Francisco A. Laguna
This week, I gave a lunch presentation at Keller and Heckman’s TSCA and International Chemical Regulatory Law Seminar in Washington, DC. The discussion centered on 5 Latin American countries: Argentina; Brazil; Colombia; Mexico; and Venezuela. We’re converting my speech into a four-part blog series. The first will focus on Argentina.
Laguna Presentation: Latin America: 5 Country Assessments
Latin America is a natural market for United States companies wanting to sell their products overseas or establish a foreign presence of some kind. Including Cuba, the Dominican Republic and Puerto Rico, Latin America is comprised of some 20 countries with a population of approximately 580 million. In addition, the region largely speaks the same language.
The region is interesting onto itself for its socio-political and socio-economic diversity. Latin America includes 2 dictatorships, 4 socialist regimes, 3 different trading blocs, an economic mega-power in the making and some of the world’s best soap operas.
Two of the challenges of doing business in Latin America, as a whole, are: 1) each country has a distinct identity, with its own cultural nuances, biases and business practices; and 2) each country is exceedingly bureaucratic. And, of course, the culture affects the bureaucracy and the way one deals with government agencies and their representatives.
Today, I’d like to talk about some of our experiences in 5 countries: Argentina; Brazil; Colombia; Mexico; and Venezuela.
Under the administration of Cristina Fernández de Kirchner, Argentina has continued to decline economically. For 2014, the expected consumer inflation rate is 40%. Predictions for 2015 and beyond are the same or worse. Clients of TransLegal’s Buenos Aires office report that they are in survival mode, doing what they can to keep afloat.
The government has imposed a series of restrictive measures that curtail business and impede trade: including stringent foreign currency controls. Argentine companies reported that it is increasingly more difficult to obtain hard currency to pay for consulting or legal services rendered abroad.
In legal / regulatory terms, Argentina has always prided itself on having sophisticated laws, which are sometimes quite clear and specific. The issue now is enforcement or interpretation of the law by government officials, compounded by a weak and not necessarily independent judiciary. This has resulted in the use of laws to target specific sectors or persons.
Arbitrary denials of permits and authorizations have become more commonplace. For example, Argentine companies cannot distribute dividends to foreign shareholders without approval. The government is routinely withholding or conditioning its approval, especially for critics of the state.
On a more everyday level, clients report that they have experienced delays and denials of import permits for products that either compete with government-owned enterprises or companies owned by friends of the state. This practice tends to be more common for finished goods rather than ingredients, parts or components. However, under a system of economic cronyism, any product can become a target, and the government justifies its actions as a means of protecting domestic industry.
Current government practices have resulted in robust black market trade in goods and currency. In addition, it has fueled corruption. Although the country has strong anti-corruption laws on the books, they are not often enforced. In comparison to its neighbor’s in the region, Argentina has a much higher corruption index. It is a major challenge to doing business in the country and a deterrent for FDI.
The next presidential elections are late October 2015. Until then, there is little hope of change in Argentina.