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In 2001 we suffered a huge economic and social crisis. And after that, 2003 and onwards we have recovered at an 8 or 10 percent annual rate. Recent indicators shows a slowdown in the economy in the end of last year and this year and we expect that this trend change by the end of this year, and we expect a growing of 4 percent for 2012.
Currently Argentinean entities have several challenges. One of them is mainly inflation. We have an average of 20 or 22 annual inflation rate. This generates that companies have to adopt their operation to this inflation scenario. For instance, since cost have increased for the last time at this average rate, this affects competitiveness, and companies have to deal with that. In addition to this, there have been a lot of new regulations in terms of foreign exchange and importations. These new regulations also have to make companies to work hard on it and to adopt all their operations to these new measures. Basically you can imagine that since there are importation restrictions, companies sometimes, it’s not just a matter of economic issues. It is just operational. They have to replace goods; they have to adapt their machinery, their line of productions to new products. So these are important challenges to Argentinean entities currently.
Argentina has recently terminated some international tax treaties. For instance with Spain, with Switzerland, with Chile, and that generated that companies that operate with those countries have to adapt or think again on tax policies. Because for instance now new tax rate applies to payment of royalties, new tax treatment to the distribution of dividends, new tax treatment on tax on assets, new tax treatment on income tax.
In addition to this in Argentina there are taxes at several levels. Not only federal taxes. We have federal taxes, we have provincial taxes, and we have municipal taxes. So you can imagine that a company has to deal with all these sort of taxes. And what happen when there is some of these jurisdictions run out of money they have to make more pressure on the tax audit. And this is what is happening now.
We noticed that for instance not perhaps the federal tax but provincial taxes, and municipalities, started to audit companies more than in the past. They start to impose new withholding regimes, new taxes. And this generated a complex structure of taxes at different levels. Sometimes this generates that companies have important tax credits that is not easy to get them refunded from these governments. So these are additional issues that companies have to face.
Our challenges are to find alternatives to deal with all these new regulations that are arising in Argentina. And we work a lot with companies in ways to, for instance, import goods, in ways to allow them to import goods, for instance by making special arrangements with exporters. This is a way for instance that the government allows importers to import goods. And we assist them in make this sort of arrangements, this sort of agreements between importers and exporters.
Of course we assist companies in analyzing all these new measures in terms of international taxes, tax treaties. We also assist companies in things that are dealt in the directors’ tables. How to recover these tax credits that some companies have at different levels.
I think that in Argentina will remain this regulations. I think that we’ll have a medium term with few changes, perhaps companies will have to re-analyze the ways of doing business in Argentina. For instance, if they are not allowed to remit funds to their home offices or to their controlling entities outside, they have to use the money they have in Argentina for any other usings. And perhaps it’s the time to thinking of new investments in Argentina that perhaps are not currently needed. But it’s a way to use this money, it’s a way to make their presence strong in Argentina, and it’s a way of thinking of medium or long term instead of thinking of the short term which is perhaps not that easy for them. So I think that this is the challenge for the next two or three years in Argentina and of course we are here to assist companies to work on that.
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