The Government eases capital regulations for services companies and their workers to promote exports

The National Government announced on June 2 that it will ease foreign exchange restrictions for companies in the knowledge-based economy sector that increase their exports on a year-on-year basis. The measure aims to promote the development of the sector and its exports, retain Argentine talent, promote the development of new projects and encourage the accumulation of reserves.

During the meeting, the Ministers of Economy, Martín Guzmán; Productive Development, Matías Kulfas; and the President of the Central Bank, Miguel Ángel Pesce, explained that, based on this measure, which will become operational through a Communication from the monetary authority, companies will be able to access the foreign exchange market for 50% of their incremental exports on the condition that 20% of the funds are used exclusively to pay workers’ wages. In addition, workers who provide services abroad will be able to receive from abroad the total monthly amount of up to USD $1000 per month freely available without the need to settle them in the foreign exchange market.

In this context, the Minister of Economy explained that the National Government seeks to adapt capital regulation schemes towards a macroprudential scheme. Along these lines, Guzmán highlighted the initiative that will benefit the knowledge-based economy sector and stated that it aims to “build an Argentina with greater capacity and knowledge generation.” Guzmán also pointed out that the State has redefined the use of public resources to invest more in science, technology and education, and described the knowledge economy sector as “a very important sector for generating value, jobs and foreign exchange.” This measure contributes to the development of the sector,” Guzmán added, while assuring that Argentina is “taking important steps to be able to get the economy to settle on a path of greater productive dynamism.” In this sense, the Minister said that “the economy is undergoing a recovery that is evidenced in the figures, accompanied by job creation” and that “Argentina’s exports have been growing in terms of volume and prices.” “The trend we are seeing in exports is auspicious,” he added. On the other side, Kulfas indicated that the measures announced by the Government “are important to give more dynamism to the exports of the knowledge based economy sector, which are very dynamic.” “We have a growth plan that allows us to expand employment in this sector, which is already generating more than 1,000 formal jobs every month, and which is also key to retaining talent in a global context where there is a lot of competition for qualified human resources.

Argentina has a potential and it has to be able to develop it in all its dimensions,” he added. Before the businessmen and businesswomen, Pesce provided details of the measure and highlighted that the National Government decided to “move forward with companies that export very valuable services because they generate jobs and take advantage of an important resource such as human capital.” In addition, the President of the Central Bank specified that exports “are growing strongly, around 25% in the first quarter” and stated that “this puts us in an auspicious perspective.”

In addition, María Laura Palacios, Vice President of CESSI and CEO of G&L Group, highlighted the work carried out between the public and private sectors and stated that “Argentina is a country where our knowledge is valued and we want to find a way for knowledge to remain in Argentina”. Finally, the Executive Director of Argencon, Luis Galeazzi stated that “the knowledge-based economy exists because there is talent, and if there is no talent retention, there will be no foreign exchange growth.” Galeazzi explained that the public sector and the private sector “are partners in this interest” because “there are two incremental dollars: one that reinforces reserves and at the same time, boosts the sector’s capacities.” “It is a necessary and intelligent measure and it is a good thing for everyone. The results will be seen in a short time”, he concluded. The knowledge-based economy is a new and dynamic sector, and this is reflected in its strong competitive export bias. During 2021, exports of associated services were around US$6.5 billion. Thus, the knowledge economy is constituted as the second export complex, only behind the oilseed-grain complex. In 2018, the previous administration established an export duty of $4 per every dollar (at that time equivalent to a 12% tax rate) on all local services traded abroad. Thus, for the first time export duties were applied to services. This decision was reversed as of 2020, when a policy of reducing duties related to exports with higher added value (industry, regional economies and services) was established, always taking care of fiscal sustainability, to promote employment and productive dynamism in a federal sense. THE EXPORT DUTY FOR THE SECTOR WAS ALSO LOWERED TO ZERO.

Likewise, after successive reductions, as of January 2022 these deductions applicable to services produced in the country and consumed abroad were completely eliminated, definitively correcting the distortion caused by the 2018 measure. These measures are part of a set of support policies for the sector, reflected in 2020 by the enactment of the Knowledge Based Economy Law, No. 27570, which provided benefits for employment, investments and exports that were put into operation and have already begun to yield results in 2021. Together with this decision regarding the knowledge based economy, other measures were implemented to encourage productive investment in all areas, adapting the rules in order to reasonably manage the foreign exchange market. This is evidenced by Decree 277/22, which created the Foreign Exchange Access Regimes for the Incremental Production of Oil and Natural Gas (RADPIP and RADPIGN for their acronym in Spanish), recently published. María Apólito, Undersecretary of Knowledge Based Economy of the Ministry of Productive Development; Melina Mallamace, chief of staff of the Ministry of Economy; Roberto Arias, Secretary of Tax Policy; and Agustín Lódola, Undersecretary of Regional and Sectorial Programming also took part of the meeting.

Representing the companies were Sebastián Mocorrea, President of Argenco; Clara Mendiberri, Managing Director of JPMorgan; Néstor Nocetti, founder and CEO of Globant; Sergio Kaufman, CEO of Accenture; Sergio Candelo, President of the Chamber of the Argentine Software Industry of Argentina (CESSI); Liliana Garay (InvGAte) and Ernesto Galindez, CEO of TGV.