ARGENTINA Trends and Developments Contributed by: Daniel Rinci, Tomas Cabanelas, Fernando García and Marisa Majul, Rinci & Asociados
Rinci & Asociados Estudio Rinci & Asociados Av. Santa Fe 830 - 2° Floor Buenos Aires Argentina Tel: +54 011 5031-8980 Email: Info@estudiorinci.com Web: www.estudiorinci.com
Political Shift in Argentina Javier Milei won the 2024 presidential elections in Argentina campaigning on a free market and lower public spending, as opposed to the more intervention - ist policies of previous governments. This sharp shift came with political, economic and legal uncertainties that persist to date. The economic administration is summarised by the government in three main “anchors”: budget surplus, monetary restriction and exchange rate flotation. Milei also strongly campaigned on dollarisation of the economy, but over time this objective has shifted to currency exchange deregulation and the free choice of foreign currency in domestic contracts. Previous governments in Argentina have tried – and failed – to implement similar policies. During the 1990s and again in the second half of the 2010s, free mar - ket policies were implemented, leading to market crashes, exchange rate volatility and public outrage. Eventually, policies returned to the status quo, which in turn meant big losses for companies and individuals who had invested under free market policies. So far, the government has introduced important eco - nomic changes without triggering a major crisis. Pre - viously existing foreign exchange prohibitions – cepo cambiario – were dropped without an exchange rate crash, inflation was mostly controlled – although not eliminated, sovereign risk diminished, and political cri - ses regarding defunding of pensions, universities and social programmes were mostly averted.
Regarding legislation, several business-oriented laws were implemented despite a minority in congress. In particular, a regime for large investments (RIGI) was passed, which provides a guarantee of regulatory, customs, tax and foreign exchange stability for 30 years for investments over USD200 million. However, many reforms introduced via presidential decree were ruled out by the courts or by congress, such as an intended labour reform and government restructuring attempts. This whole transition had winners and losers: oil and gas, mining and agricultural activities have been driv - ing economic growth, while retail and industry are down due to lower import taxes and regulations. Regarding taxation, significant changes have been implemented (see “Tax reforms” below). Import tax - es, tariffs, excise taxes and other taxes were mildly reduced. A tax amnesty and a tax moratorium were also implemented, although historically this happens on average once per presidential term. General VAT and income tax rates remain at the same levels of 21% and 35%, with no changes in sight. There were attempts by the government to lower these rates but they were unsuccessful and the issue is very complex: federal taxes are distributed between the federal government and the provinces at a fixed rate, and this distribution represents a large share of public revenue for the latter. Thus, any lowering of these rates would severely impact provincial budgets, leading to firm opposition.
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