The incentive framework for large investments in Argentina

Máximo Bomchil
BOMCHIL, Buenos Aires
maximo.bomchil@bomchil.com

The government inaugurated in Argentina in December 2023 has two fundamental objectives in its political programme. First, to stabilise the economy by eliminating the federal state deficit and therefore terminating with the printing of money to finance it and the inflation it generates. By reducing state expenditures in an amount equal to 3.5 per cent of gross national product (GNP) in the ten-month period since its inauguration, the government has eliminated the deficit in the public sector and, furthermore, has generated a small surplus. Inflation has fallen sharply, and the government expects that it will continue to fall next year.

The second pillar of the programme was to create a friendly atmosphere for investments. In July, after very difficult negotiations in Congress, a law was passed introducing deep structural reforms to deregulate the economy, encourage new domestic and foreign investments and reduce bureaucracy in government agencies. It includes the privatisation of several state companies, a labour law reform and changes in the hydrocarbons, natural gas and electricity generation legislation, among others.

The law also enacts the Incentive Framework for Large Investments (RIGI, by its Spanish acronym) which provides tax, foreign exchange and custom duties benefits to companies planning to import and invest a minimum of US$200m in Argentina. Participants will enjoy exemptions and reductions from national and provincial taxes, as well as the ability to import goods duty-free. The RIGI will apply to investments in infrastructure, forestry industry, tourism, mining, steel, energy, technology and oil and gas sectors. The regime includes new projects or expansions of existing projects, with certain investments required within two years of RIGI’s entry into force, extendable for an additional two years.

Disputes arising between the federal government and the investor, if not resolved amicably, shall be submitted to arbitration under the rules of the Permanent Court of Arbitration or the International Chamber of Commerce (excluding the Expedited Proceeding) or the Convention on the Settlement of Investment Disputes between Nationals and Other States of 1965 or the ICSID Additional Facility Rules, at the investor’s option.

The law guarantees the investor 30 years stability of the tax, foreign exchange and custom duties incentives, as well as of the regulation of the whole framework.

The success of the government in stabilising the economy in such a short period of time has been astonishing. There are good reasons to expect that the RIGI will be successful also, attracting domestic and foreign investment much needed to boost the economy after many years of stagnation.