Policies on Foreign Direct Investment

Angola’s business environment remains one of the most difficult in the world.  Investors must factor in pervasive corruption, the legacies of and impulses toward central planning and control, an underdeveloped financial system, loss of U.S. corresponding banking relationships, abundant but unskilled labor, and extremely high operating costs.  Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate trade and raise costs.

The new government is making concerted efforts to improve and diversify sources of foreign direct investment (FDI). The New Private Investment Law (NPIL) approved by Presidential Decree 10/18, of June 26, 2018 eliminates preferential treatment to local investors and offers equal treatment to foreign investors. There are no laws or practices that discriminate against foreign investors, including U.S. investors.  FDI is concentrated in the oil industry with negligible investments in the diamond, power generation, infrastructure and health sectors. The NPIL also eliminated local content provisions for foreign investors, with local content provisions now only applicable to investments specific to the oil & gas, mining, banking and financial services, aviation, and shipping sectors.

In addition to changes to the investment legal framework, the government created the Agency for Private Investment and Export Promotion (AIPEX), a single state-run agency with the goal of facilitating investment and export processes.  In September 2018, the American Chamber of Commerce in Angola (AMCHAM-Angola) and AIPEX launched Angola’s first investment guide in New York. Angola’s first anti-trust law, approved on May 17, aims to ensure and safeguard sound competition practices in the award and enforcement of public contracts.

The government launched a series of measures to expedite the issuance of tourist and business visas, a historically difficult process that has been a major area of complaint from international companies, expatriate workers, and investors.  The government abolished the visitor visa requirement for several countries in the region, and as of March 30, it began issuing tourism visas on arrival at the airport to citizens from 61 countries/regions, including the United States, China, and the European Union (EU).

President Lourenço continued a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against patronage politics.  In early December 2018, his administration rolled-out an ambitious five-year strategy to tackle corruption, money laundering and other economic and financial crimes. The strategy focuses on three main pillars – prevention, prosecution, and institutional capacity building, and includes short and long-term initiatives for a-whole-of society approach to help reduce the impact of corruption.  These strong anti-corruption initiatives led to the detention of several high-level public and private figures, and the President dismantled most of the influence of his predecessor’s family over key sectors of the economy. These reforms have attracted considerable international attention.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the NPIL, the Angolan government eliminated the 35 percent local content requirement in foreign investments, and it offered incentives to companies investing in the domestic economy, while maintaining minimal FDI screening processes, bringing it more in line with those of its sub-Saharan African neighbors.  Foreign ownership remains limited to 49 percent in the oil and gas sectors, 50 percent in insurance, and 10 percent in the banking sectors. There are several objectives that the GRA seeks to accomplish through its FDI screening process: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of the “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or any other behavior that could threaten the stability of the Angolan economy; and, 4) diversify the economy.

Other Investment Policy Reviews

Angola has been a member of the World Trade Organization (WTO) since 1996. There have been no investment policy reviews for Angola from either the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) in the last five years.  The WTO performed a policy review of Angola in September 2015. Excerpts of the Trade Policy Review concluding remarks by the WTO Chairperson were as follows:

“Members noted that Angola had implemented a number of measures aimed at import substitution.  Its applied tariff rates have been significantly increased and range from 2 percent to 50 percent, with a simple average of 10.9 percent (up from 7.4 percent in 2005).  Members urged Angola to rectify the instances where applied tariff rates and other duties and charges exceed the corresponding bound levels. In lieu of import substitution, members suggested that Angola reduce production costs through lower import tariffs on inputs and further trade facilitation measures with a view to enhancing competitiveness and promoting local production.”

Members welcomed Angola’s new mining code and sought information about opportunities for foreign operators.  They sought clarifications about Angola’s agricultural policy, which deals with food security and aims for sustainability of its fisheries sector.  Some participants inquired about Angola’s plans to broaden its General Agreements on Trade in Services (GATS) commitments beyond its three existing sectors.  Members were also interested in the Government’s priorities regarding, inter alia, competition policy, Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) regimes, and state-trading and state-owned enterprises.  Noting that Angola’s intellectual property regime had not been substantially updated since 1992, members urged the country to implement the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and to broaden its participation in international conventions on intellectual property.  The Customs Tariff for import/export rights version of 2017 of the World Customs Organization (WCO) harmonized system came into force on August 9, 2018. 

Business Facilitation

The World Bank Doing Business 2019 report ranked Angola 173 out of 182 countries and also recorded an improvement in Luanda’s electrical grid and overall access to electricity, and the government’s facilitation of border trade by improving infrastructure at the Port of Luanda. Dealing with construction permits was made easier and less time-consuming because of improvements in the permit applications system, according to the World Bank.  Angola also made exporting and importing easier by implementing an automated and standardized customs data management system, ASYCUDA World (Automated System for Customs Data), and by upgrading its port community system to allow for electronic information exchange between different parties involved in the import/export process. Launching a business typically requires 36 days, compared with a regional average of 27 days.

In 2012, the government opened approximately twenty “Balcoes Unicos do Empreendedor” (Single “One stop” Shop for Entrepreneurs).  In addition to the Balcoes Unicos process, new business owners must also complete processes at the Ministry of Commerce, the tax office, and a provincial court in the location where the business has its headquarters. The newAIPEX that replaced the Angolan Investment and Export Promotion Agency (APIEX) now serves as a one-stop shop to promote investments, exports and the international competitiveness of Angolan companies. The new state-run private investment agency website is http://www.aipex.gov.ao/PortalAIPEX/#!/  . Contact Information: Departamento de Promoção e Captação do Investimento; Agencia de Investimento Privado e Promoção de Investimentos e Exportações de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81

To encourage the flow of investors and boost tourism, Presidential Decree 56/18, of February 20, 2018 exempts several neighboring countries from visa entry requirements, and as of March 30, visas upon arrival are available to 61 countries/regions including the United States and the EU upon presentation of proof of accommodation and financial support. The 2018 NPIL eliminates the 35 percent local partner stake in the capital structure of foreign investment in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and information technology (IT) sectors.

Angolan law provides equal access for women entrepreneurs and underrepresented minorities in the economy.  However, in practice, the investment facilitation mechanisms do not provide added advantages to these groups.  Programs to benefit female entrepreneurs and underrepresented groups such as startup projects, business capacity building and development, and financial assistance including micro credit, are mainly implemented by non-governmental organizations and international financial institutions such as the African Development Bank (AfDB), the World Bank (WB), and private sector companies.

Outward Investment

The Angolan Government does not promote or incentivize outward investment nor does it restrict Angolans from investing abroad.  Investors are free to invest in any foreign jurisdiction. According to data from the BNA, in 2018, government did not invest abroad but received returns on previous investments abroad.

Capital Markets and Portfolio Investment

Angola’s capital markets remain embryonic.  To respond to the need for increased sources of financing of the economy, in 2013, the Angolan Government created the Capital Market Commission (CMC).  Angola’s banks are likely the most established businesses that could potentially list on an exchange. However, many Angolan banks have a high rate of non-performing loans, reported to be as high as 31 percent.  Angola’s banks have struggled in recent years due to the country’s deteriorating economic environment and increasingly high rate of delinquent loans. The Governor of the BNA has stated that Angola’s banks must go through a consolidation phase and has started assessing the banks’ asset capacity.  So far, the BNA has revoked the licenses of three banks based on their failure to meet the mandatory new share-capital minimum requirement. The process may limit banks’ ability in the near-term to list on the country’s fledgling stock exchange.

The Angolan government raised USD 3 billion in its second Eurobond issue in international markets with investor demand reportedly reaching nearly USD 9 billion.  In August 2012, Russia’s second-largest bank, VTB, managed the sale of Angola’s first international bond, a USD 1 billion, 7-year bond with a 7.0 percent yield.  In November 2015, Angola raised a USD 1.5 billion, 10-year Eurobond with a 9.5 percent yield. Angola plans to issue a third Eurobond in the second quarter of 2019.

The BNA has developed a market for short-term bonds, called Titulos do Banco Central, and long-term bonds, called Obrigaçoes do Tesouro.  Most of these bonds are bought and held by local Angolan banks. The Obrigaçoes have maturities ranging from one to 7.5 years, whereas the Titulos have maturities of 91 to 182 days.  For information on current rates, see: http://www.bna.ao/  .

Foreign investors do not normally access credit locally.  For Angolan investors, credit access is very limited, and if available comes with a collateral requirement of 125 percent, so they either self-finance, or seek financing from non-Angolan banks and investment funds.  The termination of the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs) on September 25, 2018 has further reduced funding opportunities for many SMEs. Since its inception in 2012, Angola Invest financed approximately 515 projects worth USD 377 million.

The Angolan National Development Plan provides for the liquidation of unviable state-owned enterprises, the privatization of non-strategic state enterprises and the sale of shareholding by 2022.  In January 2018, the president created a commission to prepare and implement the privatization process, via the Stock Exchange.

Money and Banking System

The BNA has remained under considerable pressure to stabilize Angola’s economy as a high rate, currently 31 percent, of non-performing loans has crippled the banks’ ability and willingness to foster private sector lending. The BNA implemented a contractionary monetary policy, reducing local currency in circulation over fears of escalating inflation and foreign currency arbitrage. To address further these concerns, in early 2018, the government also scrapped the Angolan currency’s fixed peg to the U.S. dollar in favor of greater rate flexibility, and began regular foreign exchange auctions to banks, preventing the allocation of dollars to preferred clients.  A 47 percent devaluation of the local currency throughout the year meant an increase in Angola’s debt, now close to 85 percent of GDP.

The IMF projects Angola’s economy will recover in 2019, in large part due to additional regulatory reforms that should open up the economy to more investment. Angola’s agreement with the IMF for USD 3.7 billion in financial support suggests the government’s intent to reassure investors, and to diversify Angola’s source of borrowing. As a key condition of the IMF loan, Angola cannot have any new oil collateralized debt.  The government also resorted to international capital markets and raised USD 3 billion in its second Eurobond issue with investor demand reportedly reaching nearly USD 9 billion.  The issue was in two installments, the first with a ten-year maturity, a nominal value of USD 1.75 billion, and a coupon fixed at 8.35 percent.  The second, with a 30-year maturity, nominal value of USD 1.25 billion, and a coupon of 9.375 percent.

There are currently 27 banks in Angola.  Five banks, Banco Angolano de Investimentos (BAI), Banco Economico, Banco de Fomento Angola (BFA), Banco BIC Angola (BIC) and Banco de Poupança e Credito S.A.R.L. (BPC), control over 80 percent of total banking assets, deposits, and loans.  Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds. Banks had until the end of 2018 to comply with the newly BNA-set USD 50 million mandatory capital start-up requirement, up from the previous USD 25 million requirement.  In early 2019, the BNA revoked the operating licenses of two banks, Banco Mais and Banco Postal, for failing to increase their capital to meet the new minimum requirements.  Another bank, Banco Angolano de Negocios e Comercio, is currently under BNA administration.

Angola has been affected by the broader global de-risking trends wherein banks decide to stop lending to businesses in markets deemed too risky from an anti-money laundering and terrorist financing compliance (?) standpoint.  In December 2016, Deutsche Bank, the last international bank providing dollar-clearing services, closed its dollar clearing services in Angola. A limited number of international banks still operate in Angola and provide limited trade finance such as Germany’s Commerzbank and South Africa’s Standard Bank.  In 2018, there were no further correspondent bank losses. International banks previously refrained from entering the Angolan market because of the risk of fines and other penalties, but in 2018 there was more interest, with several banks conducting independent assessments of the business climate.

Foreign Exchange and Remittances

Foreign Exchange Policies

Angola continues trading mostly in two currencies, the U.S. dollar and the Euro, with the Renminbi gaining greater prominence given the degree of trade with China.  In a bid to deal with the foreign currency shortage and substantial foreign currency arbitrage in the parallel market, the government has opted for a managed float for its currency exchange rate.  The Angolan Kwanza was pegged at a rate of 166.00 per U.S. dollar from April 2016 to January 2018 following a steep devaluation due to the slump in oil prices.  On January 10, 2018 the BNA began conducting foreign currency auctions allowing the kwanza to fluctuate within an undisclosed but controlled band.  Since dropping the peg to the U.S. dollar in January 2018, the Kwanza has depreciated by approximately 47 percent.

The National Bank of Angola (BNA) set new rules for foreign exchange and remittances on November 19, 2018 in order to curb depleting foreign currency reserves.  Under Instruction no. 15/2018 of November 19, 2018 the BNA sells foreign currency (U.S. dollar and Euros only) to commercial banks by auction. Commercial banks may then assign foreign currency to their clients based on a schedule submitted and approved by the BNA.  On the sale by banks to exchange offices and remittance companies, banks may only make foreign currency available in physical notes on a collateral basis, as they must, at the time of sale debit the national currency account of those institutions against delivery of physical notes.  Banks may charge a margin of up to 2 percent on the reference exchange rate published on the institutional website of the National Bank of Angola, considered high for investors.

Payment of remittances in any form and non-strategic imports face a lengthy wait between 90-180 days for foreign exchange.  Priority is given to strategic importers of food, raw materials for construction, agriculture, medicine and the oil sector. The government also has a huge backlog of forex arrears of approximately USD 3 billion.

Investors cannot freely convert their earnings in kwanza to any foreign exchange rate due to limited available foreign exchange.  Credit cards and other options for payment are extremely limited and money-servicing businesses (Western Union & MoneyGram) have ceased foreign outward transactions in foreign currency.

Remittance Policies

The Angolan government established anti-money laundering restrictions in January 2014 and is currently revising the law to better combat illicit remittance flows.  The subsequent drop in foreign exchange availability in Angola, beginning in 2015 due to declining petroleum revenues, has severely impeded personal and legitimate business remittances.

International and domestic companies operating in Angola continuously face significant delays securing foreign exchange approval for remittances to cover key operational expenses, including imported goods and expatriate salaries.  Profit and dividend remittances are even more problematic for most companies, including foreign airlines with withheld remittances for the sector currently valued by the International Air Transport Association (IATA) at USD 137 million, down from USD 540 million in June 2018.

The BNA is trying to facilitate remittances of international supplies by introducing payment by letters of credit.  Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due.  The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries.

Sovereign Wealth Funds

In October 2012, President dos Santos established a petroleum-funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA).  The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles. In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10.  The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component (http://www.fundosoberano.ao/investments/  ).  Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but has since been removed by President Lourenco based reportedly on poor results at the FSDEA and conspiracy with the Fund’s wealth manager, Quantum Global (QG) to embezzle FSDEA funds.  Former Minister Carlos Alberto Lopes was named new head of the FSDEA. Zenu, on house arrest, remains under investigation for money laundering, embezzlement, and fraud related to his management of the FSDEA, and for fraud in connection with the transfer of USD 500 million from the Angolan Central Bank to a bank in the UK. On March 22, 2019 the government also freed Jean-Claude Bastos de Morais, QG’s CEO, in preventive detention since September 2018, based on the insufficiency of evidence to support the collection of malfeasance charges.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments.  The FSDEA is reportedly in possession of approximately USD 2.24 billion of its private equity assets previously under the control of QG.

In Angola, certain state-owned enterprises (SOEs) exercise delegated governmental powers, especially in the mining sector where the government is the sole concessionaire.  Foreign investors may sometimes find demands made by SOEs excessive, and under such conditions, SOEs have easier access to credit and government contracts. There is no law mandating preferential treatment to SOEs, but in practice they have access to inside information and credit.  Currently, SOEs are not subject to budgetary constraints and quite often exceed their capital limits.

SOEs, often benefitting from a government mandate, operate mostly in the extractive, transportation, commerce, banking, and construction sectors.  All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government. SOEs are not explicitly required to consult with government officials before making decisions.  By law, SOEs must publish annual financial reports for the previous year in the national daily newspaper Jornal de Angola by April 1.  Such reports are not always subject to publically released external audits (though the audit of state oil firm Sonangol is publically released).  The standards used are often questioned. Not all SOEs fulfill their legal obligations, and few are sanctioned.

Angola’s supreme audit institution, Tribunal de Contas, is responsible for auditing SOEs.  However, the Tribunal de Contas does not make its reports publicly available. Angola’s fiscal transparency would be improved by ensuring its supreme audit institution audits SOEs, as well as the government’s annual financial accounts, and makes public its findings within a reasonable period.  Publicly available audit reports would also improve the transparency of contracts between private companies and SOEs.

In November 2016, the Angolan Government revised Law 1/14 “Regime Juridico de Emissão e Gestão da Divida Publica Directa e Indirecta,” which now differentiates between ‘direct’ and ‘indirect’ public debt.  The GRA considers SOE debt as indirect public debt, and only accounts in its state budget for direct government debt, thus effectively not reflecting some substantial obligations in fact owed by the government.  President Lourenço has launched various reforms to improve financial sector transparency, enhance efficiency in the country’s SOEs as part of the National Development plan 2018-2022 and Macroeconomic Stability Plan.  The strategy included the prospective privatization of 74 SOEs that are deemed not profitable to the state. The privatization will possibly include the restructuring of the national air carrier TAAG, Sonangol, and its subsidiaries.  The latter intends to sell off its non- core businesses as part of its restructuring strategy to make the parastatal more efficient.

Angola is not a party to the WTO’s Government Procurement Agreement (GPA).  Angola does not adhere to the OECD guidelines on corporate governance for SOEs.

Privatization Program

The government has a plan to privatize 74 of 90 public companies by 2022 through the Angola Debt and Securities Exchange market (BODIVA) and under the supervision of the Institute of Management of Assets and State Participations (IGAPE).  The privatization plan is in line with the provisions of the Government’s Interim Macroeconomic Stabilization Program (PEM), which aims to rid the government of unprofitable public institutions. The terms of reference for the privatization program are not yet public, except for seven factories located in the Special Economic Zone (ZEE).  The seven industrial units with full terms of reference are:

UNIVITRO – glassworks industry; JUNTEX – plaster industry; CARTON – carton and packaging industry; ABSOR – absorbent products industry; INDUGIDET – sanitation and detergents industry; COBERLEN – blankets and linens industry; and, SACIANGO – cement bags industry.

The government plans to privatize part of state-owned Angola Telecommunications Company, companies in the oil and energy sector, as well as several textile industries.  The government has stated that the privatization process will be open to interested foreign investors and has guaranteed a transparent bidding process. Proposals from investors for seven industrial units at the ZEE will be given special attention to those who decide to retain local workers in these units. The government created a privatization commission on February 27, 2018 and a website https://igape.minfin.gov.ao/PortalIGAPE/#!/sala-de-imprensa/noticias/5413/anuncio-de-concurso-tender-announcement   for submission of tenders.  Full tender documents can be obtained by visiting the below link:
http://www.ucm.minfin.gov.ao/cs/groups/public/documents/document/zmlu/mdu4/~edisp/minfin058842.zip 

Alternatively, contact igape@minfin.gov.ao.  The tenders are open to local and foreign investors.

Corruption remains a strong impediment to doing business in Angola and has had a corrosive impact on international market investment opportunities and on the broader business climate.  Transparency International’s 2019 Corruption Perceptions Index ranks Angola 165 out of 175 countries in its corruption level survey, down two places from the previous year due to ongoing efforts to bring down corruption to lower levels.

Since coming into office, President Lourenco has led a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism.  President Lourenco has dismissed a number of prominent Angolan figures from government ministries and SOEs and has replaced board members charged with developing plans to improve operations and accountability in public institutions.  The president approved a set of amendments to the Public Contracts Law on November 16, 2018, which imposed further requirements for the declaration of assets and income, interests, impartiality, confidentiality, and independence in the formation and execution of public contracts.  On December 6, the Government of Angola rolled out of a national anti-corruption strategy (NACS) billed under the motto, “Corruption – A fight for All and By All.” The five-year strategy, developed in concert with the UNDP, is designed to improve government transparency, accountability, and responsiveness to citizen needs.  The NACS focuses on three pillars in the fight against corruption – prevention, prosecution, and institutional capacity building.

The government also passed the Law on the Repatriation of Financial Resources in June 2018, which established the terms and conditions for the repatriation of financial resources held abroad by resident individuals and legal entities with registered offices in Angola.  The law exempted individuals and legal entities, who voluntarily repatriated their financial resources within a period of 180 days following the date of entry into force of the Law, by transferring the funds to an Angolan bank account, from any obligation or liability of tax, foreign exchange and criminal nature.  Upon expiry of the grace period for repatriation, the Law allowed for the possibility of coercive repatriation by the government. The government estimates that USD 30 billion of Angolan assets are sheltered overseas. In early 2019, the government established the National Asset Recovery Service (SNRA), an institution linked to the Attorney General’s Office (PGR), in charge of ensuring compliance with the repatriation law.

The 2010 Law on Administrative Probity, unlike President Lourenco’s mandate for senior government officials, requires all public officials to disclose their assets and income once every two years, and it prohibits public servants from receiving money or gifts from private business deals.  The Penal Code makes it a criminal offense for private enterprises to engage in business transactions with public officials. Angola has incorporated regional anti-corruption guidelines and into their domestic legislation, including: the SADC “Protocol Against Corruption,” the African Union’s “Convention on Preventing and Combating Corruption,” and the United Nation’s “Convention against Corruption.”  Angola does not have an independent body to investigate and prosecute corruption cases, and generally, enforcement of existing laws is weak or non-existent. Three institutions – the Audit Court, the Inspector General of Finance, and the Office of the Attorney General – perform many of the anti-corruption duties in Angola. http://www.business-anti-corruption.com/country-profiles/sub-saharan-africa/angola/initiatives/public-anti-corruption-initiatives.aspx  

It is important for U.S. companies, regardless of their size, to assess the business climate in the sector in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery.  U.S. individuals and firms operating or investing in Angola, should take the time to become familiar with the relevant anticorruption laws of both Angola and the United States in order to properly comply with them, and where appropriate, they should seek legal counsel.

In 1996 the Government of Angola enacted by presidential decree the Alta Autoridade Contra Corrupção (High Authority Against Corruption) Act.  There has been no action taken to implement the law since it was enacted in 1996.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Angola is not a member state to the UN Anticorruption Convention or the OECD Convention on Combatting Bribery.  On March 26, 2018 it ratified and published in the national gazette the African Union Convention on the Prevention and Fight against Corruption and now takes legislative measures against illicit enrichment (Article 8), confiscation and seizure of proceeds and means of corruption (Article 16), and international cooperation in matters of corruption and money laundering (Article 20).

Resources to Report Corruption

Hélder Pitta Grós
Procurador Geral da Republica (Attorney General of the Republic)
Procurador Geral da Republica (Attorney General’s Office)
Travessa Antonio Marques Monteiro 22, Maianga
Telephone: 244-222-333172

Policies Towards Foreign Direct Investment

The Macri government actively seeks foreign direct investment. To improve the investment climate, the Macri administration has enacted reforms to simplify bureaucratic procedures in an effort to provide more transparency, reduce costs, diminish economic distortions by adopting good regulatory practices, and increase capital market efficiencies. Since 2016, Argentina has expanded economic and commercial cooperation with key partners including Chile, Brazil, Japan, South Korea, Spain, Canada, and the United States, and deepened its engagement in international fora such as the G-20, WTO, and OECD.

Over the past year, Argentina issued new regulations in the gas and energy, communications, technology, and aviation industries to improve competition and provide incentives aimed to attract investment in those sectors. Argentina seeks tenders for investment in wireless infrastructure, oil and gas, lithium mines, renewable energy, and other areas. However, many of the public-private partnership projects for public infrastructure planned for 2018 had to be delayed or canceled due to Argentina’s broader macroeconomic difficulties and ongoing corruption investigations into public works projects.

Foreign and domestic investors generally compete under the same conditions in Argentina. The amount of foreign investment is restricted in specific sectors such as aviation and media. Foreign ownership of rural productive lands, bodies of water, and areas along borders is also restricted.

Argentina has a national Investment and Trade Promotion Agency that provides information and consultation services to investors and traders on economic and financial conditions, investment opportunities, Argentine laws and regulations, and services to help Argentine companies establish a presence abroad. The agency also provides matchmaking services and organizes roadshows and trade delegations. The agency’s web portal provides detailed information on available services (http://www.produccion.gob.ar/agencia). Many of the 24 provinces also have their own provincial investment and trade promotion offices.

The Macri administration welcomes dialogue with investors. Argentine officials regularly host roundtable discussions with visiting business delegations and meet with local and foreign business chambers. During official visits over the past year to the United States, China, India, Vietnam, and Europe, among others, Argentine delegations often met with host country business leaders.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic commercial entities in Argentina are regulated by the Commercial Partnerships Law (Law 19,550), the Argentina Civil and Commercial Code, and rules issued by the regulatory agencies. Foreign private entities can establish and own business enterprises and engage in all forms of remunerative activity in nearly all sectors.

Full foreign equity ownership of Argentine businesses is not restricted, for the most part, with exception in the air transportation and media industries. The share of foreign capital in companies that provide commercial passenger transportation within the Argentine territory is limited to 49 percent per the Aeronautic Code Law 17,285. The company must be incorporated according to Argentine law and domiciled in Buenos Aires. In the media sector, Law 25,750 establishes a limit on foreign ownership in television, radio, newspapers, journals, magazines, and publishing companies to 30 percent.

Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) establishes that a foreigner cannot own land that allows for the extension of existing bodies of water or that are located near a Border Security Zone. In February 2012, the government issued Decree 274/2012 further restricting foreign ownership to a maximum of 30 percent of national land and 15 percent of productive land. Foreign individuals or foreign company ownership is limited to 1,000 hectares (2,470 acres) in the most productive farming areas. In June 2016, the Macri administration issued Decree 820 easing the requirements for foreign land ownership by changing the percentage that defines foreign ownership of a person or company, raising it from 25 percent to 51 percent of the social capital of a legal entity. Waivers are not available.

Argentina does not maintain an investment screening mechanism for inbound foreign investment. U.S. investors are not at a disadvantage to other foreign investors or singled out for discriminatory treatment.

Other Investment Policy Reviews

Argentina was last subject to an investment policy review by the OECD in 1997 and a trade policy review by the WTO in 2013. The United Nations Conference on Trade and Development (UNCTAD) has not done an investment policy review of Argentina.

Business Facilitation

Since entering into office in December 2015, the Macri administration has enacted reforms to normalize financial and commercial transactions and facilitate business creation and cross-border trade. These reforms include eliminating capital controls, reducing some export taxes and import restrictions, reducing business administrative processes, decreasing tax burdens, increasing businesses’ access to financing, and streamlining customs controls.

In October 2016, the Ministry of Production issued Decree 1079/2016, easing bureaucratic hurdles for foreign trade and creating a Single Window for Foreign Trade (“VUCE” for its Spanish acronym). The VUCE centralizes the administration of all required paperwork for the import, export, and transit of goods (e.g., certificates, permits, licenses, and other authorizations and documents). Argentina subjects imports to automatic or non-automatic licenses that are managed through the Comprehensive Import Monitoring System (SIMI, or Sistema Integral de Monitoreo de Importaciones), established in December 2015 by the National Tax Agency (AFIP by its Spanish acronym) through Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit detailed information electronically about goods to be imported into Argentina. Once the information is submitted, the relevant Argentine government agencies can review the application through the VUCE and make any observations or request additional information. The number of products subjected to non-automatic licenses has been modified several times, resulting in a net decrease since the beginning of the SIMI system.

The Argentine Congress approved an Entrepreneurs’ Law in March 2017, which allows for the creation of a simplified joint-stock company (SAS, or Sociedad por Acciones Simplifacada) online within 24 hours of registration. Detailed information on how to register a SAS is available at: https://www.argentina.gob.ar/crear-una-sociedad-por-acciones-simplificada-sas . As of April 2019, the online business registration process is only available for companies located in Buenos Aires. The government is working on expanding the SAS to other provinces. Further information can be found at http://www.produccion.gob.ar/todo-sobre-la-ley-de-emprendedores/.

Foreign investors seeking to set up business operations in Argentina follow the same procedures as domestic entities without prior approval and under the same conditions as local investors. To open a local branch of a foreign company in Argentina, the parent company must be legally registered in Argentina. Argentine law requires at least two equity holders, with the minority equity holder maintaining at least a five percent interest. In addition to the procedures required of a domestic company, a foreign company establishing itself in Argentina must legalize the parent company’s documents, register the incoming foreign capital with the Argentine Central Bank, and obtain a trading license.

A company must register its name with the Office of Corporations (IGJ, or Inspeccion General de Justicia). The IGJ website describes the registration process and some portions can be completed online (http://www.jus.gob.ar/igj/tramites/guia-de-tramites/inscripcion-en-el-registro-publico-de-comercio.aspx ). Once the IGJ registers the company, the company must request that the College of Public Notaries submit the company’s accounting books to be certified with the IGJ. The company’s legal representative must obtain a tax identification number from AFIP, register for social security, and obtain blank receipts from another agency. Companies can register with AFIP online at www.afip.gob.ar or by submitting the sworn affidavit form No. 885 to AFIP.

Details on how to register a company can be found at the Ministry of Production and Labor’s website: https://www.argentina.gob.ar/produccion/crear-una-empresa . Instructions on how to obtain a tax identification code can be found at: https://www.argentina.gob.ar/obtener-el-cuit .

The enterprise must also provide workers’ compensation insurance for its employees through the Workers’ Compensation Agency (ART, or Aseguradora de Riesgos del Trabajo). The company must register and certify its accounting of wages and salaries with the Directorate of Labor, within the Ministry of Production and Labor.

In April 2016, the Small Business Administration of the United States and the Ministry of Production of Argentina signed a Memorandum of Understanding (MOU) to set up small and medium sized business development centers (SBDCs) in Argentina. The goal of the MOU is to provide small businesses with tools to improve their productivity and increase their growth. Under the MOU, in June 2017, Argentina set up the first SBDC pilot in the province of Neuquen.

The Ministry of Production and Labor offers a wide range of attendance-based courses and online training for businesses. The full training menu can be viewed at: https://www.argentina.gob.ar/produccion/capacitacion 

Outward Investment

Argentina does not have a governmental agency to promote Argentine investors to invest abroad nor does it have any restrictions for a domestic investor investing overseas.

Capital Markets and Portfolio Investment

The Macri administration has enacted a series of macroeconomic reforms (unifying the exchange rate, settling with holdout creditors, annulling most of the trade restrictions, lifting capital controls, to mention a few) to improve the investment climate. In May 2018, the Congress approved a new capital markets law aimed at boosting economic growth through the development and deepening of the local capital market. The law removed over-reaching regulatory intervention provisions introduced by the previous government and eased restrictions on mutual funds and foreign portfolio investment in domestic markets. Argentina also signed several bilateral agreements and MOUs with other countries aimed to increase foreign direct investment. There are no restrictions on payments and transfers abroad (in accordance with IMF Article VIII).

The Argentine Securities and Exchange Commission (CNV or Comision Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit. Nevertheless, the domestic credit market is small – credit is 16 percent of GDP, according to the World Bank. The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires city. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores).

U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina.

Money and Banking System

Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. The main challenge for banks is to rebuild long-term assets and liabilities. Due to adverse international and domestic conditions with the economy entering into a recession with high inflation and interest rates, credit to the private sector in local currency (for both corporations and individuals) decreased 18 percent in real terms in 2018. In spite of falling credit, banks remain well equipped to weather weak economic conditions. The largest bank is the Banco de la Nacion Argentina. Non-performing private sector loans constitute less than four percent of banks’ portfolios. The ten largest private banks have total assets of approximately ARS 2,643 billion (USD 64 billion). Total financial system assets are approximately ARS 5,506 billion (USD 134 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system.

Foreign banks and branches are allowed to establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years.

The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Blockchain developers report that several companies in the financial services sector are exploring or considering using blockchain-based programs externally and are using some such programs internally. One Argentine NGO, through funding from the Inter-American Development Bank (IDB), is developing blockchain-based banking applications to assist low income populations.

Foreign Exchange and Remittances

Foreign Exchange

President Macri has issued a number of regulations that lifted all capital controls and reduced trade restrictions. In November 2017, the government repealed the obligation to convert hard currency earnings on exports of both goods and services to pesos in the local foreign exchange market.

Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. The BCRA limits banks’ dollar-denominated asset holdings to 10 percent of their net worth.

In June 2018, the International Monetary Fund (IMF) and Argentina announced a Standby Arrangement agreement (SBA). Three months after agreeing to a USD 50 billion SBA, Argentina and the IMF announced in September 2018 a set of revisions, including an increase of the line of credit by USD 7.1 billion and front loading the disbursement of funds. The revised program sought to erase any doubts about the government’s ability to cover its financing needs for 2018 and 2019 and in turn, Argentina committed to meeting strict new budget and monetary policy targets. On the monetary side, the BCRA replaced inflation targeting with a policy to ensure zero growth of the monetary base through December 2019. The BCRA also allows the exchange rate to float freely between a floor and ceiling of 34 and 44 pesos per dollar (at the time of introducing the framework).

Originally, the BCRA hoped that the floor and ceiling bounds would avoid a real appreciation of the peso; the adjustment started with a 3 percent monthly increase for the last quarter of 2018, and would drop to a monthly 1.75 percent increase for the second quarter of 2019. However, in mid-April 2019, the BCRA announced that the floor and ceiling will remain constant until the end of 2019, at 39.8 and 51.5 pesos per dollar, respectively. Under this framework, the BCRA may only sell up to USD 150 million reserves per day when trading above the ceiling.

Remittance Policies

According to Resolutions 3,819/2015 and 1/2017, companies and investors have no official restrictions on money conversion, remittances, or repatriation of their earnings.

Sovereign Wealth Funds

The Argentine Government does not maintain a Sovereign Wealth Fund.

The Argentine government has state-owned enterprises (SOEs) or significant stakes in mixed-capital companies in the following sectors: civil commercial aviation, water and sanitation, oil and gas, electricity generation, transport, paper production, satellite, banking, railway, shipyard, and aircraft ground handling services.

By Argentine law, a company is considered a public enterprise if the state owns 100 percent of the company’s shares. The state has majority control over a company if the state owns 51 percent of the company’s shares. The state has minority participation in a company if the state owns less than 51 percent of the company’s shares. Laws regulating state-owned enterprises and enterprises with state participation can be found at http://www.saij.gob.ar/13653-nacional-regimen-empresas-estado-lns0001871-1955-03-23/123456789-0abc-defg-g17-81000scanyel .

Through the government’s social security agency (ANSES), the Argentine government owns stakes ranging from one to 31 percent in 46 publically-listed companies. U.S. investors also own shares in some of these companies. As part of the ANSES takeover of Argentina’s private pension system in 2008, the government agreed to commit itself to being a passive investor in the companies and limit the exercise of its voting rights to 5 percent, regardless of the equity stake the social security agency owned. A list of such enterprises can be found at: http://fgs.anses.gob.ar/participacion .

State-owned enterprises purchase and supply goods and services from the private sector and foreign firms. Private enterprises may compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. Private enterprises also have access to financing terms and conditions similar to SOEs. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. SOEs are not currently subject to firm budget constraints under the law, and have been subsidized by the central government in the past; however, the Macri administration is reducing subsidies in the energy, water, and transportation sectors. Argentina does not have regulations that differentiate treatment of SOEs and private enterprises. Argentina has observer status under the WTO Agreement on Government Procurement and, as such, SOEs are subject to the conditions of Argentina’s observance.

Argentina does not have a specified ownership policy, guideline or governance code for how the government exercises ownership of SOEs. The country generally adheres to the OECD Guidelines on Corporate Governance of SOEs. The practices for SOEs are mainly in compliance with the policies and practices for transparency and accountability in the OECD Guidelines.

Argentina does not have a centralized ownership entity that exercises ownership rights for each of the SOEs. The general rule in Argentina is that requirements that apply to all listed companies also apply to publicly-listed SOEs.

In 2018, the OECD released a report evaluating the corporate governance framework for the Argentine SOE sector relative to the OECD Guidelines on Corporate Governance of SOEs, which can be viewed here: http://www.oecd.org/countries/argentina/oecd-review-corporate-governance-soe-argentina.htm .

Privatization Program

The current administration has not developed a privatization program.

Argentina’s legal system incorporates several measures to address public sector corruption. The government institutions tasked with combatting corruption include the Anti-Corruption Office (ACO), the National Auditor General, and the General Comptroller’s Office. Public officials are subject to financial disclosure laws, and the Ministry of Justice’s ACO is responsible for analyzing and investigating federal executive branch officials based on their financial disclosure forms. The ACO is also responsible for investigating corruption within the federal executive branch or in matters involving federal funds, except for funds transferred to the provinces. While the ACO does not have authority to independently prosecute cases, it can refer cases to other agencies or serve as the plaintiff and request a judge to initiate a case.

Argentina enacted a new Corporate Criminal Liability Law in November 2017 following the advice of the OECD to comply with its Anti-Bribery Convention. The full text of Law 27,401 can be found at: http://servicios.infoleg.gob.ar/infolegInternet/anexos/295000-299999/296846/norma.htm . The new law entered into force in early 2018. It extends anti-bribery criminal sanctions to corporations, whereas previously they only applied to individuals; expands the definition of prohibited conduct, including illegal enrichment of public officials; and allows Argentina to hold Argentines responsible for foreign bribery. Sanctions include fines and blacklisting from public contracts. Argentina also enacted an express prohibition on the tax deductibility of bribes.

Corruption has been an issue in Argentina. In its March 2017 report, the OECD expressed concern about Argentina’s enforcement of foreign bribery laws, inefficiencies in the judicial system, politicization and perceived lack of independence at the Attorney General’s Office, and lack of training and awareness for judges and prosecutors. According to the World Bank’s worldwide governance indicators, corruption remains an area of concern in Argentina. In the latest Transparency International Corruption Perceptions Index (CPI) that ranks countries and territories by their perceived levels of corruption, Argentina ranked 85 out of 180 countries in 2018, an improvement of 10 places versus 2016. Allegations of corruption in provincial as well as federal courts remained frequent. Few Argentine companies have implemented anti-foreign bribery measures beyond limited codes of ethics.

Since assuming office, President Macri made combating corruption and improving government transparency a priority objective for his administration. In September 2016, Congress passed a law on public access to information. The law explicitly applies to all three branches of the federal government, the public justice offices, and entities such as businesses, political parties, universities, and trade associations that receive public funding. It requires these institutions to respond to citizen requests for public information within 15 days, with an additional 15-day extension available for “exceptional” circumstances. Sanctions apply for noncompliance. The law also mandates the creation of the Agency for Access to Public Information, an autonomous office within the executive branch. President Macri also proposed a series of criminal justice and administrative reforms. Chief among these are measures to speed the recovery of assets acquired through corruption, plea-bargaining-type incentives to encourage judicial cooperation, and greater financial disclosure for public servants. In early 2016, the Argentine government reaffirmed its commitment to the Open Government Partnership (OGP), became a founding member of the Global Anti-Corruption Coalition, and reengaged the OECD Working Group on Bribery.

Argentina is a party to the Organization of American States’ Inter-American Convention against Corruption. It ratified in 2001 the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention). Argentina also signed and ratified the UN Convention against Corruption (UNCAC) and participates in UNCAC’s Conference of State Parties. Argentina also participates in the Mechanism for Follow-up on the Implementation of the Inter-American Convention against Corruption (MESICIC).

Since Argentina became a party to the OECD Anti-Bribery Convention, allegations of Argentine individuals or companies bribing foreign officials have surfaced. A March 2017 report by the OECD Working Group on Bribery indicated there were 13 known foreign bribery allegations involving Argentine companies and individuals as of that date.  According to the report, Argentine authorities investigated and closed some of the allegations and declined to investigate others.  The authorities determined some allegations did not involve foreign bribery but rather other offenses.  Several such allegations remained under investigation. 

Resources to Report Corruption

Laura Alonso
Director
Government of Argentina Anti-Corruption Office
Oficina Anticorrupción, Tucumán 394, C1049AAH, Ciudad Autónoma de Buenos Aires.
Phone: +54 11 5167 6400
Email: anticorrupcion@jus.gov.ar and http://denuncias.anticorrupcion.gob.ar/ 

Poder Ciudadano (Local Transparency International Affiliate)
Phone: +54 11 4331 4925 ext 225
Fax: +54 11 4331 4925
Email: comunicaciones@poderciudadano.org
Website: http://www.poderciudadano.org