Political/Legal Aspects
Argentina is one of the largest countries in South America after Brazil. The country with a population of over 40 million citizens boasts of vast natural resources and growth in agricultural products. While initially, the country has had political instability before the 1976 coup, currently there is peace and political stability in the country. The country has a democratic system of government and a conducive climate that is suitable for investment. The government of Argentina has introduced numerous initiatives aimed at promoting the economic state of the country ( U.S. EXIM Bank, 2019 ). After the 2016 recession, the government has introduced reforms aimed at creating a free foreign trade and creating a fairgrounds for competition for both the foreigners and domestic business. The reforms included tax reforms, free foreign direct investment, and lifting of the foreign exchange controls. The creation of the Argentinian Simplified Shares Company aimed at creating a more flexible international trade regulations that seek to attract foreign investment. The current regime has established a cool political climate conducive for the introduction of foreign investment in the infrastructure and automobiles. There is no trade restriction for foreign investors on any specific industry, and both the foreign and domestic firms are given fair competition ground. The trade policy of Argentina focuses on enhancing both foreign and domestic trade creation.
The Argentinian government has also established an attractive legal framework for the foreigners interested in doing business in the country. Argentina is a signatory to the Vienna Conventional on International contracts and allows for the use of international laws in arbitration and negotiation of contracts. The body that is in charge of the trademark and patents protection in the country is the National Institute for Industrial Property. The trademark laws allow for ten years of protection and are renewable on the condition that it was marketed within the first five years of registration. The copyright, on the other hand, is protected for life and up to 30 years after the death of the author. For patents, the initial period of validity is three years and may be extended for up to 20 years ( Puig & Shaffer , 2018). However, the laws regarding the protection of the intellectual property are not strict, and in some cases, firms may end up having their copyright and patents imitated. The legal framework of the business allows for equal treatment of the foreigners and domestic business owners. The government has also made reforms to the tax laws which led to the reduction of the amount of taxes foreign businesses are to pay. This was with a motive of promoting foreign investment and establishing a strong economy. The state of the security in Argentina is stable as very few cases of insecurity are reported. Businesses, both foreign and locals are provided with adequate security to ensure that there is growth in the business sector ( Puig & Shaffer , 2018). Corruption is an offense in Argentina, and some laws have been put in place to deal with cases of corruption. The country has made reforms in labor laws and human rights protection. Workers are protected by the labor laws, and employers are required to adhere to such laws while dealing with the employees. Violation of the labor laws can result in industrial action and lawsuits in Argentina.
Delegate your assignment to our experts and they will do the rest.
Economic Aspects
Argentina is a high-income economy and a country rich in natural resources highly literate people and an export-oriented agricultural sector as well as a diversified industrial base. The country has a mixed economic system which includes private freedom as well as a centralized economy with a variety of industrial sectors ( World Trade Organization, 2019 ). While the country has been in the past undergoing an economic recession, it has currently reversed to a strong high-income economy where people maintain a relatively high quality of life and high GDP. Argentina is one of the emerging market economies with a GDP of $578.7 billion and a recorded growth on average of 2.1%.
The major sectors include Agriculture, Industry manufacturing, services, and natural resources. Manufacturing is one of the largest sectors of the economy contributing 15% of the total GDP ( Peinhardt & Wellhausen, 2016 ). The leading products from manufacturing are food processing, motor vehicles, and spare parts as well as steel and electronics. Most of the exports from Argentina are agricultural products even though some of the industrial products are also exported. The service sector entails banking and tourism as well as transportation. The citizens of Argentina live a relatively high-quality life with low poverty levels and fair income distribution. The purchasing power is high due to high income amongst the citizens. Majority of the Argentinians are literate and employed in the various sectors of the economy while others are entrepreneurs. The per capita is relatively high with a low-income gap between the individuals.
Previously, the country had experienced high levels of inflation that affected the economy and international trade. After 2016 however, the economy has been stabilized, and the rate of growth stands at 2.1% annually ( Peinhardt & Wellhausen, 2016 ). The country’s balance of payment stands at -14.693 billion US dollars. Argentina has a strong currency that is relatively stable and does not undergo a lot of fluctuations. The country has become an attractive investment destination for foreign investors, especially in the manufacturing sector. This has greatly contributed to the rapid economic growth currently being witnessed in the country. The country is, however, experiencing a trade deficit in its country as well as in the budget. The deficit in the budget sometimes forces the government to increase the taxes to cover the deficit.
Trading Conditions
A trade agreement exists between the United States and Argentina. The United States is the number two trading partner behind Brazil. There are flexible foreign trade policies in Argentina made purposely to promote foreign trade. The firms that want to import goods into Argentina are required to register with the National Registry of Importers and Exporters ( Nazmi, 2016 ). The procedures to get registered are relatively simple, and the aim is to help the government monitor the exports and imports. The country although allowing free trade has anti-dumping laws that prevents and restricts the quantity of the products that can be dumped into the country. The imported goods which are seen as a threat to the local industries are subjected to a compensatory duty. The fair trade laws of Argentina are based on Article VI of the WTO under Resolutions 281/97 and 622/95.
Argentina is a member of the MERCOSUR, and together with other member countries work to promote fair trade and elimination of tariffs. To the non-members, the common external tariffs are introduced at 20%. However, some products such as the automotive sector can be subjected to a tariff of up to 35%. Since 2012, all the imported capital goods have been subjected to 14% tariff ( Nazmi, 2016 ). The major purpose of imposing a higher tariff is to shield the domestic firms from unfair competition that may be created by the cheaply imported goods. The government aims to create a fair and equal ground for all businesses to compete.
A good trade relations, however, exists between the United States and Argentina. The United States exports a variety of products to Argentina with major ones including machinery, oil, and organic materials. More than 500 U.S. firms are doing business in Argentina and employ more than 15000 people. According to the Department of Commerce, the United States is the largest investor in Argentina with over $14 billion stock in direct foreign investment. Due to a strong trade relationship between the United States and Argentina, there are relatively few trade barriers between the two countries.
Socioeconomic and Cultural Aspects
Argentina has a population of more than 40 million, and the population continues to grow. The many different sectors have a fair distribution of the labor force, with the industrial sector being the leading employer followed by agriculture. The levels of unemployment are average in Argentina. Since the introduction of the reforms in the labor force, the rights of employees are protected under the labor laws. These laws govern the relationship between the employer and the employee. The employers are therefore restricted within the labor laws at both hiring and firing. Both women and men participate in the labor force, with both working in various sectors within the economy.
Conclusion and Recommendation
The company should pursue a more detailed analysis and spend more resources to introduce a high-end car to Argentina. Based on the above-analyzed data, Argentina stands out as one of the best nations to invest due to fair trade regulations. The country has a large population of working class with relatively stronger purchasing power thus providing a market opportunity for the product. It has a stable, growing economy which also supports business growth. The political and legal aspects of Argentina are conducive and supports both foreign and domestic investment. A good trade relationship already exists between the US and Argentina, and thus the firm can take advantage of the existing trade relations to join the market. Despite the existence of a few obstacles in the Argentinian market, many aspects provide a conducive environment that supports foreign investment.
References
U.S. EXIM Bank: Finance Guarantees & Insurance for US Exporters. (2019). Retrieved from https://www.exim.gov/
World Trade Organization - Global trade. (2019). Retrieved from https://www.wto.org/
Puig, S., & Shaffer, G. (2018). Imperfect Alternatives: Institutional Choice and the Reform of Investment Law. American Journal of International Law , 112 (3), 361-409.
Peinhardt, C., & Wellhausen, R. L. (2016). Withdrawing from investment treaties but protecting investment. Global Policy , 7 (4), 571-576.
Nazmi, N. (2016). Economic Policy and Stabilization in Latin America . Routledge.
