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Argentina's History

Argentina was a nation populated by numerous nomadic tribes and two main indigenous groups prior to the country's colonization by European explorers. The southern and eastern regions were home to the Guarani people. The other group, the Diaguita, is noted for their success in preventing the powerful Inca tribe from expanding their empire into Argentina. Together these two groups composed the origins of agricultural civilization, most specifically the development of the cultivation of maize, in the country (1).

Amerigo Vespucci's voyage in 1502 led to the arrival of Europeans in the region. The indigenous people of the land fought to resist colonization by these visitors from Europe. Spanish navigator Juan Diaz de Solias visited Argentina and was killed in 1516, and attempts at establishing Buenos Aires as a port were thwarted several times by native resistance forces (2). However the strength of the indigenous people was no match for the disease that was brought to the area from their Spanish intruders.

In 1580, Spain was finally able to establish Buenos Aires as a permanent colony and further integrate the region into the Spanish empire by establishing the Vice Royalty of Rio de la Plata which enabled Buenos Aires to become a flourishing port. In 1816, the United Provinces of the Rio Plata declared their independence from Spain and on July 9th Buenos Aires formally declared independence (3). The hero of Argentina's national independence was embodied in General Jose de San Martin who is credited with “breaking the shackle of Spanish rule” in South America (2). With Spanish rule at an end, political groups struggled to gain power in the area. The Unitarians, who strived for a central government, were at odds with the Federalists, who strived for local control and many civilian and military factions all fought for their right to determine the future of the nation. In 1853 a modern constitution was promulgated and in 1861 a national unity government was formed (2).

While modern Argentina was established through the introduction of modern agricultural techniques and integration of Argentina into the world economy in the late 19th century, internal political strife ensued for many years. Radical and conservative forces continued to fight for control of the government, and in 1943 the military ousted Argentina's constitutional government. Juan Domingo Peron, an army colonel, was responsible for the overthrow and soon became the government's dominant figure as Minister of Labor. In 1946 he was elected to the presidency. Following Peron's death, the military took control of the government and reversed many of Peron's policies. Official sources identified approximately 9,000 persons who "disappeared" during the 1976 to 1983 military dictatorship, while some human rights groups put the figure as high as 30,000 (2). In 1983 the country's military regime failed to seize the Falkland (Malvinas) Islands by force from the UK, which led to the return of a democratic society. Democracy has persevered but not without numerous challenges, the most daunting of which was the brutal economic crisis that took place during 2001 and 2002 and led to violent public protests and the resignation of several interim presidents (3).

While politics have had a profound effect on the country, Immigration has greatly shaped Argentina's population. Immigrants from Europe, the majority from Italy and Spain, make up a significant portion of the population. The influx of Europeans into the region has also had a significant effect on the culture. And while the official language of Argentina is Spanish, many immigrants and natives keep their own languages and customs as a matter of pride.

Demographics (3):

Population: 40,913,584 (July 2009 est.)

Population Growth Rate: 1.053% (2009 est.)

Birth Rate: 17.94 births/1,000 population (2009 est.)

Death Rate: 7.41 deaths/1,000 population (July 2009 est.)

Ethnic Groups: White (mostly Spanish and Italian) 97%, Mestizo (mixed white and Amerindian ancestry), Amerindian, or other non-white groups 3%

Religion: Nominally Roman Catholic 92% (less than 20% practicing), Protestant 2%, Jewish 2%, other 4%

Languages: Spanish (official), Italian, English, German, French

Literacy: definition:age 15 and over can read and write

total population:97.2%


female:97.2% (2001 census)

Economic Figures (3):


GDP (Purchasing Power Parity)

GDP (Exchange Rate)

GDP - Real Growth Rate

GDP per Capita


$575.2 billion

$324.8 billion




$538.6 billion




$495.5 billion



GDP Composition




Labor Force

16.27 million

Unemployment Rate


Inflation Rate

8.6% (2008 est.)

8.8% (2007 est.)

Predominant Economic Model

Argentina boasts rich natural resources ranging from lemons, soybeans, grapes, corn, tobacco, peanuts, tea, wheat, livestock, petroleum and natural gases that allow it to maintain a globally competitive agricultural sector. Coupled with a highly educated population and a diversified industrial base, it is gradually recovering from the economic crisis of its past. Argentina's economy is founded on exports, particularly of agricultural products. According to the U.S. Department of State, “Foreign trade was approximately 39% of GDP in 2008 (up from only 10% in 1990) and played an increasingly important role in Argentina's economic development. Exports totaled approximately 22% of GDP in 2008 (up from 15% in 2002), and key export markets included MERCOSUR countries (23% of exports), the EU (19%), and NAFTA countries (10%)” (2).

Argentina experienced renewed growth between 2003 and 2007 due to several factors. First it shifted to a more flexible exchange rate system. This occurred during a period of sustained global and regional growth. Argentina used monetary, fiscal, and income distribution policies to boost domestic aggregate demands. Favorable international commodity prices and interest rate trends as well as the governments improved collection efforts also contributed to its success (2).

This economic revival enabled the government to accumulate substantial official reserves (over $44.9 billion as of late August 2009) to help insulate the economy from external volatility in the market (2). However, the global financial turbulence over the past two years has stopped Argentina's rapid economic expansion.

Report on Observance of Standards and Codes (ROSC)

The International Monetary Fund (IMF) and the World Bank embarked on a joint pilot exercise preparing "Reports of the Observance of Standards and Codes" (ROSCs). In this exercise, the two institutions undertook a large number ofsummary assessmentsof the observance of selected standards relevant to private and financial sector development and stability (6). Argentina was assessed on several areas that affect a country's financial development and stability.

With regards to Data Dissemination, Argentina subscribes to the IMF's Special Data Dissemination Standard (SDDS). The SDDS measures a country's dissemination practices. It covers four sectors of the economy: real, fiscal, financial, and external and also encompasses population. The SDDS and has four dimensions: quality of the data, the data's integrity, the public's access to the data, as well as thedatadimension (this includes the coverage, periodicity, and timeliness of the data) (6). According the IMF's 2008 report, Argentina met all of the requirements of the SDDS.

The Fiscal Transparency portion of the ROSC provides an assessment of the fiscal management practices of Argentina through IMF'sCode of Good Practices on Fiscal Transparency— Declaration on Principles. A description of practices and an IMF commentary on the fiscal transparency in Argentina are used in the assessment. Argentina was found to be compliant with the IMF Code.

The Transparency of Monetary and Financial Policies portion of ROSC looks at the clarity of roles and responsibilities of monetary policymakers, financial policy, the open process for formulating and reporting monetary and financial policies, public availability of information, and accountability and assurance of integrity by the central bank and financial supervisory agencies (6). ROSC determined that Argentina's institutional arrangements limit the monetary policy flexibility of the Central Bank of the Argentine Republic (BCRA) which has resulted in a high degree of transparency in the formulation and conduct of monetary policy. It also leads to effective and timely disclosure of international reserves and the composition of monetary liabilities (6).

The Banking Supervision portion of ROSC assessed Argentina's compliance with the Core Principles for Effective Banking Supervision which was created by the Basle Committee on Banking Supervision. In Argentina, under the BCRA lies the Superintendency of Financial and Exchange Institutions (SEFyC) which is responsible for banking supervision. While Argentina has in place an effective legal framework for banking regulation, the ROSC suggests it improves in several areas including: modifying its current preferred creditor scheme and expansion of the current range of instruments (used to intervene with institutions who are damaging the financial system) available to BCRA (2).

The remaining sections of the ROSC include: Securities Market Regulation, Insurance Industry Regulation, Accounting Practices, and Auditing Practices. However, these sections were self-assessments conducted by Argentinean authorities and, as such, the information in these sections was not verified by the IMF staff. Therefore, the validity and reliability of the information in these sections has not been inspected.

Cultural Description based on Hofstede's Values

Hofstede's cultural dimensions provide a framework for understanding how basic values underlie organizational behavior (Deresky, 2008, pp.100). Hofstede's four value dimensions include: power distance, uncertainty avoidance, individualism, and masculinity, and provide a broad look into the cultural tendencies of different nations. Argentina's value dimension rankings provide a general view of cultural trends and other tendencies that affect the way business is conducted in Argentina and with other countries.

Power distance is the level of acceptance by a society of the unequal distribution of power in institutions (Deresky, 2008, pp.100). Argentina scored a 49 in the Power Distance category (low but very close to the mid range); this means that in Argentina there is a general respect for authority in society. Therefore, there is a balance between enforcement of hierarchy in management structures and encouragement of harmony and cooperation in the workplace.

Individualism refers to the tendency of people to look after themselves and their immediate families only and to neglect the needs of society (Deresky, 2008, pp.102). Argentina scored a 46 in this category (again low but close to the mid range), demonstrating Argentineans' desire to satisfy not only themselves but society as well. Like many other Latin American countries, Argentineans place great importance on personal relationships as well as the welfare of their immediate and extended family members.

Masculinity represents the degree to which a country exemplifies the values of pride, materialism and assertiveness. In this category Argentina scored a 56, which means that society has a tendency to lean toward values of assertiveness and materialism. Uncertainty avoidance refers to the extent to which people in a society feel threatened by ambiguous situations (Deresky, 2008, pp.101). Argentina scored an 86 in this category, demonstrating a high level of uncertainty avoidance. This implies that generally individuals are encouraged to avoid aggressive and risky behavior. Society implements strict laws and regulations in order to deter risk and eliminate unexpected situations. In a business context, managers are inclined to make low-risk decisions and employees generally remain at one company for their entire career. The following charts illustrate Argentina's Hofstede rankings compared to Latin America as a whole:

As evidenced by the previous charts, Argentina ranks similarly to Latin America in all categories expect that it demonstrates a higher level of individualism.

Expected Accounting Values based on Gray

Given Argentina's Cultural Dimensions according to Hofstede, it is possible to determine the expected accounting values using Gray's Theory. Gray identifies four accounting values: professionalism, uniformity, conservatism, and secrecy. Gray proposes four hypotheses that can assist in determining the type of accounting system used in a country. These four hypotheses are as follows:

Hypothesis 1: The higher a country ranks in terms of individualism and the lower it ranks in terms of uncertainty avoidance and power distance then the more likely it is to rank highly in terms of professionalism (7). Given Argentina's scores in individualism (46), uncertainty avoidance (86), and power distance (49), it most likely values statutory control over professionalism as an accounting practice. This is evidenced by the implementation of strict laws and regulation to combat the country's high uncertainty avoidance.

Hypothesis 2: The higher a country ranks in terms of uncertainty avoidance and power distance and the lower it ranks in terms of individualism then the more likely it is to rank highly in terms of uniformity (7). Argentina's high level of uncertainty avoidance leads it to follow more uniform accounting practices. This is what would be expected of a risk adverse society. The limitation of flexibility eliminates the risk of the unexpected.

Hypothesis 3: The higher a country ranks in terms of uncertainty avoidance and the lower it ranks in terms of individualism and masculinity then the more likely it is to rank highly in terms of conservatism (7). Again Argentina's high level of uncertainty avoidance plays a crucial role in its accounting system. A conservative accounting system would be used in Argentina because of the preference of a cautious approach over a risk-taking one. This enables the country to cope with the ambiguity of future events.

Hypothesis 4: The higher a country ranks in terms of uncertainty avoidance and power distance and the lower it ranks in terms of individualism and masculinity then the more likely it is to rank highly in terms of secrecy (7). Argentina would most likely value an accounting system founded on secrecy. Given the political and economic instability the country has experienced, confidentiality and the restriction of disclosure of information about business practices would be preferred.

Corruption Perception Index

Transparency International (TI) was founded in 1993 and is an organization whose mission is to create change towards a world free of corruption. Each year TI releases the Corruption Perception Index (CPI). The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is a "survey of surveys", based on 13 different expert and business surveys (5). CPI generates a ranking and a score for each country; the ranking shows the level of corruption compared to other countries and the scorerepresents the perceived level of public-sector corruption in the country (the higher the score, the less corruption is perceived to be an issue in that country).

The 2009 CPI ranked Argentina at 106 of the 180 countries surveyed. It received a 2.9 score, which shows that the country is viewed as being highly corrupt in the public-sector. According to TI, a score of less than 3 indicates rampant corruption. This is not a surprise given Argentina's political instability and economic hardships over the years. Below you can visually see Argentina's level of corruption compared to the rest of South America:


Accounting Environment


Argentina is inspired by the American model for financial accounting, with some differences (26). Accounting standards in Argentina are set by the Argentine Federation of Expert Councils on Economics (FACPCE) through the Special Committee on Accounting and Auditing Standards (CENCyA). FACPCE is a private, professional association that consists of 24 Consejos, one for each province and one for the federal capital (12). Once all the Consejos accept a standard, it is published in the Boletn Oficial de la Argentina. According to the IMF, the Consejos and the regulatory agencies of the provinces are responsible for enforcing accounting standards. An accountant's failure to follow these standards subjects them to disciplinary action by the Consejos and exposes companies to penalties. As a result, the Consejos have formed Special Legal Committees that periodically review randomly selected accounts for compliance, and investigate complaints. The Special Committee on Accounting and Auditing is required to make sure that Argentine accounting and auditing standards move in the same direction as international standards. The Commerce Code of Argentina requires all companies to provide annual reports and publicly traded companies to report quarterly statements (12). Based on these standards and requirements, Argentina has created significant transparency in fiscal activities. Improving financial reporting of companies is important for Argentina to promote the confidence and trust of the public in local business communities and to reduce perceived corruption.

According to Deloitte, “Companies operating in Argentina must file financial statements that are prepared and presented in accordance with reporting practices and accounting principles generally accepted under Argentine GAAP.” Argentine GAAP follows U.S. GAAP in all material elements but some reporting practices differ slightly. First, statements based on Argentine GAAP are more general than those published under U.S. GAAP and there a fewer pronouncements to follow. Argentine GAAP is less restrictive, with more ability to interpret specific rules and accounting principles. There are no specific mandatory pronouncements for certain matters, resulting in appropriate solutions being developed from established rules in matters of uncertainty. Often, relevant U.S. GAAP guidelines are used as guidance (24). The two bodies of standards are substantially different with respect to (but not limited to) marketable securities, inventories, fixed assets, intangible assets, and environmental liabilities. Deloitte explains the following differences between the two standard setting bodies:


Under Argentine GAAP, companies value ending inventories at the restated historical cost or replacement cost. Holding gains or losses from inventory are credited to income, with balances not exceeding net realizable value. Under U.S. GAAP, inventory is valued at the lower of historical cost or net realizable value.

Intangible Assets

Organizations in Argentina treat pre-operating expenses as intangible assets and amortize them over a five year period. U.S. GAAP states that these costs should be expensed.

Environmental Liabilities

In the U.S. environmental contingency analysis is required and the identified contingencies should be accrued on a periodic basis. In Argentina there are no rules or procedures that refer to environmental liabilities.

According to the IMF, on March 20, 2009 the Argentine Federation of Expert Councils on Economics approved the adoption of IFRS for financial statements of public companies (12). In addition to the differences between U.S. GAAP and Argentine GAAP, there are also differences between Argentine GAAP and International Accounting Standards (IAS) (24). Deloitte identifies some of the following differences:

Loss Contingencies

International Accounting Standards require the loss contingency's occurrence be “more probable than not,” while in Argentina, the probability must be significantly more than 50%.

Deferred Assets and Liabilities

Argentine GAAP states that deferred assets and liabilities should be discounted, while IAS does not require them to be discounted.

Auditing Standards

Auditing standards are also set by the Special Committee on Accounting and Auditing Standards, which represents Argentina on the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC) (12). According to this body, the released financial statements must include an audit opinion, and the Consejos Profesionales are obligated to ensure that the opinions are in accordance with accounting standards. The IMF states that the Consejos are in charge of licensing, investigating, and disciplining auditors, who are monitored through random compliance checks (12). Strict auditing standards and regulations are necessary to restore trust and stability in governments and business organizations in Argentina.


Argentina has one of the most complicated tax systems in the world because taxes are assessed on federal, provincial, and municipal levels (28). The Administración Federal de Ingresos Públicos or Federal Administration of Public Revenue (AFIP) was established in 1997 to enforce tax and customs policies. The AFIP is divided into three departments: The Dirección General Impositiva, whose function is to enforce, collect, and control national taxes. The Dirección General de Aduanas collects taxes levied on imports and exports and controls the international trade in Argentina. Finally, the Dirección General de Recursos de la Seguridad Social is tasked with the duty to collect and control social security resources and shares some of its power with complimentary organizations, such as the National Labor Department (27). The income tax rates of Argentina are listed below:




From more than $

to $


Plus %

Over the surplus in $




































A noticeable difference between Argentina and the U.S. is illustrated by this income tax rate table; the maximum income amount listed in Argentina is $120,000 while the U.S. lists income up to $372,950.

A significant difference between the tax system in the United States and that of Argentina is the collection of the value added tax. The value added tax is an indirect tax imposed at different stages of production of goods and services produced internally and imported. Compared to sales tax, which is levied on the total value of retail goods and services purchased, the value added tax is reflected in the final price of the goods and services produced or imported. Argentina's value added tax is currently 21% (30).


As previously discussed with respect to Hofstede's values, business in Argentina is hierarchical with clearly defined roles between managers and subordinates. Employees view managers as having greater experience and lower ranking employees are usually not called upon to consult with top management during decision making. With such a hierarchical system, business can take longer than expected as decisions must be passed from higher levels down to lower levels. Additionally, Argentina is a culture focused on relationships. Managers often take a paternalistic attitude with regard to their employees (29). Also, as a polychromic culture, deadlines are set well in advance but are usually viewed as being flexible.

Legal Environment

The Argentine legal system is a mixture of U.S. and Western European legal systems (3). Great influence on the Civil Code of Argentina is the Spanish legal tradition as well as the Brazilian Civil Code, the Napoleonic code and the Chilean Civil Code (which is based largely on French theoretical works). Another major influence during the 20th Century was the German legal theory (9). Argentine law is based on two pillars of civil law: 1) the Constitution of Argentina and 2) the Civil Code of Argentina. Civil law is based on Roman law and is used predominantly in continental Europe and most former colonies of European nations (11). In Argentina justice is administrated by federal and provincial courts. Along with the Supreme Court are appellate courts, district courts and territorial courts. Since 1853 Argentina has had a jury based system for criminal cases but this approach is used rather infrequently. However, Argentina's legal system suffers from a lack of power to enforce orders against executives and federal judges who actively pursue corruption. Additionally, some courts are fully staffed with political leaders and their supporters. Police brutality is also common (although torture is forbidden) and the judicial system is subject to slow action and delays (10). Argentina's judicial branch is the Supreme Court which consists of nine judges who are appointed by the president with approval of the Senate. In 2006 the Argentine Congress passed a bill to reduce the number of Supreme Court judges to five (10).

Competition Law

Argentina's modern competition law was enacted in 1980 and its two substantive articles are Articles 85 and 86 of the Treaty of Rome. The law is enforced using an administrative process with available sanctions like fines and administrative orders. The law also created Argentina's first competition law enforcement agency, the National Commission for the Defense of Competition (CNDC). The CNDC has only advisory powers but, following an investigation, it submits recommendations to a government ministry which then renders the final decision. Argentina's current competition law was enacted in 1999 and had two major important implications. First, it introduced a formal merger control system (there was previously no independent merger law) and secondly it created an independent law enforcement body, the Tribunal for the Defense of Competition. This Tribunal consists of seven members which are appointed by the president after a competitive process conducted by a specially appointed jury. Unfortunately this Tribunal has never been constituted and the CNDC is still the major regulatory body (16). The major factor that determines if competition law is met is consumer welfare. It does not take into account producer welfare, fairness, or economic growth. There are specific regulations about what actions are unlawful. Unlawful for example are horizontal agreements (fixed prices or rigging bids), vertical practices (exclusive dealings) and single firm conducts (obstructing entry or excluding persons from the market) (16).

Banking Supervision

The basics of Argentine banking supervision are prepared by the Basle Committee. The principles established address major dimensions of banking regulation including preconditions for effective supervision, licensing processes, approval for changes in structure, methods of ongoing banking supervision, information requirements, formal powers of supervision, and cross-border banking (12). Argentina's supervisory framework separates banking regulation from supervision. Supervision is the responsibility of the Superintendency of Financial and Exchange Institutions (SEFyC) which operates under the charter of the Central Bank (BCRA) and is funded by the budget of the BCRA. The Board of Directors of the BCRA is solely responsible for prudential regulations and is kept informed of supervisory developments. The BCRA, through the SEFyC, is responsible for monitoring regulatory compliance and enforcement of laws. A draft law before the National Congress would give supervisory staff immunity from personal and institutional liability for actions taken in good faith during their supervisory duties (12).

Argentina's legal basis for banking regulation consists of relevant laws, which are effectively implemented, and a legal framework which does not hinder the creation or enforcement of loan contracts. The SEFyC engages in formal and informal actions to meet its objectives; its actions are directed so that institutions correct the delinquent aspects of their operations, discontinue practices in conflict with current regulations, or take the necessary steps to correct their economic and financial situations. The allowed practices are covered by the rules of the SEFyC or by the Law on Financial Institutions. In addition, the SEFyC is legally authorized to intervene in banks through the imposition of inspectors, the suspension of activities, and other measures it deems necessary. Not allowed is the administration or nationalization of institutions (12).

Companies within the Argentine financial system must submit quarterly audited reports. If an Argentine financial institution has foreign shareholders which exercise control over it, these foreign investors must submit semiannual consolidated balance sheets to the SEFyC which are then audited by firms with a recognized standing. The appointment of external auditors requires approval by the SEFyC which determines whether these companies meet certain prerequisites or not. The Audit Control Department overseas and verifies the work of these auditors. Any relevant matters regarding effective supervision or other major findings must be brought to the attention of the SEFyC by the auditors. Each quarter financial institutions must publicize their financial information. The BCRA sets the accounting and auditing standards for financial institutions which are consistent with the standards of the Argentine Federation of Expert Councils on Economics and Argentine GAAP (12).

Securities Market Regulation

Responsible for the regulation of investment businesses in Argentina is the National Securities Commission (CNV) which acts independently but is linked to the executive arm of the government through the Ministry of Economy and Public Works and Services. The CNV is a member of the International Organization of Securities Commission (IOSCO) and therefore current law is consistent with the majority of IOSCO's 30 principles. However, currently the third IOSCO principle is not met because CNV has the power to exercise its policies but is underfunded by the national budget. The CNV has the authority to take disciplinary actions and can issue penalties but its punitive actions are limited. However, it has recourse in the criminal justice system if entities refuse to cooperate. Furthermore, the CNV has the authority to share public and non-public information with its counterparts around the world and has legal power to obtain information on a compulsory basis for foreign regulators (12).

Argentina is also a party of the International Center for the Settlement of Investment Disputes (ICSID), the World Bank's Multilateral Investment Guarantee Agency (MIGA) and adheres to the principle of international arbitration. Furthermore, foreign participants are granted the same rights as domestic investors when trading at Argentina's Stock Market (14).

Insurance Industry Regulation

The regulation of insurance institutions is handled by the Superintendency of Insurance which is an autonomous entity operating under the Banking and Insurance Under-Secretary of the Ministry of Economy and Public Works and Services. Argentina is also a member of the International Association of Insurance Supervisors (IAIS), whose standards Argentina mostly meets. Argentina is also in observance with the 1997 Concordat (the Principles Applicable to the Supervision of International Insurers and Insurance groups and their Cross-Border Establishments) except in two areas: 1) the Superintendency lacks legal power to take over the management of troubled companies and 2) leading indicators of trouble in insurance companies are still under development (12). The Supervisory Standard on Derivatives is not observed but this is not seen as a major shortcoming at this stage because derivative investments are largely non-existent in the country. Progress on implementing the IAIS's Memorandum of Understanding on exchange of information with other countries has been limited, although an agreement has been reached with Uruguay (12).

Import and Export Regulations

Since 1981 the Customs Code has regulated imports and exports into and out of Argentina. Argentina is open to all exporters and is thus one of the most open economies in the world. With the creation of MERCOSUR in 1991 almost all non-tariff restrictions have been eliminated in member countries, zero duties have been introduced, and tariffs have been removed for over 90 percent of traded goods. For countries outside MERCOSUR, tariffs range from 0 to 22 percent with few exceptions. Argentina's fair trade laws are based on Article VI of the WTO which it is also part of. Argentina has various antidumping and countervailing measures in place. In general, no preliminary requirements need to be met by imported goods and documentation requirements have been simplified. However there are some goods which may need a permit to be imported. There are also some measures in place (including phytosanitary rules, specific duties or special investigations) to help the Government inhibit imports in order to protect domestic industries. Also for some types of goods (mainly automotive related) quotas are in place to regulate imports but are likely to phase out due to MERCOSUR regulations. Some goods are forbidden from entering Argentina like various used automobiles and certain dangerous products (12).

Property Rights

Argentina's competition law is relatively new and contains no special provision regarding intellectual property rights, and there is no case law on competition and intellectual property. Only Argentine patent law has specific provisions relating to competition which imply that if a patentee performs anticompetitive actions, their patent can be granted to its competitors (13).

Potential Applications of the Base of the Pyramid Protocol

In Argentina companies and governments can use Hart's concept of the Great Leap Downward to the population at the Base of the Pyramid. The Base of the Pyramid refers to the four billion people world wide which are living in poverty and are currently underserved by companies because they are not seen as valuable customers or stakeholders (15). To unleash the innovation and power of the Base of the Pyramid (BoP), companies need to rethink the way they currently do business. They have to become what Hart calls ‘Indigenous'. That means that they have to partner with the poor to enable business for both of them. (15).

This new way of thinking has lead to the BoP Protocol (Hart, 2007, p. 214). It consists of three interdependent and overlapping phases of activity with a specific outcome (15). The question is how these phases can affect Argentina and its economic progress. First, Argentina has huge potential to profit from this concept because over 14 percent of the population currently lives beneath the poverty line (14). This results in a huge amount of untapped markets for companies. Argentina's government has an integral interest in giving its poor an increased standard of living so that the country can reduce poverty and unemployment levels, thus helping to bring the economy out of the current economic slump. So how would the Protocol for BoP look like if it were used in Argentina?

Phase I: Opening Up

First the needs and opportunities of the BoP need to be discovered (15). This means that companies, NGOs, and governments need to realize what the BoP needs, while the BoP has to find out how they can use their strength to enhance their lives. The outcome of this phase should be a set of business concepts created with the help of the BoP which can generate value for all partners involved. The Argentine government and the companies that operate there need to find out the strength of Argentina's poor population and what business concepts can be used to exploit these strengths in a way that is both beneficial for Argentina as a country and for the nation's underprivileged.

Phase II: Building the Ecosystem

In the second phase companies and the government need to build a close relationship with the people at the Base of the Pyramid to enable the effective implementation of the new business concepts (15). The outcome of this phase should be an actual business model that can be tested in the community. For Argentina, this means that companies and the government need to build a close relationship with Argentina's poor to allow the best possible implementation of the newly created business models.

Phase III: Enterprise Creation

The final step is then to launch the tested business models and to scale them out with a focus on sustainable value creation for all parties involved (15). The outcome of this phase should be a prosperous network of locally-embedded businesses that serve the needs of the BoP. With respect to Argentina this means that after successfully testing the business concepts, companies need to scale-out these established models across Argentina (and maybe across MERCOSUR or South America as a whole) in order to empower Argentina's poor. The Base of the Pyramid protocol in Argentina should include building on what Juan Domingo Peron started while in office in the 1940s. After ousting the government, Peron pursued policies which were aimed at giving an economic and political voice to the working class people (14).

Globalization in Argentina

Modern globalization in Argentina, according to historians, began during the military dictatorship of 1976-1983, under General Jorge Videla, that followed the death of President Juan Peron in 1974. During this period, Peron's protectionist policies were replaced with trade liberalization strategies and a rising international debt (18). It was during this liberalization period when the economy was opened to trade that exports grew, and the country experienced an enormous inflow of foreign capital and investment. Economic conditions worsened with Argentina's return to democracy in 1983. Disinvestment, an increasing deficit, and a stagnant economy caused the country's economy to collapse in 1989, which resulted in massive inflation throughout the nation (19). Carlos Menem took office after this crisis and swiftly enacted adjustments under guidance from the IMF. These policies included privatization of state enterprises (including partial privatization of the social security system), labor market reforms, deregulation of the private economy, and trade liberalization in order to move toward a more free market economy (20).

These reforms resulted in a period of economic growth, prosperity, and increased productivity in Argentina during the 1990s. However, toward the end of the 1990s the living conditions of many middle and lower class citizens began to decline as the country experienced rising unemployment rates and decreasing wages. During this time, spending on health services and education declined because of the privatization of such industries. These events created a “new poor” among low and middle class Argentineans, which coupled with ever increasing international debt and government corruption, lead to widespread public distrust of the government and its leaders. Additionally, the devaluation of the Argentine peso resulted in extreme inflation of prices, especially for food and other basic goods. It was estimated that by June 2002 the value of the peso was only equivalent to $0.26 U.S. dollars (18). The lowest members of society were hit the hardest because of unemployment rates that rose to over 25% in many parts of the nation, including the capital of Buenos Aires. As a result, the poverty level rose from approximately 30% in 1999 to over 50% by 2002 (18).

Impact of Globalization

Globalization has significantly impacted Argentina and its people. The country is listed as number five on the list of top export destinations, following China, India, the Philippines, and Singapore. It is considered a good place for foreign companies to offshore production and services because of the cheaper wages and closer proximity to the United States and Europe than Eastern nations (21). Globalization and the resulting financial crisis of the late 1990s has lead to a boom in Argentina's tourism industry as many Americans and Europeans can now cheaply visit the South American nation (22). Additionally, the people of Argentina were able to experience the benefits of globalization through the wide variety of imported consumer goods available to them. Further, with a population of only 38 million people and enough food produced to feed 300 million, domestic and international exporting is an important industry. The economy in Argentina is now slowly recovering after years of recession and is expected to increase in the future. The GDP of Argentina from 1981 to 2004 is shown below, illustrating the increase during the prosperous 1990s, the economic crisis in 2001-2002, and the recovery in recent years.


1981-1991 1991-2001 2001 2002 2003 2004

GDP -0.1 2.9 -4.4 -11.3 8.8 9.0

GDP per capita -1.5 1.6 -5.6 -10.1 7.9 8.2

Source:World Bank; IMF. *FIEL forecast **: own estimates

In addition, from 1970 to 2000, Argentina increased in three standard measures of social development; increased literacy rates, increased life expectancy, and decreased infant mortality rates.

Literacy Rate in Argentina (%)









Life expectancy in Argentina (years)









Infant Mortality (per 1000 live births)


















Investment in US $










% of GDP










The growth of the 1990's also increased the amount of foreign investment into Argentina and the financial crisis lead to a sharp decrease in such investment as shown below. Only recently has the company begun to attract more foreign investors (22).

While globalization initially lead to an increased standard of living and prosperity for Argentina, the country has been subject to the many negative aspects of globalization and international trade. The country is mainly a commodity exporter, producing goods such as soybeans, corn, wheat, and meat for consumption in foreign countries at low prices. Argentina produces food for over 300 million people, making trade an important economic element. However, markets such as Europe and the United States are less accessible because of government subsidies in these countries, and high food safety requirements. Additionally, the threat of cheap imports from China and Brazil has threatened domestic Argentine farmers and producers. The 2001 crisis stemming from globalization has increased the gap between the richest and poorest members of society, caused public debt default, and increased corruption. Since 2001, Argentina has changed presidents five times, which shows the low level of public trust and confidence in the Argentine government (22).

Human Trafficking

The political and economic environment that existed in the early twenty-first century has allowed many illegal activities to thrive in Argentina. According to the CIA world Factbook, Argentina is a source, transit, and destination country for men, women, and children who are trafficked for commercial sexual exploitation and forced labor. Not only are children from rural areas brought to Argentine cities for sex tourism, but women and children from Paraguay, Brazil, and the Dominican Republic are trafficked into Argentina for sexual exploitation and forced labor. In addition, Argentine women and young girls are sold to Mexico and countries in Western Europe for sweatshop labor, domestic servitude, and sex slavery. Argentina is on the Tier 2 watch list, which monitors countries thought to be committing human rights violations, because of its failure to combat human trafficking but has recently shown progress by enacting the first federal anti trafficking legislation in 2009 (3).

Illegal Drugs

Argentina has also become a transshipment country for cocaine headed for Europe, and heroin headed for the United States according to the CIA. These activities have lead to increased domestic drug use, illegal narcotics and weapons trafficking, and money laundering activities especially near the Argentina-Brazil-Paraguay borders; further resulting in law enforcement corruption and fundraising for extremist organizations (3).

Impact of NGOs, IMF, UN, WTO and World Bank

NGOs and other organizations have a significant influence on many countries but especially on less developed countries such as Argentina. As mentioned above, Argentina is part of a South American trade bloc called MERCOSUR which it helped to form in 1991. The devaluation of Brazil's currency in 1999 resulted in major problems for countries within MERCOSUR, but after much dispute between Brazil and Argentina, MERCOSUR was re-launched in 2000 and targets were set which are similar to those of the European Union (ex: the plan for a common currency) (14).

Especially high is the influence of the International Monetary Fund (IMF) as Argentina is largely dependent on its funds due to its past economic crisis. In 2000, after introducing tough financial policies, (like fixing the peso to the U.S. dollar) the IMF granted Argentina a contingency credit of $7.4 billion. The influence of the IMF reaches deeply into Argentina's economic policy. For example the Argentine government decided in 2000 to cut the budget by $600 million to reach the deficit reduction target set by the IMF. The result was increased pressure to reduce local spending, and years of local misgovernment and violent protests. Further, the IMF's pressured major public spending cuts mainly in the form of wage and pensions cuts. At the end of 2000 fear had spread that Argentina could not cover its foreign interest payments and thus the government again had to agree to a new credit line of $39.7 billion by the IMF. The IMF also supported major actions by Argentina's economic minister Domingo Cavallo, such as new taxes and large cuts in public spending. With the financial crisis in 2001 the IMF had to grant further loans to Argentina totaling $8 billion and resulting in more pressure to cut costs (14). As a member of the Organizations of American States (OAS) Argentina voted against building a free trade zone covering South and North America in 2005 because the government feared (together with other South American countries) that the trade union could endanger its fragile economy (14).

Argentina has been a member of the United Nations' Security Council since 2005. It is also a member of the Rio Group, the Economic Commission for Latin America and the Caribbean, the Latin American Economic System, the Latin American Integration Association, and the Agency for the Prohibition of Nuclear Weapons in Latin America and the Caribbean. Argentina is also part of the World Bank's Multilateral Investment Guarantee Agency (MIGA) and the World Trade Organization. (14). Finally, Argentina is a subscriber of the Kyoto Protocol which will have major influences on Argentine's economy and development in the coming years (17).


1. “Argentina.” InterKnowledge Corp. URL:

2. “Argentina”. US Department of State. URL:

3. “Argentina”. CIA- World Fact Book. URL:

4. “Geert Hofstede Cultural Dimensions”. Itim International. URL:

5. “Corruption Perceptions Index”. Transparency International. URL:

6. “Reports on the Observance of Standards and Codes (ROSC)”. The World Bank Group. URL:

7. Salter, Niswander: Cultural Influence on the Development of Accounting Systems Internationally: A Test of Gray's [1988] Theory. URL:

9. “Legal Systems”. Wikipedia. URL:

10. “Legal system in Argentina”. NYU. URL:

11. “Definition of Civil Law”. Encyclopedia Britannica. URL:

12. “Report on Argentina”. International Monetary Fund.URL:

13. AIPPI, 2009 -

14. “Country Review on Argentina”. CountryWatch. Report 2008. URL: Country+Review%22+and+DT+20080701%29%29&bdata=JmRiPWJ0aCZ0eXBlPTEmc2l0ZT1laG9zdC1saXZlJnNjb3BlPXNpdGU%3d.

15. Hart: Capitalism at the Crossroads: Aligning Business, Earth, and Humanity [2007].

16. “Argentina - Peer Review of Competition Law and Policy”. OECD-Country Studies. Report 2006. URL:

17. “Kyoto Protocol”. UNFCC. URL:

18. “Beyond the Crisis: Economic globalization and informal work in urban Argentina”. Encyclopedia Britannica. URL: /18/26998983/Beyond-the-Crisis-Economic-globalization-and-informal-work-in-urban-Argentina.

19. “Argentina Dirty War 1976 - 1983”. URL: http://www.globalsecurity. org/military/world/war/argentina.htm.

20. “History of Argentina”. URL: .asp?groupid=2333 &HistoryID=ac09&gtrack=pthc.

21. Mundra, Anil. A New Sort of Offshoring. Published January 26, 2009. URL: http://www.

22. “What Argentina Thinks About Globalization: An Interview from Buenos Aires.” Published February 7, 2007. URL: PHPSESSID =3e41920bffbfaae76672db5a9e74e948.

24. Deloitte Executive Summary. Argentine and U.S. GAAP and the International Accounting Standards. April 2004. URL:

26. The Federation of International Trade Associations. “Argentina.” URL:

27. Administracion Federal de Ingresos Publicos. URL:

28. “Investing and Doing Business in Argentina.” June 27, 2009. URL:

29. “Intercultural Management- Argentina.” URL:

30. “Difference Between Value Added Tax (VAT) and Sales Tax.” Economy Watch. URL:

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