Argentina

Region: Latin America & Caribbean

Income category: Upper middle income

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

0-14 years: 25.6% (male 5,369,477/female 5,122,260)

15-64 years: 63.5% (male 12,961,725/female 13,029,265)

65 years and over: 10.8% (male 1,819,057/female 2,611,800) (2009 est.)

GNI (Gross national income)per capita (US$): 6050

The political environment.

Government

Argentina's political framework is a federal presidential representative democratic republic, in which the
President of The Argentine Nation is both head of state and head of government, complemented by a
pluriform multi-party system. The current president is Cristina Fernández de Kirchner, with Julio Cobos
as vice president.

Executive power resides in the President and the Cabinet. The President and Vice President are directly
elected to four-year terms and are limited to two terms. Cabinet ministers are appointed by the
president and are not subject to legislative ratification.

Legislative power is vested in the bicameral National Congress or Congreso de la Nación, consisting of a
Senate (Senado) of seventy-two seats, and a Chamber of Deputies (Cámara de Diputados) of 257
members.

Senators serve six-year terms, with one-third standing for reelection every two years. Members of the
Chamber of Deputies are directly elected to four-year term via a system of proportional representation,
with half of the members of the lower house being elected every two years. A third of the candidates
presented by the parties must be women.

The judiciary is independent of the executive and the legislature. The Argentine Supreme Court of
Justice has seven members who are appointed by the President in consultation with the Senate. The rest
of the judges are appointed by the Council of Magistrates of the Nation, a secretariat composed of
representatives of judges, lawyers, the Congress and the executive.

Argentina is a member of an international block, Mercosur, which has some legislative supranational
functions. Mercosur is composed of five full members: Argentina, Brazil, Paraguay, Uruguay and
Venezuela. It has five associate members without full voting rights: Bolivia, Chile, Colombia, Ecuador and
Peru.

International Relations

Argentina has diplomatic relations with over 120 countries and is a member of over 230 international
organizations, as well as a charter member of the United Nations (UN) and founding member of the
Organization of American States (OAS).

Argentina is also a member of the World Bank, the International Monetary Fund (IMF), the International
Finance Corporation (IFC), the Inter American Development Bank (IDB) and the Inter American
Development Corporation (IDC). In 1967 Argentina joined the General Agreement on Tariffs and Trade
(GATT).

Argentina has overcome conflicts with neighboring countries through international agreements such as
the Treaty on Peace and Friendship with Chile and the Treaty of Economic Integration with Brazil, (which
included talks about cooperation on sensitive matters such as a nuclear and aerospace technology). In
1985 the country accepted the Pope's decision concerning the dispute with Chile over three islands in
the Beagle Channel and the last border conflict with Chile was amicably solved in 1998.

The restoration of diplomatic relations with the United Kingdom in 1990 is proof that Argentina is
interested in settling the dispute of sovereignty over the Malvinas Islands through dialogue and peaceful
negotiations.

With the precedent of agreements such as the ALALC (Latin American Free Trade Association), and
ALADI (Latin American Integration Association), the Treaty of Asunción signed in March 1991, formally
created MERCOSUR, or Southern Common Market, whose members are Brazil, Argentina, Paraguay and
Uruguay.

Highlights

 Argentina ranks below the income group averages in all global rankings, except for the Political
Risk Rating, where it is on par with the income group average.
 According to the World Economic Forum's Global Competitiveness Report for 2006-07, the three
most problematic factors for doing business are policy instability, access to financing, and
corruption. Argentina is a nation that, in the past couple decades, has undergone economic
turmoil. This includes a depression and a substantial debt. It also has a history of corruption and
bribery in the past, and has resulted in more transparency to encourage international trust, but
is still perceived as a more corrupt nation than most other significant economies.
 Argentina ranks in the top 50 countries in the Getting Credit indicator, but it ranks in the bottom
10% of countries for time to pay taxes and the total tax rate. Tax rates were cited as the fifth
largest constraints in the Enterprise Survey (2006).
 Annual GDP growth has been above 8.5% for the last five years.
The Argentine government’s internet policy

The Argentine government's policy toward the Internet is based on two declarations of principles and is
organized around three axes: constant monitoring of the Internet, enactment of specific regulations and
the implementation of programs designed to help the growth of the Internet, and reflection over the
future challenges.

Two Declarations of Principles

The first declaration is that the Internet is a matter of national interest.

Decree 554/97, dated June 19, 1997, declares of "national interest the access to the Internet by the
Argentine people, in equitable social and geographic conditions, with reasonable costs, and with quality
standards in accordance with modern multimedia applications."

The decree also entrusts the secretary of communications (SECOM) with broad powers to:

 develop a strategic plan for expansion of the Internet in Argentina that achieves several public
policy objectives, such as creation of Web sites for Argentine public libraries, promotion of
access to the Internet by the educational system, and promotion of a national telemedicine
network
 analyze incorporation of the Internet within an analysis of the definition of universal service
 analyze and propose alternative price policies in order to stimulate and diversify use of the
Internet
 encourage use of the Internet to support activities related to education, culture, information,
entertainment, and health

The second declaration says regulation of Internet content should be hands-off. The Argentine
government took note of the 1997 U.S. Supreme Court decision of Reno v. ACLU,12 in which the Court
held that the federal statutory prohibition of so-called indecent language on the Internet violates the
freedom-of-speech protection guaranteed by the U.S. Constitution. Thereupon the Argentine
government adopted a liberal position regarding the content of information available on the Internet
and access to that information by users.

The economical environment

The potential of the market

Latin America is becoming one of the world’s most promising broadband markets, growing at a CAGR of
54% from 2003 to 2007. The region’s broadband leaders are Brazil, Mexico, Argentina, Colombia, and
Chile, and in early 2008, these five countries accounted for around 86% of all broadband subscribers in
the region. The options most available are DSL, cable modem, and wireless broadband. Of these, ADSL
has emerged as the clear leader.

Internet Usage Statistics:

20,000,000 Internet users as of Dec./2008, 49.4% of the population, according to Price & Cooke.

Internet Broadband Connections:

2,600,000 Internet users as of Dec./08, 6.4% of the population, according to ITU .

Internet Growth and Population Statistics of Argentina:

YEAR Population Internet Users % Pen. GNI p.c. Usage Source

2000 36,260,130 2,500,000 6.9 % $ 7,440 ITU
2004 37,584,554 7,500,000 20.0 % $ 3,720 Prince &Cooke
2007 40,301,927 16,000,000 39.7 % $ 5,150 Prince &Cooke
2008 40,677,348 20,000,000 49.2 % $ 6,050 Prince &Cooke

Internet Usage and Population Statistics for South America:

SOUTH Population % Pop. Internet % Growth %

AMERICA (2008 Est.) S. A. Usage, Population (2000-2008) Users
Latest (Penetration S. A.
Data )
Argentina 40,481,998 10.40% 20,000,000 49.40% 700.00% 15.10%
Bolivia 9,601,257 2.50% 1,000,000 10.40% 733.30% 0.80%
Brazil 196,342,587 50.40% 67,510,400 34.40% 1250.20% 51.00%
Chile 16,454,143 4.20% 8,368,719 50.90% 376.20% 6.30%
Colombia 45,013,674 11.60% 17,478,505 38.80% 1890.70% 13.20%
Ecuador 14,354,469 3.70% 1,759,500 12.30% 877.50% 1.30%
Falkland
Islands 2,478 0.00% 1,900 76.70% 0.00% n/a %
French Guiana 219,736 0.10% 42,000 19.10% 2000.00% 0.00%
Guyana 770,794 0.20% 190,000 24.60% 6233.30% 0.10%
Paraguay 6,831,306 1.80% 530,300 7.80% 2551.50% 0.40%
Peru 29,180,899 7.50% 7,636,400 26.20% 205.50% 5.80%
Suriname 475,996 0.10% 44,000 9.20% 276.10% 0.00%
Uruguay 3,477,778 0.90% 1,100,000 31.60% 197.30% 0.80%
Venezuela 26,414,815 6.80% 6,723,616 25.50% 607.70% 5.10%
TOTAL SOUTH
AM. 389,621,930 100.00% 132,385,340 34.00% 826.30% 100.00%
According to Tendencias Digitales (a well-known local group that conducts surveys), Argentina was the
Internet and e-commerce leader in the Spanish-speaking world in May 2007. The country produces half
of the Internet’s Spanish-language content and is home to 11 of the top 15 sites in terms of traffic in
Latin America and Spain.

According to Internet World Stats (internetworldstats.com), Argentina has about 13m Internet users, or
about 34% of the population, higher than Brazil (17.2% of the population), but lower than Chile (42.4%).
In terms of connections, broadband is the preferred access route (about 85% of accounts). According to
Cisco (US), broadband penetration in Argentina was 4.1% of the total population in December 2006,
below Chile (6.8%), but above Brazil (3%). The average time on the Internet in Latin America is about 8
hours per week, according the same survey, but Argentinians tops this, with a weekly average of 8.2
hours.

In previous years, the Internet was used mainly for communication purposes (e-mail, chat, etc) and
information searches, but the number of e-commerce transactions more than doubled during 2006,
according to the Argentina E-commerce Chamber (Cámara Argentina de Comercio Electrónico—CACE).
About 5m Argentinian Internet users made purchases via the Web in 2006, for a total of Ps10bn (around
US$3.3m); online advertising grew by 35% over the same period.

Several companies perform most of their procurement and sales operations through electronic transfers
of some sort, but the fact that tax evasion is so high in the country (even outside of these electronic
platforms) has made the government more interested in setting some limits on e-commerce.

According to the Networked Readiness Index (NRI) of the World Economic Forum, Argentina ranks 63rd
out of 122 countries. The index measures countries’ integration of information and communication
technologies (ICT). Within the region, Chile ranks 31st and Brazil ranks 53rd.

Growth of e-commerce

According to the Argentina E-commerce Chamber (Cámara Argentina de Comercio Electrónico—CACE),

the average online purchase was for about Ps240 (around US$80) in 2006, with technology as the top-
selling sector in terms of revenue. Other products purchased online included clothes, home appliances,
handicrafts, financial services and retail products. The number of new and second-hand products sold
via online-auction websites also grew strongly in 2006. The purchase of tickets (cinema, concerts and
theatres) and electronic learning also showed up an important part of users’ purchase preferences.
Home-appliance stores have very functional websites that allow shoppers to compare prices and
conduct purchases online. Several stores also offer customers the ability to view and make purchases
from online wedding registries.

CACE expects the value of e-commerce purchases in Argentina to double, from around Ps10bn in 2006
to Ps20bn in 2007. It explains this jump by the rise of broadband connections, the increase in personal-
computer ownership and improvements in Internet offerings of goods and services.

The number of homes with Internet access reached 2.50m by the end of 2006, up from 2.22m a year
earlier, according to the national statistics office (Instituto Nacional de Estadística y Censos). Of this
amount, there were 1.4m broadband accounts ( compared with 795,000 in 2005, a rise of 76%), 381,000
dial-up accounts (509,000 in 2005, a drop of 25%), and 727,000 free accounts from Internet service
providers (919,000 in 2005, a drop of 21%). Free ISP accounts generated an average of around 320m
minutes per month of communications, a decrease of 20% compared with 2005. About 43% of
residential Internet users are in the city of Buenos Aires. At the corporate level, 223,000 institutions had
Internet access at the end of 2006, compared with just 192,000 at the end of 2005. By the end of 2006,
ISPs provided 80% of the accounts, with more than 50,000 customers. Speedy (owned by Telefónica;
ADSL) is the main provider, followed by Fibertel (Cablevisión; cable-modem), Arnet (Telecom; ADSL) and
Flash (Grupo Clarín; cable-modem).
The variety of services provided over the Internet have increased dramatically. For instance, online
banking has always been a very active segment but mostly to check balances and pay utility bills.
Customers are increasingly using the web to transfer money and pay for everyday items such as school
fees and hotel bookings. The sending of cheques through the mail has always been insecure, so there
was no difficulty in getting consumers to change that practice. In the investment sector, however, the
picture is mixed. Although asset managers claim that 50% of unit-trust (mutual-fund) sales are done via
the web, only 8% of stockmarket trades are conducted online, although many brokers have their own
portals.

Music downloading is one of the main uses of the internet—even more so than e-mails and chat.
According to figures provided by the chamber that represents the local music industry (Cámara
Argentina de Productores de Fonogramas y Videogramas—CAPIF), Argentinians downloaded 608m
songs illegally in 2006 (412m in 2005), equivalent to 50m albums with 12 songs each. This figure includes
downloads from local and international websites. The survey indicates that three albums are
downloaded illegally for each album sold legally. Piracy in Argentina accounts for 74% of music
purchases; only 26% of the songs acquired pay copyrights.

Foreign investment

There are no restrictions on foreign investment in telecommunications, data transmission and the
Internet. All telecoms operators in Argentina are under the control of foreign companies or have
important foreign shareholders. These companies in turn run the largest Internet service providers. The
exception to the foreign player is Ciudad Internet, which is controlled by a local company, Grupo Clarín
(in which Goldman Sachs of the US has a minority interest).

Law 25856 of January 2004 has enabled the software industry to receive investment incentives similar to
those offered other industrial activities. Prior to the passage of the law, the sector was not eligible for
investment incentives. The government hopes they will spur foreign investment in the sector.

Intellectual property

Intellectual-property rights are being reviewed—as is patent and trademark legislation generally—to
align them with global standards. Argentina has not passed any laws recently that affect software,
however, and this is beginning to have severe implications. In April 2002 a judge ruled a group of
website hackers not guilty, since existing intellectual-property laws could not be applied to the Internet.
The state prosecutor did not appeal against the ruling since there was no legal basis to do so.

Domain names are also a troublesome issue. Although the courts have ruled more than once that the
owner of a trademarked brand has rights over the same domain name, the process of recovering the
name when another person or firm has registered it may take months, at the very least. The body that
registers domain names is the Network Information Centre Argentina (NIC Argentina) of the Ministry of
Foreign Affairs, International Trade and Culture. Registration is on a first-come-first-served basis online
at http://www.nic.ar. In mid-2006 the Council of the Common Market (Consejo del Mercado Común)
decided on the creation of a Mercosur domain; a commission is now defining the technical and
registration issues.

Argentina was one of the two Latin American countries that had free registration, but the government
announced at the end of 2006 that it will charge a fee for Argentina Internet domains (com.ar, org.ar,
edu.ar, mil.ar and net.ar) in order to avoid domain seizure.

Consumer protection

Law 24240 of October 1993 enforces consumer safeguards. Internet buyers have a window of five days
in which to return their purchase at no cost, as long as the goods are unused. In the private sector,
American Express provides insurance that protects customers against fraud for all transactions paid for
with its card.

The legal climate for e-business in Argentina has been strengthened by the passage of a personal-data-
protection law of November 2000 (Law 25326/2000) and a digital-signatures law of November 2001
(Law 25506).

Contract law and dispute resolution

No specific bodies have been set up to resolve e-commerce disputes among companies or between
companies and consumers. The normal court system and arbitration mechanisms apply.

Basis of taxation

E-commerce companies are expected to provide invoices, like other businesses. Most taxes in Argentina
are federal, and there are only slight variations among provincial taxes to make a real difference
between online and offline transactions. E-commerce companies are less prone to tax evasion than
other businesses in Argentina since credit cards retain value-added tax (VAT) payments on behalf of the
seller.

Imports related to e-commerce are minimal, and most are for books (which are tax free in Argentina)
and compact discs. Since most US shops do not ship goods to Argentina and very few of them accept
credit cards issued in Argentina, crossborder taxation has not been a significant issue.

Classification of e-commerce transactions

At present, there are no legal classifications of e-commerce transactions for tax or other purposes.

Compliance and enforcement issues

Tax collection in Argentina has always been lax. Proposals now before the legislature would attempt to
improve administration and collection, but they are a long way from implementation. Written laws are
not significantly different in Argentina from the average Western developed country, but enforcement
of these laws is poor. Lobbying, the network of contacts and unwritten rules are often more important
than having good management teams to perform business.

Main economic indicator (according to latin-focus.com / worldbank.com):

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

GNI (Gross national income)per capita (US$): 6050

2002 2003 2004 2005 2006 2007 2008

GDP (real ann. %-chg) -10.9 8.8 9.0 9.2 8.5 8.7 6.8
Inflation (CPI, ann. var. in %) 41.0 3.7 6.1 12.3 9.8 8.5 7.2
Exchange Rate (Peso/US$ eop) 3.360 2.933 2.975 3.032 3.070 3.151 3.454
Current Account Balance (US$ m) 8,767 8,140 3,213 5,236 8,011 7,107 7,034
Trade Balance (US$ m) 16,661 15,671 12,130 11,700 12,306 11,072 12,656
Exports (US$ m) 25,651 29,484 34,576 40,387 46,456 55,780 70,069
Imports (US$ m) 8,990 13,813 22,445 28,687 34,151 44,707 57,413
Int. Reserves (US$ m) 10,362 14,119 19,517 28,076 32,037 46,176 46,386
External Debt (US$ m) 156,748 164,918 171,115 113,799 108,873 124,575 128,112
Interest Rate (CB Dep, 30-59d %) 23.9 3.9 2.5 3.8 3.7 10.3 15.1
Investment (real ann. %-chg) -36.4 38.2 34.4 22.7 18.2 13.6 9.1
Agriculture (real ann. %-chg) -2.3 6.9 -1.5 11.1 2.6 7.0 2.8
Industry (real ann. %-chg) -9.2 13.4 10.1 6.5 7.9 11.2 -2.7
Services (real ann. %-chg) -10.8 5.8 8.3 9.3 8.9 17.3 -5.3
Manufacturing (real ann. %-chg) -10.6 16.2 10.7 8.0 8.4 7.5 5.0
Supermarket Sales (ann. %-chg) -26.0 -9.1 8.6 5.8 9.3 17.1 26.5
Unemployment (%) 20.4 14.5 12.1 10.1 8.7 7.5 7.3

Trade balance graph (1996-2008)