Doing business in Argentina
Thanks Jackson for let me post this thread in my opinion sometimes it's useful to know.
First of all, american and argentine way to do business it's different some ways but the same all over. I've been in both cases and I've found scams, right people, stupid things and unnecesesary paperwork and stuff in both places.
What makes the differences (in what I've seen) it's just three variables:
- Timming.
- Amount.
- Service.
- Taxes respect (fear of prosecution)
Perhaps this may not apply for every transaction but in general it works, I've been researching for these differences talking to several friends that also did or attempt to make transactions in both countries.
Time is money:
The more transactions you make in a period, the more profit you make. But in Argentina they move slower and why? Because of the value of the product and the smaller size of the market.
Argentineans will not move down original prices too much when they receive an offer, obviously I'm talking about business not small chica negotiation. In general argentieans will tempt to wait more time than making a discount.
This is also observed in season sales, after easter you will not see a wholesale on chocolate eggs as in the US, in Argentina they choose keep the eggs till the next year (observed by myself at the supermarket)
This make the whole production chain gets paralized against the American case where the production chain ends and gets activated from zero the next year.
Similar happens whith a guy that I know who is trying to sale an apartment since two years ago and he don't want to move the price and the apartment still for sale. Amazing!
Some times this may become an opportunity since as the market move slow, it also makes buyers does. So if you are energic you may get an advantage.
Amounts, larger or smaller?:
I good statistics proffesor I had he told us once that people seen itself as middle class and politically moderated, even if you ask Bill Gates he will respond that he have middle class behaviors and the same answer will be obtained from a poor guy.
Access to technology, trips and credit it's more restricted in Argentina, but access to education (including university) and health it's more restricted in the US.
Anyway, running a business in Argentina it's cheaper than in the US. But the marketplace for selling in Argentina it's also smaller.
On the services is where I absolutely complain:
Services may be cheap but quality of services in my overall revision it's not good. I wish I see the city cleaner and friendly, but too much buses, and people behavior make you see the streets dirty, full of envelopes people just throw and dog shit. These behaviors some times are also duplicated when you hire a lawyer that acts slow as a turtle, a designer some lundries, taxi drivers that takes longer ways and many other examples.
Service it's depreciated since when someone starts a chain and decided to contract not the best one but the cheaper one to save, they obtain bad quality that repeats over and over till the final product it's also bad.
So, when you hire an acceptable service it's absolutely overpriced:
For example, if you hire a remis to pick someone to the airport, there are many that offers an '87 / '89 peugeot 504 model as a remis for 50 pesos.
If you want to travel in style in a '99 Mercedes Benz Model it's 230 pesos.
Hummer Limo? Doesn't even exists.
On the taxes: Many people try to avoid to pay taxes in Argentina and many because they don't see the taxes they pay expressed into general improvement.
Are chicas also unethical?
[QUOTE=Saint]I probably can better comment on this subject better than most in Argentina. I started 3 Argentina corporations here (2 SRL's and 1 SA) All are doing well. Before moving to Argentina, I was a corporate executive. I had business interactions with over 600 of the biggest and most respected corporations around the world. I also dealt with prominent families of the USA as well as institutions like the Federal Reserve Bank. I only point this out to show that I do understand how business is done properly in most countries around the world.
There are fundamental differences here in the business community. Argentina may perhaps be one of the most difficult countries in the world to do business in but those that are organized, well educated, have experience doing business and are well funded can prosper here as I have proven. In fact, my consulting company helps many foreign individuals and businesses do business here properly and efficiently.
I have posted on other message boards on this subject so to save time I'll just cut / paste my comments here on the business environment.
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I am an American and I moved to Argentina last year. I came down over the course of 2.5 years 15+ times before I moved here permanently. I find the Porteņos very educated and friendly. However, it is a totally different world being in a city like Buenos Aires as a tourist and another living here and operating as a business.
Before moving down to Argentina, I read that Transparency International, which is a well respected organization listed Argentina as one of the most corrupt countries in the world to do business in. [url]http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004[/url] I thought to myself there had to be a mistake. Why would they write this about a country I loved so much. How could Argentina be grouped with countries like Libya, Ethiopia, Kenya, Angola and the Congo??
Let me tell you something. After living down here and doing business with these locals I can tell you that I'm surprised Argentina isn't ranked further down the list. It is sad to say but the way many businesses here do business is almost criminal. The truly shocking thing is most businesses have done business like this for so long --this is all normal to them. They don't know another way to do business. The Porteņos always try to compare themselves to their European descendents but from a business perspective they have more in common with African nations like the Congo, Angola and Ethiopia.
There is no sense of ethics or loyalty for the most part. There are exceptions to the rule but many locals try to extract as much as they can out of the first/only transaction. They try to make as much as they can in the beginning and they don't worry about a longer term mutually beneficial relationship in the future down the road. This is perhaps the biggest challenge I have doing business here.
The reality is that the vast majority of companies here in Argentina would be bankrupt or go out of business in as little as 2-3 months in the USA or the UK. In the United States companies that operate like this quickly go under and are replaced by companies that are organized, ethical and offer good customer service and strong relationships with clients that last for years. That is very rare here. Many companies here think they are doing you a favor by spending money with them or giving them your business. They are so short sighted here. It's truly unbelievable.
Many savoy and intelligent businessmen and women have emigrated to the United States and Europe because they could not do business in their own country. Not only do they not trust the government but they don't trust one another. Family fortunes have been made but then lost due to rapidly changing laws, market conditions or outright theft. It is scary to think about but it is not like the United States. There are not stories after stories of how people made fortunes. There are far more tales of how people lost their shirts. One successful Porteņo, named Roberto, who owns and administers [url]www.travelsur.net[/url] emigrated to the US emailed me the following, "Argentina, for the most part, is the closest thing to the wild west anywhere, aside from some African countries. And chances are it will forever remain like this, in between short periods of calmness." I couldn't agree with his statement more.
Many locals are blind to this type of behavior and they believe this is how business is done all over the world. The Porteņos that have studied or worked abroad in the USA, UK, Asia or other parts of the world recognize this defect of their own country. My doctors, attorneys, bankers, accountants and friends all studied or worked abroad so they understand how difficult it is in their own country. Many meetings I go to on a daily basis the locals apologize ahead of time for the system here in Argentina.
However, this kind of behavior is exactly what has caused my companies to grow so quickly. Americans and Europeans don't like doing business in this fashion. Individuals and investors that are flocking to Argentina do not trust the locals (for good reason) so they have hired me and my company as a consultant to assist them. It takes more than a good idea to evolve and create a viable business here in Argentina. It takes capital but it takes a good knowledge of the kind of business environment that is in place here. Many foreigners pack up and go home very quickly because they are not accustomed to working like this. They were not educated on how slow the system is here and how much red tape there is. They have never before operated in an environment where there is no loyalty, ethics or professionalism.
Those with a solid business background that have operated in the USA / UK / Europe / Asia, that have a good education and understand business and long term relationships, and are well funded are going to become dominent leaders in their respective fields here in Argentina. The key is having a realistic expection before you come of what the business environment is like. There are many opportunities in Argentina for a foreigner with a good head on their shoulders and a good business plan. There is no hope of coming to Argentina and getting ahead by being an employee. You MUST start your own business here to thrive.
While I am fully aware that it is impossible to change the system on a massive scale, my goal is to create businesses and help others create businesses that will fundamentally help change the business community in Argentina. Since the dawn of time -- no matter how much corruption there was in a society, companies with a solid business model that operated efficiently and properly and were well funded, not only excelled but they caused other companies to rise to the occassion.
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MCSE was correct that it is less expensive to run a business here than in the USA / UK and other parts of the world but the market is smaller for most products. I have meetings every week with foreigners that seek my consulting on their business plan. 98% of them are very bad and wouldn't make it here. Or if they did, it wouldn't be worth it for them because the income would be too small. You have to really think things through before deciding to try to start a business here.
There are great ideas out there. I have thought of several but I'm just limited by time since I'm working a ton as it is. Those that are planning to move here and do business here need to really have a good game plan. Make sure you have excellent advisors, lawyers, accountants and bankers. This will go along way to help you achieve your goals.
Maybe my other posts will help out as well so I'll post them below as well. I've been emailed over the years that my posts have helped many. I ask for nothing in return. Just hope it helps and if you receive some benefit then "pass it on" and post some other useful information for other future readers.
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Importance of a Solid Business Plan and Business Model.
Perhaps the most important factor in the success of a company in any country, but especially Argentina is coming up with a solid business plan. Everyone has great ideas but how many people follow through with those ideas? Not many. In a country like Argentina, it takes much more than a great idea to make it. You must formulate a business plan and keep working on it until it is perfect. Even after it is perfect, pitch your business plan and business model to all your business associates, lawyers, family and friends. Talk to your acquintances that may work for financial institutions as well. Present your business plan to every single one of them until every single one of them tells you that you have a good idea that they deem to be viable. If even one of them points out flaws in your plan, keep changing it until it is perfect.
The moment of truth. Once you perfect your business model and everyone tells you how great of an idea it is, ask them if they would want to become an investor in the company you were forming. If it is such a great idea and you thought your business plan was solid and you pitched it correctly, you should have people interested in what you are trying to put together. If you just get a few people that say they would invest you have accomplished something. Once you make it through all those steps, don't move forward unless you are well funded.
Put some serious time and money into researching your business plan. In my quest to do business in Argentina, I came down to Argentina about 17 times over the course of 2.5 years. Each trip I would make a few contacts. More than anything, I wanted to learn how things operated here. It is imposible to understand just how rotten the system is until you are working here on a daily basis. It is not just one segment of the work industy. It is rampant problems throughout the system.
There is no such thing as "easy money" here in Argentina. I am routinely working 12-14+ hours a day. Although I tested the waters back in 2002, I didn't move down to Argentina permanently until August 2004. Because of the hard work and dedication over the course of 2+ years putting together a solid business plan, after only 9 months I am already getting unsolicited offers from individuals and corporations from outside Argentina to purchase my company and several of my owned properties.
Don't get discouraged by others that tell you that you are foolish to want to try to start a business in South America. Everyone told me that it was a mistake to quit a lucrative career in the USA and move here. Now, after only a few months, those same people are telling me that they are envious and wish they had the courage to follow their dreams as I did. Anything is possible but remember that it takes a solid business plan, dedication and a lot of hard work, and enough capital to get started and operate for the first few years.
Keeping your Cash Offshore.
Offshore deposit accounts should form the foundation for any expat. Offshore accounts are not used to beat bond or equity markets - they won't. Offshore accounts are used because they offer both safety and liquidity.
Before moving to Argentina, you will be well aware that you will not want to deposit any significant amount of money into the local banking system. The locals have been swindled out of their savings by their own government. While it will be necessary to open local you$s dollar and Peso accounts, it will be for convenience purposes only-- for things such as paying bills with online banking.
With the tremendous power of the internet, gone are the days of using a traditional bank with high fees. Unfortunately, due to historically low interest rates, deposit accounts -normal or offshore- are paying out very low interest rates. Still, with all the advantages it is a must for an expat doing business in Argentina. Deposit accounts are both safe and secure. Offshore deposit accounts should form the basis of your financial life.
Set up an account with plenty of time before you move to Argentina. Allow time for any checks, ATM debit cards, credit cards, PIN numbers, etc. To arrive at your USA address before you move. Making sure you have these accounts should be your priority and the one thing you concentrate on doing before you move.
It is not necessary to worry about setting up long-term investments in the first 6-8 months of moving abroad. You might decide that Argentina is not for you or you simply can't work in this type of business environment and move back to your home country. This initial 6-8 month time frame gives you time to see how things are going. Put any spare cash into your deposit account during this time.
It really does not matter which bank you decide to use. The important thing is to keep your cash offshore out of Argentina.
Power of Technology.
The power of the internet and technology should be utilized to the fullest extent. It is wise while putting together your business plan to set up everything you will need to stay connected in Argentina. Just because you are leaving the United States does not mean you will not need to stay connected to the United States. Odds are you will have clients, business associates, advisors, and friends in the USA that you will need to operate efficiently in Argentina.
Vonage. Com.
Perhaps one of the most important technological advances for the expat moving to Argentina is the VOIP (voice over IP) phone service. It is amazing technology that allows you to make / receive unlimited calls to / from the USA for a flat $25 per month fee. You can go to Vonage to sign up for the service. Email us before you sign up if you would like to receive one month free. After you sign up, you will receive a small box that you simply plug into a high-speed Internet connection here in Argentina (or anywhere in the world)
As long as you have a high-speed connection you can plug in your IP phone and you can make and receive calls unlimitedly to the USA and Canada. Service is quite good as long as you have a good connection. You can sign up with the area code of your choice so you can get a number from any USA city. You can also sign up to receive a toll-free number (for an added fee) if you have many clients in the USA.
EFax. Com.
Email is powerful but there will probably always be a need for faxes. EFax is an amazing service that allows you to set up a USA fax number in the area code of your choice. Faxes received at this number are automatically sent to you via email to you in Argentina, or wherever you are traveling. You select an email address you want the fax delivered to. You can receive faxes from anywhere in the world you are traveling to.
Not only can you receive faxes via email but you can also send faxes via email or online via their website with your efax number and PIN number. Efax will convert your document to a fax and they will email you a confirmation so you know the fax was sent. It is amazing technology that should be utilized. Service is very affordable at $13 per month.
Paperless PO Box. Com.
Paperless PO Box is a great service that allows you to have a USA address even though you are living in Argentina. This company gives you a PO Box address in the USA. All of your mail is scanned by a computer and then they email you a copy of what they scan. Keep in mind that if you need a physical copy of the mail or it is an important document, you may want to have that mail sent to a family member or friend in the States. The US Postal service will forward all mail to you to Argentina free for a one year period although the mail service here in Argentina is not too reliable.
This service is wonderful for most documents that you don't need the original document. In this day and age of the internet, there are very few documents where you need the original copy. All the scanning of the physical mail is all automated by machines so there is never an actual person reading your mail. If you do need a particular document, their company can overnight you the document. The original mail is preserved for 90 days and then automatically destroyed if you do not request it. It is affordable at $30 per month.
PayTrust. Com.
PayTrust enables you to send payments to anyone in the USA. Even though you are living thousands of miles away in Argentina, odds are you will still have bills in the United States. Taxes, professional services fees to attorneys / accountants / advisors, credit cards, etc. Are a part of most expat's lives no matter where they are living. We all have bills in the USA and this company allows you to pay these bills with no hassles effortlessly.
You get a user name and password and log in to your account. You can see your account balance from your bank and send payments to anyone in the USA. This is far different than online bill paying with your bank. You actually get a PO Box address that you can send your bills to. All bills are scanned and you can see these bills online. Paytrust allows you to even pay property taxes online which is not possible with traditional online banking. The cost is reasonable at $13 per month.
Importance of Relationships with Trustworthy Local Contacts.
Another key to the success of starting your business will be creating relationships with locals whom you can trust. That is more difficult that you would think. A good attitude to have in Argentina is trust NO ONE until they prove they can be trusted. There are only a handful of people I trust here in Argentina. Still, it is impossible to create a business with out the help and assistance of local contacts. It is simply impossible to start a business in Argentina without good advisors, accountants, lawyers, banks or financial firms and local business owners.
As previously mentioned in the "Business Environment in Argentina" section, it's a jungle here and you will fail if you don't take the time to set up relationships with good local contacts.
There are various ways to structure your corporation but most corporations require that you have at least another partner. You can't form a corporation with just one person so naming only yourself is not an option. There are ways to form a company with just one person but they are not the best option because there are limits to the amount of money the company can earn in each calendar year. It won't make sense for most entrepreneurs starting a company here.
One common corporation here in Argentina is the equivalent of our LLC (limited liability corporation) in the United States. It is called a SRL here. It stands for Sociedad de Responsabilidad Limitada. You must have at least one other partner in your corporation so it is essential that you have someone that you can trust 100% because at least on paper that person will own 10% of your company.[/QUOTE]So would this short sighted grab it while you can attitude not also be present in the chicas of Argentina? Are they unethical as well?
Interesnting book about real estate in Argentina
[url]http://www.ilbookstore.com/product.php?productid=16133&cat=103&page=1[/url]