How To Do Business In Argentina

A. HOW TO DO BUSINESS IN ARGENTINA

International Management

April 20, 2006

B. Summary

The main goal for the project "How to do business in Argentina" was to show how a Multinational Company must approach different aspects like government, laws, society, culture and infrastructure when facing the challenge of doing business in other countries.

First, we will do a short review of some important background aspects such as its geography, its localization and main geographical characteristics. We will also analyze historical events and political factors that influenced society, culture, economy and development of the country. The government system, economic factors such as inflation and GDP, technological factors and labor market characteristics will also be explained during the project.

Secondly, we will analyze the history and the practice of the organizational relations between labor unions and management. Moreover, we will explain the different control activities and relations between government and business.

The project will also analyze cultural characteristics such as individuals' position in the society, gender role, relationship between different genders and different ages, workers and their attitudes toward work, time management, authority, competition and cooperation with coworkers. Finally we of conclude with recommended managerial activities based on all the background and general information collected for this guide.

Country Information

1. Geography

Argentina is located in South America. It is the second largest country of the region after Brazil. It has an area of almost 3.8 million square kilometers and represents 2.8 % of the continent. Approximately 50% of its area is plains (grasslands and savannahs), 20% are plateaus, 20% are mountains, and the remainder is in the Antarctic. Argentina has borders with Uruguay, Brazil, Paraguay, Bolivia and Chile in a perimeter of 9,376 Km.

Argentina's main characteristic is the contrast between the eastern plains and the Andes mountain range to the west. From the north to Tierra del Fuego in the south, Argentina presents big contrasts: the plateaus, the lake region, the forests and glaciers in the Patagonia. The Pampas, in the center of Argentina, is the largest and best known area of plains and industry. Agricultural and livestock activities are performed in this area, which includes the city of Buenos Aires, Rosario, Cordoba, Mendoza y Mar del Plata.

By 2004, the population in Argentina was over 39 million people, almost half of which live in the city and the province of Buenos Aires. 97 % of the population is white, mostly of Spanish and Italian ancestry. By 1995, the literacy rate reached 96.2 %.

2. Historical Information and Political Factors

The most representative period of political and social changes started when Juan D. Peron, an army colonel, emerged as the strongman winning the presidential elections of 1946 and 1951. Opposition to Peron's increasing authoritarianism led to a coup by the armed forces which sent Peron into exile in 1955. Argentina entered a long period of military dictatorships with brief intervals of constitutional government that ended in 1973.

The former dictator returned to power in 1973. After Peron's death in 1974, the nation was in an economic and political collapse. In 1975 the cost of living rose 355%. On March, 1976, a military junta began the "dirty war" to restore order and eliminate its opponents. While violence declined, the economy remained in chaos. In April, 1982 General Galtieri invaded the British held Falkland Islands, also known as the Malvinas Islands. Great Britain won a decisive victory and as the 1983 elections approached inflation reached 900% and Argentina's crippling foreign debt reached unprecedented levels.

In 1991, Carlos Menem became president and promoted economic austerity measures that deregulated businesses and privatized state-owned industries. But beginning in September, 1998, eight years into Menem's two term presidency, Argentina entered its worst recession in a decade. In December, 1999 Fernando de la Rua became president. Despite the introduction of several tough economic austerity programs by 2001 the recession slid into its third year and Argentina was bankrupt. The IMF gave Argentina $13.7 billion in emergency aid in January, 2001 and $8 billion in August, 2001. The international help was not enough however and Argentina verged on economic collapse forcing it to default on its $141 billion foreign debt payment which was the largest such default in history.

On January, 2002 after more instability the government announced an economic plan devaluing the Argentine peso which had been pegged to the dollar for a decade. The devaluation plunged the banking industry into crisis, caused unemployment to reach 20% and wiped out much of the savings of the middle class, plunging millions of Argentineans into poverty.

Nйstor Kirchner became Argentina's president in May 2003. Kirchner has vowed to aggressively reform the courts, police, and armed services, and to repeal amnesty laws for perpetrators of the dirty war. Argentina's economy has been rebounding since its near collapse in 2001, with an impressive growth rate of about 8% since President Kirchner took office. But doubts have been raised about efforts at repaying its record public debt default.

3. Government System

Argentina consists of 23 provinces plus a federal district, the City Buenos Aires. The Argentine Constitution establishes a Republic under a representative and federal system, and three separate branches of government: executive, legislative and judicial.

The executive branch is exercised by the President and Vice-president of the Nation, elected for a four year term, and who may be reelected for a single additional term. The legislative branch is bicameral: the Senate and the House of Representatives. Each province has adopted its own Constitution in accordance with the National Constitution, to rule its administration.

4. Economic Factors

Argentina gets its major benefits from natural resources, a highly literate population, an export oriented agricultural sector and a diversified industrial base. However, when President Menem became president in 1989, the country had huge external debts, inflation had reached 200% per month, and output was falling quickly. The government embarked on a trade liberalization, deregulation,