Outbound China M&A and investment – Argentina

A destination for Chinese investment

China's increasing economic interest in Latin America is based on the pragmatic goals of opening new markets and guaranteeing a supply of necessary inputs. In terms of outbound investment, the Chinese Government encourages and supports qualified Chinese companies with good reputation in investing in manufacturing, agriculture, forestry, fishing, energy, mineral resources, infrastructure, and service sectors in Latin America and the Caribbean. On November 5 2008, the Chinese Government issued China's first policy paper on Latin America and the Caribbean outlining in the economic field, among other subjects, these investment objectives.

Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector and a diversified industrial base. It is one of the world's most geographically varied and resource-rich territories, the second largest country in Latin America and eighth largest in the world. Along its 2.8 million square kilometres, Argentina is endowed with extraordinarily fertile agriculture lands, unexploited forest resources, exploitable mining deposits in the Andes and rich fisheries along its Atlantic Coast.

Since its economic crisis of 2002, which resulted in a 67% devaluation of its currency, Argentina has been one of the fastest growing economies in the world. The compound annual growth rate for 2003 to 2008 was 8.5%, which was below China (10.7%) but above India (8.4%). During this period, Argentina's economic growth was well above all other Latin American economies. In 2009, China continued to be Argentina's second largest trade partner, accounting for 9% of its exports and 12% of imports.

Also, according to the World Bank, at the end of 2008 Argentina had the highest GDP per capita PPP in Latin America – along with Mexico – at approximately RMB95,800 (US$14,020), compared to the region's average of RMB70,400.

Investment – measured as a percent of GDP – reached 23.1% in 2008, the highest level in the past three decades, surpassing investment rates in a number of Latin America's main economies. Unlike previous growth cycles, Argentina has sound fiscal and current account surpluses (3.1% and 2.2% of GDP, respectively, in 2008). On March 30 2009, the central banks of China and Argentina reached an agreement for a three-year, RMB70 billion (US$10.25 billion) currency swap. This was the first such accord between China and a Latin American nation and broadened Argentina's access to foreign currency reserves. Furthermore, the Central Bank's foreign exchange reserves stood at an unprecedented level of US$48.1 billion (approximately RMB328.5 billion) in December 2009. The country's recent economic performance may provide Argentina with a relatively solid foundation to face upcoming challenges given the current global financial crisis.

This article summarises some of the key topics to be considered by Chinese companies and businesses upon evaluating an investment opportunity in the Republic of Argentina. They include the guarantees and protection conferred by Argentine law upon Chinese investors, the legal vehicles to channel Chinese investment in Argentina, and a description of Argentine foreign exchange regulations and taxation.

Equal treatment under law for Chinese investors