Investment opportunities in Argentina

Argentina is a country that occupies an important place on the international business map, with enormous potential in terms of natural resources, human capital and dynamic industrial complexes.

The Argentine government actively seeks foreign direct investment. Both foreign and domestic investors are generally treated equally in Argentina. However, foreign participation is prohibited in certain sectors, such as aviation and media. There are also restrictions on foreign ownership of rural land, water bodies, and border areas. Argentina recently introduced tax incentives for investors in the automotive sector, which include accelerated depreciation and prompt VAT refunds on new capital equipment, as well as a full exemption (0% rate) from export duties on manufactured goods produced under investment initiatives.

Why Argentina

1. Large and diversified economy

• 3rd largest economy in the region with a GDP of $500 billion (after Brazil and Mexico).
• 4th largest country in the region by population (43 million), 93% in urban areas; average age 30 years; vegetative growth of 0.9% per year.
• With a demographic dividend until at least 2030.
• Unemployment rate below 6.6%. About 75% of jobs are in the service sector.

2. Availability of natural resources

• The 8th largest country in the world (2.8 million km²), 53% arable land.
• Extensive coastline (4,700 km).
• 8 large oil and gas fields (5 conventional, 3 unconventional, potential for offshore exploration).
• Unexploited reserves of metals and minerals (copper, gold, silver, lithium, potassium).
• Optimal conditions for the development of renewable energy (wind, sun).

3. High-quality human resources

• Highly qualified workforce of international level, demonstrated technical ability, creativity and versatility.
• Ranked 1st in the Human Development Index and in the Education Index in Latin America.
• 98% literacy. About 110,000 college graduates per year.
• Ranked 2nd among countries with the highest share of the middle class.
• World-renowned scientific and technological institutions (CONICET, INTA, INTI).
• Entrepreneurship - successful initiatives (Mercado Libre, Taking Off, Globant projects).

4. Strong institutional structure

• Legal and regulatory framework inspired by developed countries.
• The system of republican and federal government guarantees autonomy to the provinces.
• A wide range of agreements and bilateral and multilateral treaties (G20, MERCOSUR, UNASUR).
• Member of the World Bank's International Centre for Settlement of Investment Disputes (ICSID).

5. Developed infrastructure

• An extensive network of roads and railways throughout the country (+35,000 km each), 43 ports and 54 airports.
• High level of Internet connectivity: 75% broadband and 141% mobile.
• Wide coverage of energy supply through gas pipelines and the National Interconnected System (SIN) for electricity.

6. Attractive value proposition

• Low asset valuations.
• Attractive domestic market (significant size and purchasing power).
• Access to talent and raw materials at an affordable price.
• Unrealized consumption and investment (logistics, infrastructure, services, energy).
• Potential to regain historical leadership in certain sectors (e.g. meat, grain, oil and gas).

Sectors for investment

Renewable energy

Since 2016, Argentina has held several auctions for wind, solar, small hydro, biogas and biomass projects to meet its goal of increasing renewable energy production and reaching 20% of the country's demand by 2025 year.

The government has awarded 244 projects, adding over 6,300 MW of installed renewable energy capacity through Rounds 1, 1.5, 2 and 3 of RenovAr, the government’s renewable energy plan, and the Renewable Energy Futures Market (MaTER). The market is dominated by European and Chinese players, supported by export credit agency financing.

The third round of the RenovAr program included small-scale projects distributed throughout the country, promoting a more decentralized and federalized electricity generation infrastructure. The projects in question were mostly installed near consumption zones and have become the cornerstone of the diversification of Argentina’s energy matrix.

The power purchase agreements were issued in US dollars for 20 years. At the time, the Argentine government protected the projects from potential economic instability through a number of instruments, such as the Argentine Government Trust Fund and World Bank insurance. However, due to the fiscal deficit reduction targets linked to the Argentine government’s agreement with the IMF and the high country risk associated with economic instability and political uncertainty, some projects failed to reach financial close. Electricity production from renewable sources such as biogas, biomass, wind and solar increased by 42.5%, 30.4%, 28.4% and 52.3%, respectively.

Oil and Gas

Argentina’s energy sector regulatory framework aims to provide greater market certainty and attract foreign investment to stimulate oil and gas production for export. Given the current economic challenges, the Argentine federal and provincial governments continue to play a significant role in critical sectors of the economy such as energy and mining. The Government of the Republic (GOA) views the oil and gas sector as a major export driver and foreign exchange earner. The government aims to attract foreign direct investment to stimulate economic growth.

Argentina has the world's fourth-largest shale oil reserves and the second-largest shale gas reserves. The Vaca Muerta Shale formation is located in the provinces of Neuquén, Mendoza, and Rio Negro, and only part of it has been developed for oil and gas production. The quality of the Vaca Muerta shale, production incentives, tax breaks, and negotiated labor benefits have helped reduce operating costs and improve efficiency. Major global E&P companies including Chevron, ExxonMobil, Petronas, Raizen (Shell) and Total are present along with many local firms. Argentina’s state-owned energy company YPF holds the largest market share in the upstream sector.

The industry reports a continued need for small and medium-sized service companies with shale experience to enter the market to further improve efficiency and reduce costs.

Neuquén Province, home to the largest portion of the Vaca Muerta formation, continues to be a key driver of industry growth. Total unconventional oil and gas production increased by approximately 11% and 26% year-on-year, respectively.

The government has launched “Plan GasAr,” a natural gas plan to increase local production and reduce gas imports by providing a framework that guarantees access to foreign exchange and government support to increase production. On July 9, 2023, GOA inaugurated the first phase of President Néstor Kirchner’s approximately $2.5 billion natural gas pipeline, which will extend from the Vaca Muerta basin in Neuquén to Buenos Aires Province. Once fully operational, the pipeline will save billions of dollars in liquefied natural gas (LNG) and other fuel imports. The current administration is evaluating funding sources for the second phase, which will reach Santa Fe Province.

Phase I of the pipeline has a current capacity of 11 million m³/day. Capacity is expected to increase to 25 million m³/day once two new compressor units currently under construction are operational. In addition, once Phase II is completed, capacity is expected to increase to 44 million m³/day. Several midstream transportation projects are being considered, including the expansion of the existing Neuquen to Buenos Aires pipeline, which could play an important role in increasing oil exports.

The market is awaiting the government’s introduction of a hydrocarbons bill, which could include a hydrocarbon investment incentive regime to provide the industry with tax and fiscal stability. The bill is expected to stimulate incremental oil and gas production for domestic and international markets and facilitate the continuity of production at mature wells through secondary and tertiary recovery, which account for approximately 80% of the country’s normal hydrocarbon production, as well as provide access to foreign exchange.

Infrastructure/Construction

The Argentine government plays a prominent role in the infrastructure sector. In the short term, the administration is reportedly focusing on small infrastructure projects - in the $20 million range - with opportunities for local companies in an attempt to create local jobs, as well as other projects that were tendered and awarded under the previous administration. Priority areas for public works include social housing, ports, roads, railways, and water works. The government's top priority projects include the construction of hydrocarbon pipelines, the modernization of railways and the expansion of existing power lines, as well as logistical infrastructure related to the mining sector.

Agricultural Industries

Agricultural Equipment

Argentina has a well-developed local manufacturing industry that produces agricultural machinery and inputs. The sector consists of approximately 730 companies and was one of the first industries to develop in the country due to the predominant role of agriculture in the economy. According to local statistics, domestic production of agricultural machinery and equipment accounts for about 80% of total demand. Local content requirements imposed by previous government administrations have led to an increase in local production of parts and components. This has forced multinationals to include more than 50% local content in the equipment they produce. Domestic production of seeders, sprayers, and tools is strong and competitive. Argentina maintains export duties on many agricultural products exported. Since 2008, Argentina has applied additional percentage export duties on a number of products, including soybeans, soybean meal, and soybean oil. In addition, some products, such as beef and wheat, face export quotas.

The government's 10-year plan, called the "National Promotion of Investment and Agricultural Exports," aims to increase exports by approximately 35% and create new jobs for the sector. The plan could lead to business opportunities for foreign exporters as local producers seek new solutions.

Best Subsector Prospects

Agri-Tech and Biotechnology: The Argentine market needs to adopt new technologies in this sector, with a focus on traceability of production, as well as products and services that will improve environmental practices.

Irrigation Equipment: The local irrigation market has been growing in recent years due to the increase in Argentine farmland devoted to row crops. Currently, 5.6 million acres (which is about 7% of agricultural land) are irrigated. The Argentine government aims to increase existing irrigated areas by 28%.

Parts and Components: Annual sales in this subsector currently account for about 12% of the total market, with many national products. There are opportunities for technologies ranging from precision farming to key electronic components for home appliances.

Opportunities

Products that offer cost savings and best practices are in high demand, as are those that improve the quality of agricultural machinery. Information technology services and products for the agricultural sector are also in high demand in the country. There is a potential market for innovative products and machinery, such as cleaner engines that reduce air pollution. Distribution agreements, joint ventures with domestic manufacturers, and licensing provide investment opportunities for foreign companies.

Information and Communications Technology (ICT)

Argentina has a well-educated and tech-savvy population, home to 11 of Latin America’s 34 unicorns. The ICT market is a mature sector with one of the highest broadband penetration rates in the region, where the main communication networks are digital, but there is still limited competition for broadband and mobile phone services. The main challenge is the need to connect unevenly distributed populations in remote and sparsely populated areas, where there is capacity and demand for satellite communications services. Other challenges include completing the replacement of copper cables with fiber optics, which, combined with economic problems, has slowed the rollout of 5G services while completing the rollout of 4G, according to local telecom regulator ENACOM.

Best Subsector Prospects

Telecom Infrastructure

In the telecom sector, investments are focused on four areas: deployment and improvement of the 4G+LTE network; expansion of broadband Internet access; expansion of data/broadband and content over cellular networks; and satellite services (for remote and rural areas of the country). Although Argentina’s regulator ENACOM recently announced the allocation of 5G spectrum, 5G deployment remains a medium-term reality in Argentina, given the current state of the fiber optic network required to implement 5G quickly. The current fiber optic network covers more than 33,000 km, with 85% of the fiber “lit” (active), and Internet speeds 15% slower than regional peers. The Federal Internet Plan network will use the fiber optic network of the state-owned telecommunications and satellite company ARSAT as a data service provider at the wholesale level, offering access to local Internet service providers, cooperatives, municipalities and SMEs. The Argentine government is implementing a "cloud first" policy by investing in the creation and development of a robust national data center in ARSAT.

IT Services

IT Services offer opportunities for foreign companies in the areas of network implementation, management and maintenance, legacy applications, RTE (real-time infrastructure) implementation, remote transaction processing, backup, disaster recovery systems, Internet and network security systems, digital asset management, storage, utility computing and rural information systems. Cloud computing and virtualization-related services will continue to be in high demand in 2025. Outsourcing of software development and call/contact centers continues to attract new investments, exports and increased domestic sales. Other market conditions will support the growth of IT services, such as the increased use of online platforms for sectors such as banking, e-commerce and public administration, which have increased awareness related to IT security.

Cybersecurity

85% of Argentine companies plan to invest in cybersecurity over the next four years. Despite the recent growth of the local cybersecurity market, this is only the initial stage. In general, the adoption of cybersecurity technologies lags behind more mature markets by two to three years. Some of the leading sectors for cybersecurity investment in Argentina include banking, energy (oil and gas), telecommunications, manufacturing, retail, and most recently the public sector.

Opportunities

The Argentine government will continue to invest in infrastructure and improve the long-delayed rollout of FTTH (fiber to the home). State-owned ARSAT continues to connect more than 1,200 cities in the country to its core fiber network, with an estimated investment of $80 million over the next 18 months.

While there is no confirmed date for the 5G spectrum auction, once launched, there will be opportunities for foreign companies offering solutions in sectors such as the Internet of Things (IoT)/Artificial Intelligence (AI) for specific verticals such as automotive, energy, and metals, as well as smart cities and e-government.

Medical Devices

Healthcare spending in Argentina has traditionally been around 9-10% of GDP, one of the highest in the region. Argentina’s medical equipment and devices market is dominated by imports, accounting for around 65-80% of the total market. The majority of imports are equipment and devices, accounting for about 51% of medical imports, as well as specialized catheters, cannulas, patient care products, orthopedic implants, and dental products.

Additional export opportunities for foreign companies include e-health technologies and mid- to high-end technology products, such as electrodiagnostic equipment and other specialized medical equipment and devices that do not compete with locally produced products.

There is also potential for a market for stents, heart valves, pacemakers, and other specialized disposables. All medical imports must be made by a registered medical device importer with the Argentine Food, Drug, and Medical Device Regulatory Agency (ANMAT).

Opportunities

The Government of Argentina, using international loans from multilateral development banks, will continue to provide funding to support public programs, especially those focused on primary health care, maternal health, infectious and immunopreventable diseases, and health infrastructure, as part of the national plan. This plan emphasizes efficiency, accessibility, and modernization through e-health technologies.

Travel and Tourism Services

Argentina’s hospitality industry is growing steadily, with international market leaders expanding their presence in the region. The country has become the top tourist destination in South America. The tourism sector is among the country’s top five sources of income. With the growing number of travelers to Argentina, the capital Buenos Aires has become an attractive investment region. Most of the international tourism leaders are already present in the region.

Buenos Aires, a city built on tourism, sees many new hotels opening every year. The city is also considered a cultural hub as it is home to over 300 theaters, ranking fourth in the world in theater activity. This has made the region a top choice for hosting international events.

The hospitality industry in Argentina is a mix of domestic and international brand hotels and their chains scattered throughout the country. International brands such as Wyndham and Marriott are rapidly expanding in the region and introducing their brands one after another. Marriott is expanding its First W Hotel brand in Argentina to include around 150 hotels set to open in 2024.

With hotel occupancy rates on the rise in Argentina, city planners are focusing on attracting more investment. According to the Ministry of Tourism, occupancy rates at various accommodations have been increasing in the past few years. Given the city’s population growth, the government is offering a significant level of tax credit on turnover tax for hotels for the first 15 years for new establishments and for the next 10 years for existing ones. It is planned to introduce similar practices in second-tier cities depending on their success.