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South America / Argentina

The state of play: FDI in Argentina

Facing the twin challenges of economic recession and the Covid-19 pandemic, FDI in Argentina has stuttered over the past 12 months.

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Storm clouds hover over Buenos Aires as Argentina faces up to the dual threat of recession and Covid-19. (Photo by Ronaldo Schemidt/AFP via Getty Images)

Although it is one of the largest economies in Latin America, Argentina has struggled to attract foreign direct investment (FDI) as the country’s sovereign debt soars and the Covid-19 pandemic impacts all areas of public life.

The pandemic has hit the country severely, causing poverty to rise and its GDP to contract by 16.2% during the second quarter of 2020, the largest fall in the country’s history.

In 2020, FDI in Argentina fell by 47%, according to the UN Conference on Trade and Development’s (UNCTAD) Investment Trends Monitor, while overall FDI flows in Latin America and the Caribbean fell by 37% to about $101bn.

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Argentina remains open to FDI

While many countries have introduced protectionism regulations to foreign investment in light of the Covid-19 pandemic, Argentina is yet to take any such measures, and full foreign equity ownership of Argentinian businesses is not restricted either, other than in the air transport and media sectors.

There are also restrictions on land ownership by foreign investors, as well as ownership of bodies of water and of land alongside the country’s borders.

The country’s business environment is one of the barriers to FDI in Argentina, but it has been working to modernise its FDI regime in order to attract more foreign investors, as have other Latin American countries such as Costa Rica and Ecuador.

According to a US Department of State report on Argentina’s investment climate, the country’s main sectors for investment and trade opportunities are infrastructure, health, agriculture, IT, energy and mining.

The country’s investment and trade promotion agency is the Agencia Argentina de Inversiones y Comercio Internacional, which sits under the Ministry of Foreign Affairs. According to the agency, and based on data from the Argentine National Institute of Statistics and Census, the sectors experiencing the fastest growth in the country are biotechnology and knowledge-based services.

The top five country sources of FDI in Argentina are the US, Spain, the Netherlands, Brazil and Uruguay, according to the US Department of State report.

Argentina is currently dealing with the twin challenges of the Covid-19 pandemic and economic recession, and will be reliant on foreign investment if its economy is to recover from the problems of the past 12 months.

Marina Leiva

Marina Leiva

Senior reporter

Marina Leiva is a senior reporter at Investment Monitor, where she specialises in the agribusiness sector.