at international airports. TCA is the logistics division of Aeropuertos Argentina 2000, and provides full logistics and storage services to all foreign cargo agents. TCA's primary business is bonded warehouse management at major Argentine international airports, where the company stores imported and exported cargo while their consignees perform relevant formalities with the General Customs Administration or Dirección General de Aduanas (DGA). TCA's headquarters are located at Ezeiza Airport (Argentina’s main international airport just outside of Buenos Aires). The company also has branches in Córdoba, Mendoza, Mar del Plata, and Jorge Newbery Domestic Airport, in Buenos Aires City. Air cargo imports have grown rapidly in the past years. International courier delivery services are extremely active and most global express delivery firms have significant operations in Argentina, including FedEx, DHL and UPS.
The Retail Network
There are two types of traditional sales channels in Argentina. One is through large-scale retailers with a defined but limited share of the market. The other is through the many specialized retailers that seek to protect their niches.
The food retail market is loosely separated into three categories: traditional "mom and pop" stores (locally called “chinos” no matter who owns them) scattered throughout local neighborhoods, self-service mini-markets and drugstores, and the supermarkets and hypermarkets. Consumers prefer hypermarkets and supermarkets for lower prices on weekly and monthly purchases.
The population and economic activity are highly concentrated in the Greater Buenos Aires area. The population is of largely European descent and continues to have strong ethnic, cultural, and business ties with Europe. In some respects, consumer preferences resemble those of Europeans more than those of other Latin America nationals.
The U.S. continues to be one of Argentina's top trading partners. Many U.S. firms have been very successful here and U.S. products have a strong reputation for quality and technological innovation. The U.S. lifestyle and consumption habits are increasingly influential.
As in many countries, personal relationships are fundamental when doing business in Argentina. Success requires taking the time to develop a close personal relationship with the representative, agent, or distributor. Marketing U.S. products and services in Argentina requires a high level of research, preparation, and involvement.
Always use a professional translator, and if possible, have a native Argentine speaker, such as your agent or distributor, review any materials before using them in Argentina. Any official document to be presented before GOA authorities that is not in Spanish requires attachment of an official translation into Spanish by a Sworn Public Translator (Traductor Público), as well as certification by the Translators Association.
Price and financing terms have become increasingly important selling factors.
Some practical tips to successfully approach Argentine consumers are the following:
The number of people with Internet access continued to grow in 2014, from 130,000 connections in 2001 to 12 million. Network expansion allowed people to connect from multiple locations via WiFi connections in both private and public spaces such as: cafes, restaurants, parks, hotels, etc. But in 2014 the most important increase in connections was through mobile devices (smartphones and tablets) that grew 200 percent from 2013 to 2014. Over 32 million people (over half the Argentine population) were Internet users in 2014. E-commerce activity has grown tenfold since 2000 in peso terms.
The Argentine Government called public tenders to lay 13,500 km (8,388 mi.) of cable in 2014 as part of the country's federal fiber network project “Argentina Conectada”. This will add to the already-installed 8,000 km (4,971 mi.) of fiber. Once the national fiber platform is fully deployed by the end of 2015, more than 1,400 cities and localities across Argentina will have connectivity. To date, the GOA has invested more than $484 million.
While sales via Internet have not traditionally reached the same levels as in other countries, a study conducted by the Argentine Chamber of Electronic Commerce (CACE) showed a sustained increase from 10 percent of internet users in 2001 to almost 62 percent in 2014. Online purchases using credit cards represented 70 percent of total online transactions, up from 49 percent in 2014. This may be due to the boom experienced by discount coupon sales and a growing confidence in electronic payment sites. Online sales have also a high rate of acceptance in the interior of the country, where the variety of products available is more limited and delivery is an increasingly important sales tool. According to CACE, the estimated growth of electronic commerce transactions for 2015 will be 58 percent.
Argentina has many advertising agencies and management consultants. The leading agencies are members of the Argentine Association of Advertising Agencies (Asociación Argentina de Agencias de Publicidad). Many branches or affiliates of major U.S. advertising agencies are among the leading agencies. Advertising in the print media is the most widely used method, although television, internet, and radio advertising are increasingly important.
Major Daily Newspapers
U.S. exporters should take into account that locally manufactured products and those products imported from other MERCOSUR countries will have a price and duty advantage. Some customized services and products can still charge price premiums accepted by the high end of the population in certain geographical areas. High prices, high costs, and relatively low competitive pressures have traditionally characterized Argentina due to highly concentrated markets. Please refer to Chapter 5: Trade Regulations, Customs, and Standards for more information on import tariffs and the import process.
Customer service is a differentiating factor when selling a product. Argentine consumers are paying increased attention to home delivery and after-sales service.
Protecting Your Intellectual Property in Argentina:
Several general principles are important for effective management of intellectual property (“IP”) rights in Argentina. First, it is important to have an overall strategy to protect your IP. Second, IP may be protected differently in Argentina than in the United States. Third, rights must be registered and enforced in Argentina, under local laws. For example, your U.S. trademark and patent registrations will not protect you in Argentina. There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the entire world. Protection against unauthorized use in a particular country depends, basically, on the national laws of that country. However, most countries do offer copyright protection to foreign works under certain conditions; international copyright treaties and conventions have greatly simplified these conditions.
Granting patents registering are generally is based on a first-to-file, first-in-right basis. Similarly, registering trademarks is based on a first-to-file, first-in-right basis, so you should consider how to obtain patent and trademark protection before introducing your products or services to the Argentine market. It is vital that companies understand that intellectual property is primarily a private right and that the U.S. government cannot enforce rights for private individuals in Argentina. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants who are experts in Argentine law. The Consular Section of the U.S. Embassy at Buenos Aires publishes an illustrative list of lawyers on its web page: http://argentina.usembassy.gov/lawyers2--.html.
While the U.S. Government stands ready to assist, there is little we can do if the rights holders have not taken these fundamental steps necessary to securing and enforcing their IP in a timely fashion. Moreover, in many countries, rights holders who delay enforcing their rights in a mistaken belief that the USG can provide a political resolution to a legal problem may find that their rights have been eroded or abrogated due to legal doctrines such as statutes of limitations, laches, estoppel, or unreasonable delay in prosecuting a law suit. In no instance should U.S. Government advice be seen as a substitute for the responsibility of a rights holder to pursue promptly its case.
It is always advisable to conduct due diligence on potential partners. A good partner is an important ally in protecting IP rights. Consider carefully, however, whether to permit your partner to register your IP rights on your behalf. Doing so may create a risk that your partner will list itself as the IP owner and fail to transfer the rights should the partnership end. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Argentina require constant attention. Work with legal counsel familiar with Argentine laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.
It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IP and stop counterfeiting. There are a number of these organizations, both Argentina or U.S.-based. These include:
A wealth of information on protecting IP is freely available to U.S. rights holders. Some excellent resources for companies regarding intellectual property include the following:
The U.S. Department of Commerce has positioned IP attachés in key markets around the world. You can get contact information for the IP attaché who covers Argentina at: Albert.Keyack@trade.gov.
Companies interested in Argentina should always conduct due diligence before entering into business ventures or other commercial arrangements. The U.S. Commercial Service in Argentina provides U.S. firms with information that can assist companies in due diligence efforts on a specific Argentine company to help determine its suitability as a potential business partner. We can investigate the capabilities, legitimacy, and financial strength of an Argentine company and provide useful information gleaned from government, industry and financial contacts, the local press and other sources. In addition, USCS Argentina includes site visits and interviews with key personnel of Argentine firms with whom U.S. firms are considering or maintain a business relationship through its International Company Profile service. Our assistance does not rise to the level of due diligence in a legal sense, but does provide valuable information to that end. Please contact Josette.Fiore@trade.gov for more information.
U.S. consulting firms with local subsidiaries, as well as major local players, provide a wide scope of business solutions that include IT consulting, tax work, and M&A due-diligence, and market research. The U.S. Commercial Service prepares Industry Sector market research reports on an ongoing basis. Customized Market Research (CMR) is also available for companies that wish to have specific questions answered such as: the overall marketability of a product or service; market trends and size, customary distribution and promotion practices; market entry requirements; regulations; product standards and registration; key competitors, and potential agents, distributors, or strategic partners.
For additional information and useful links please visit the following web sites: