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ARGENTINA Country Profile |
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General InformationThe Political ClimateThe Argentine economy has been steadily improving since it slid into recession in the late 1990s, which culminated with a deep financial, political and social crisis at the end of 2001. Due to record unemployment levels and a highly overvalued and inflexible currency, the crisis rapidly plunged more than half of the population into poverty while foreign investors suffered substantial losses. However, in the years following the crisis, impressive growth rates have been sustained and the political climate has been stabilised. The country has made good progress in restoring investor confidence and observers now agree that Argentina once again represents an attractive destination for foreign investors. President Cristina Fernández de Kirchner, whose husband is the former President Néstor Kirchner, won a clear-cut victory at the presidential elections of November 2007. The victory was helped by a fragmented political opposition, strong growth rates as well as the popularity of her husband. In contrast to her husband, President Cristina Kirchner has not been very outspoken concerning corruption, and anti-corruption policies have not been at the forefront of her administration's agenda. Although her husband's administration introduced various anti-corruption initiatives, it is generally agreed that corruption and graft have remained widespread and political patronage systems deep-rooted.
Various legal measures have been enacted and institutions established in order to curb corruption. However, the effects of these initiatives are severely hampered by problematic factors, such as a politicised judiciary, which is itself continuously cited as being riddled with corruption. Key laws and institutions reportedly face major implementation and enforcement shortcomings, leaving them largely ineffective. According to the Bertelsmann Foundation 2010, abuse of office by elected officials usually goes unpunished, and the political and administrative system as a whole lacks transparency, efficiency and neutrality. Until recently, the Kirchners' centre-left party, the Justicialist Party (commonly known as the Peronist Party), dominated both Houses of Parliament and held the majority of governorships. However, while being very popular in the beginning of her term in office, the popularity of President Kirchner has slowly decreased and her party lost its comfortable congressional majority in June 2009. Seen together, as they often are by analysts, the Kirchners have been criticised for monopolising decision-making power in the presidency and bills approved during their time in office have strengthened the position of the President by allowing for easier introduction of 'emergency' decrees and by increasing the President's budgetary control.
The problem of political corruption in Argentina is confirmed by Transparency International's Global Corruption Barometer 2009, where political parties are ranked the most corrupt body in Argentina, followed by public officials, parliament and the judiciary. The same survey also reveals that 81% of the respondents consider the government's efforts in fighting corruption as 'ineffective'. This information is backed by the Latinobarómetro 2008 (see English version), which reveals that public distrust in the political system is very high. For example, public opinion respondents believe that on average 76% of public officials in Argentina are corrupt, and the majority believe that the occurrence of corruption is more prevalent within the political system than in the general society. Moreover, Argentina is among the Latin American countries included in the survey where least respondents believe that there has been progress in fighting corruption. Cases of corruption include the Minister of Economy who had to resign in July 2007 after a suitcase packed with public funds was found hidden in her office bathroom, as reported by Deutche Presse-Argentur 2007. Also, in that same month, according to the Spanish newspaper El Pais 2007, the Minister of Defence resigned after Argentinean customs officials uncovered a suspect shipment of arms that had been approved by the Ministry of Defence. It is cases like these that continue to cultivate Argentinean's distrust in their political institutions and elected officials. Business and Corruption Companies operating in Argentina are affected by both public and private sector corruption. Transparency International Global Corruption Barometer 2009 reveals that the general public considers corruption to have a major impact on the business environment. When respondents were asked which sectors they perceived to be affected by corruption, the private sector scored 3.7 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt'). This perception is confirmed by the World Bank & IFC Enterprise Surveys 2006, in which 19% of responding companies expected to pay bribes to public officials in order 'to get things done'. According to the surveyed companies, the value of gifts expected to secure a government contract is equal to approximately 2.5% of that contract. The same report reveals that a total of 60% of the companies identified corruption as a major constraint to doing business in Argentina. In the World Economic Forum Global Competitiveness Report 2009-2010, companies ranked corruption as the third most problematic factor for doing business in Argentina. Interacting with public agencies is necessary for establishing or maintaining business operations in Argentina, like everywhere else. However, according to the reports cited above, this interaction in Argentina frequently entails unethical behaviour, including corruption. Investors are therefore advised to be prepared to deal with demands for bribes and other forms of corruption by strengthening and developing internal policies, codes of conduct, procedures and instructions (see Integrity System for practical tools). It is also recommended that companies conduct extensive due diligence when planning to invest or already doing business in Argentina.
According to the World Bank & IFC Enterprise Surveys 2006, companies report that bribes or gifts are expected when interacting with tax inspectors, when bidding on public tenders and when applying for various licences and permits. There are indications that a close relationship exists between the high levels of corruption within the political and administrative system and bribery by the private sector. According to the Bertelsmann Foundation 2010, all political and administrative levels are vulnerable to corruption and political influences. Corruption continues to permeate in both the government and the private sector. An area of special concern for companies is bidding on public tenders. According to the same survey mentioned above, nearly 26% of the surveyed companies expect to give gifts to secure a government contract. In order to best reduce the risk of extortion and demands for bribes in the procurement process, investors considering bidding on public tenders in Argentina are advised to use a specialised due diligence tool on public procurement.
According to the Bertelsmann Foundation 2010, organised labour plays a strong role in Argentina, but trade unions are frequently accused of being controlled by the government, which has influenced sector-specific negotiations between unions and industry. The same source also reports that trade union leaders are frequently regarded as part of the political establishment and are therefore often mistrusted by workers. Established trade unions are widely associated with high levels of corruption. According to Global Integrity 2006, the close, at times opaque, relationship between politicians and unions is illustrated by the case of Secretary of Transportation, Ricardo Jaime, who approved an advance subsidy of USD 5.5 million beginning in 2003 to the union of truck drivers, which supports a close ally of President Kirchner. The US Department of State 2009 reports that Ricardo was facing at least 25 different reported charges of corruption during his tenure as Secretary of Transportation, before finally resiging from his position in July 2009. Regulatory Environment Even though Argentina remains open to foreign investment and foreign companies can invest in the country on the same conditions as national companies, complicated and time-consuming regulations continue to pose an obstacle to doing business in Argentina. The World Bank & IFC Enterprise Surveys 2006 reveals that senior managers spend nearly 16% of their time dealing with the requirements of government regulations. According to the World Economic Forum Global Competitiveness Report 2009-2010, policy instability is ranked as the most problematic factor for doing business in Argentina by companies. According to the same report, government policy-making is highly non-transparent in Argentina. Combined with frequent changes in policies in some sectors, companies find themselves subject to considerable uncertainty in relation to unpredictable and inconsistent interpretations of relevant regulations by government officials. Although foreign trade has been liberalised, a number of administrative barriers remain. According to the World Bank & IFC Doing Business 2010, Argentina performs poorly in the area of starting a business, and in dealing with licences and paying taxes. Although business activities related to dealing with taxes were facilitated between 2008 and 2009, both time and costs related to paying taxes are still above the South American regional and OECD averages.
Several observers, as well as business and public perception surveys, including the World Economic Forum Global Competitiveness Report 2009-2010, describe the Argentinean judiciary as severely politicised and plagued by corruption. The US Department of State 2009 notes that public confidence in the judiciary is weak, but domestic investment dispute resolution is nevertheless available through local courts or administrative procedures. According to the International Trade Centre 2004, to deal with the problem of Argentina's many arbitration centres competing against one another, 25 arbitration centres in Argentina adopted a harmonisation approach, agreeing to use the same procedural rules and to conduct a cooperative branding campaign to raise awareness domestically and internationally. Gabriele Tondl writes in Trade, integration and economic development 2008 that two agencies, the Amicable Negotiations Federal Council and the Amicable Negotiations Proceedings Body, were created by the government in 2003 as alternatives to international arbitration to conduct amicable negotiations under the provisions of bilateral investment treaties. Companies that seek recourse through Argentinean courts, however, cannot dually pursue recourse through international arbitration. International arbitration of investment disputes is available for those disputes that cannot be settled through amicable consultation and negotiation between the parties. Many foreign companies prefer to include provisions for private or international arbitration in their contracts rather than deal with Argentina's courts. Argentina accepts the principle of international arbitration and is a party to the International Centre for Settlement of Investment Disputes (ICSID), the New York Convention 1958 (UNCITRAL), and the World Bank's Multilateral Investment Guarantee Agency (MIGA).
Investment incentives aimed at attracting foreign investors are promoted through a number of government-run investment programmes. These programmes provide a range of benefits for investors, including VAT refunds and access to free trade zones. The investment promotion programmes are explored further on the websites of Subsecretaría de Industría (in Spanish) and of the National Investment Development Agency. Relevant information for small and medium-sized companies can be found at the website of the Subsecretaría de la Pequeña y Mediana Empresa y Desarrollo Regional (SEPYME, in Spanish), which also runs ProArgentina (in Spanish), a portal containing export-related information for and about small and medium-sized companies in Argentina. Companies can also access the Lexadin World Law Guide for a collection of legislation in Argentina. Judicial SystemIndividual Corruption
According to Transparency International's Global Corruption Barometer 2009, the judiciary is perceived as one of the most corrupt institutions in the country by the general public. Among the Latin American countries included in the Latinobarómetro 2008 (see English version) public opinion survey, Argentina is the country where the largest percentage of respondents believe that it is possible to get a favourable sentence by bribing a judge. According to US Department of State 2009, provincial courts and federal courts at the provincial levels are more prone to corruption compared to federal courts at the city levels and the federal court over the province of Buenos Aires. Furthermore, Global Integrity 2008 assesses the judiciary's accountability in Argentina as 'weak'. Business Corruption
The protection of free competition and property rights is impeded by corruption within the judiciary and by political pressure on judges. According to the US Department of State 2009, confidence in the judiciary is weak, leading many investors to prefer private or international arbitration.
According to the World Bank & IFC Doing Business 2010, enforcing contracts through Argentinean courts is cumbersome, time-consuming and costly when compared to the average for OECD countries. Companies should note that lengthy and complicated bureaucratic procedures are widely regarded as fuelling the use of bribes, although there is little evidence of companies' experiences in this regard in the judiciary in Argentina.
According to Global Integrity 2007, in August 2007, the Council of the Magistracy suspended Judge Guillermo Tiscornia, and initiated a trial against him. The main accusation was that Tiscornia's father requested a bribe of USD 4 million from the Spanish company CODERE, so that his son would not convict the directors of the company. The day before his suspension, in an attempt to avoid his dismissal, Tiscornia accused the Minister of Defence Nilda Garré of smuggling spare rifle parts into the United States. The investigation of Garré, however, was cancelled within a week. Political Corruption
According to Freedom House 2009, former President Menen's manipulation undermined the judiciary's independence and the rule of law. Although President Kirchner has initiated several measures to deal with allegations of politicisation and corruption within the judiciary, such as reforming the process of nominations of Supreme Court judges, incompetent and corrupt judges still remain a serious problem. The Bertelsmann Foundation 2010 reports that the judicial reform measures implemented under Kirchner are, however a positive step towards increased transparency and neutrality within the judiciary. Frequency
The World Bank & IFC: Doing Business 2010:
- Enforcing a commercial contract in Argentina requires a company to go through an average of 36 administrative procedures, taking an average of 590 days and costing an average of 16.5% of the claim.
- The equivalent averages for OECD countries are 31 administrative procedures, 462 days at an average cost of 19% of the claim.
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the independence of the judiciary from the influence of members of government, citizens, or companies a score of 2.4 on a 7-point scale (1 being 'heavily influenced' and 7 'entirely independent').
- Business executives give the efficiency of the legal framework for private companies to settle disputes and to challenge the legality of government actions and/or regulations a score of 2.6 and 2.1 respectively on a 7-point scale (1 being 'extremely inefficient' and 7 'highly efficient').
Transparency International: Global Corruption Barometer 2009:
- Citizens give the judiciary a score of 4.2 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
- 50% of households surveyed consider the judiciary to be 'extremely corrupt'.
- 4% of households who had contact with the judiciary in 2008 report to have paid a bribe.
Latinobarómetro: Annual Report 2008 (see English version):
- 54% of the respondents in this public opinion survey believe that it is possible to bribe a judge in order to get a favourable sentence - the highest percentage of all 18 Latin American countries included in the survey.
Transparency International: Bribe Payers Index 2008:
- Business executives give the judiciary a score of 3.7 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
The World Bank & IFC: Enterprise Surveys 2006:
- Less than 16% of companies operating in Argentina perceive the judiciary as fair, impartial and uncorrupted. PoliceIndividual Corruption
According to the Bertelsmann Foundation 2010, the police force is perceived to be one of the most corrupt institutions in Argentina. As is the case in many other countries in the region, paying bribes to the traffic police is a common tactic for avoiding legal penalties for traffic violations. This is backed by the Latinobarómetro 2008 (see English version) which reveals that Argentina is one of the countries in the region where most respondents in the public opinion survey believe that it is possible to bribe a policeman in order to avoid a fine or arrest. Business Corruption
Companies should note that the Argentinean police are frequently cited as a corrupt institution, as reported by the Bertelsmann Foundation 2010, and the police force's actions are often viewed as arbitrary and politicised. According to Freedom House 2009, extrajudicial action is not uncommon, and the Buenos Aires police have been involved in several incidents of drug trafficking, corruption and extortion. According to the US Department of State 2009, between January and December 2008, there were 120 investigations against police officers in relation to allegations of corruption and criminal involvement. The US Department of State 2009 also cited a local newspaper which reported that from 2008 to 2009, there were 13,619 police officers being investigated for acts of corruption, violence, or irregularities in Buenos Aires Province. Political Corruption
Accountability within the police force is questionable and, according to Global Integrity 2008, the police are frequently subject to political interference. There are cases where corrupt police officers were made immune from the criminal proceedings and cases where a lack of resources or the lack of will to investigate corruption cases related to police officials was an obstacle. Furthermore, budget constraints affect the police's ability to carry out their mandate, and poor salaries are cited as an incentive towards petty corruption within the police.
The Oficina Anticorrupción (in Spanish), Argentina's anti-corruption agency, has an internal mechanism through which civil servants can complain about police actions. Attorneys and police stations receive complaints as well. According to Freedom House 2009, police abuse is rarely punished in the courts due to intimidation of witnesses and judges, especially in the province of Buenos Aires. Frequency
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the reliability of the Argentinean police services to enforce law and order a score of 2.8 on a 7-point scale (1 being 'cannot be relied upon at all' and 7 'can always be relied upon').
Transparency International: Global Corruption Barometer 2009:
- 9% of households who had contact with the police in 2008 report to have paid a bribe.
Latinobarómetro: Annual Report 2008 (see English version):
- 59% of respondents in this public opinion survey believe that it is possible to bribe a police official to avoid a fine or arrest.
Transparency International: Bribe Payers Index 2008:
- Business executives give the police a score of 3.9 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
The World Bank & IFC: Enterprise Surveys 2006:
- 25.4% of companies surveyed identify crime, theft and disorder as major constraints to doing business.
- 76% of companies surveyed pay for security in Argentina. Licences, Infrastructure and Public UtilitiesBusiness Corruption
According to Global Integrity 2008, despite the transparent laws on regulatory requirements for basic health, environmental and safety standards for businesses, there are nevertheless cases where corruption has led to enforcement inconsistencies. In 2004, a fire accident in the nightclub 'Cromañón' caused a death toll of 194 and thousands of injuries. According to The Argentimes 2009, the accident caused a scandal when corruption links between the club owner and several individuals, including the mayor of Buenos Aires were revealed. After a more than 4-year long trial, the club owner was convicted of bribery and was sentenced to 20 years in prison and the former mayor was dismissed from his post in 2006 for tolerating and ignoring safety checks at the club.
Companies should note that excessive bureaucracy is generally associated with the use of facilitation payments. According to the US Department of State 2009, companies complain that strict compliance with government regulations places them at a competitive disadvantage when competing against private sector companies that engage in fraudulent activities and bribe officials in order to reduce their regulatory burden. The World Bank & IFC Enterprise Surveys 2006, however, reveal that only a relatively small proportion of companies report that they must give gifts in order to obtain access to public utilities, such as electrical, telephone and water connections. Gifts are also occasionally given when applying for construction permits and operating licences. Political Corruption
According to Global Integrity 2008, the quality of the civil service in Argentina is seriously affected by political interference and civil servants who act against the government's policies can be punished.
The Yacyretá Dam hydroelectric project on the border of Argentina and Paraguay between 1983 and 1994, partly financed by the World Bank and the Inter-American Development Bank, is widely known as a 'monument to corruption'. It is a typical mega-project that has proven to be vulnerable to large-scale corruption. Yacyretá Dam was intended to be a clean and cheap source of energy, but large cost overruns have meant that the energy produced is not economic. According to Transparency International Global Corruption Report 2008, the original budget of USD 2.7 billion was inflated to USD 11.5 billion, and corruption is believed to have contributed to driving up the total costs. According to the International Rivers Network: Yacyretá Dam, despite the fact that there was well-documented evidence on engineering and construction companies, as well as politicians embezzling public funds, no one was ever brought to justice. Frequency
The World Bank & IFC: Doing Business 2010:
- Building a warehouse in Argentina requires a company to go through 28 administrative steps, taking as much as 338 days at a cost of more than 145% of GNI per capita.
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give government administrative requirements (permits, regulations, reporting) in Argentina a score of 2.7 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all').
Transparency International: Global Corruption Barometer 2009:
- 3% of households who had contact with registry and permit services in 2008 report to have paid a bribe.
- 2% of households who had to obtain public utilities in 2008 report to have paid a bribe.
Transparency International: Bribe Payers Index 2008:
- Business executives give the registry and permit services a score of 3.3 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
- Business executives give the medical services a score of 2.7 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
The World Bank & IFC: Enterprise Surveys 2006:
- 5.7% of companies expect to give gifts in order to obtain an operating licence.
- 8.9% of the companies surveyed expect to give gifts to get a construction permit.
- The percentage of companies that expect to give gifts to obtain electrical, phone and water connections are quite low, being 2.8%, 2.1% and 0.77% respectively. Land AdministrationBusiness Corruption
According to the Bertelsmann Foundation 2010, despite the fact that companies' property rights are protected by Argentinean law, they are nevertheless not firmly anchored in institutions. Corruption and politicisation within the judiciary and public administration make regulating property acquisition and enforcing property rights difficult in Argentina. The time to be spent and steps a company must go through to register property in Argentina are slightly less cumbersome than in other South American countries. Frequency
The World Bank & IFC: Doing Business 2010:
- Registering property in Argentina requires a company to go through 6 administrative steps and takes an average of 52 days at a cost of 7% of the property value.
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the protection of property rights in Argentina, including financial assets, a score of 2.9 on a 7-point scale (1 being 'very weak' and 7 'very strong').
Transparency International: Global Corruption Barometer 2009:
- 3% of the households surveyed reported to have paid a bribe to land services in 2008. Tax AdministrationIndividual Corruption
The Government of Argentina struggles with high levels of tax evasion among its citizens, which inhibits the government from fully benefiting from a growing private tax base. According to the Bertelsmann Foundation 2010, individual tax evasion is driven by the public's mistrust of the government, which is again fuelled by the low effectiveness of public services and the after-effects of the corralito (freezing of bank accounts), the set of strict economic measures taken at the end of 2001, in which bank accounts were almost completely frozen and withdrawal of USD was forbidden. Business Corruption
Companies report that they experience corruption in tax collection, where they face frequent interaction with tax officials. According to the World Bank & IFC Enterprise Surveys 2006, companies have more meetings with tax officials in Argentina than in most countries in the South American region, and some companies report that they expect to give gifts to tax officials in connection with these meetings. However, according to the World Bank & IFC Doing Business 2010, the number of annual corporate tax payments have fallen considerately between 2007 and 2009.
According to the US Department of State 2009, national taxation rules treat domestic and foreign companies equally; however, tax authorities do scrutinise tax declarations of foreign companies operating in Argentina with the intent of curbing the use of offshore companies to shelter profits and assets declaration. This is further highlighted in Global Integrity 2008, where tax laws are assessed as being enforced discriminatorily. Political Corruption
According to Javno News, in 2007, former Defence Minister Nilda Garre was questioned over a possible tax evasion case in relation to a government weapons deal. There were allegations that the weapons were undervalued to avoid customs taxes. The investigation was, however, cancelled.
According to Global Integrity 2008, the head of Administración Federal de Ingresos Públicos (AFIP), the agency responsible for the national tax collection, was removed due to political differences with Custom's head and due to corruption suspicions. Frequency
The World Bank & IFC: Doing Business 2010:
- A medium-size company operating in Argentina must make 9 payments to tax authorities every year, taking 453 hours on average at a total tax rate of 108% of profits.
Transparency International: Global Corruption Barometer 2009:
- 1% of households who had contact with tax revenue services throughout 2008 report to have paid a bribe.
Transparency International: Bribe Payers Index 2008:
- Business executives give the tax revenue authorities a score of 2.6 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
The World Bank & IFC: Enterprise Surveys 2006:
- Approximately 49% of companies report that a typical company declares less than 100% of its sales for tax purposes.
- Nearly 44% of companies identify tax administration as a major constraint for doing business.
- Almost 4% of companies report that they expect to give gifts in meeting with tax inspectors. Customs AdministrationBusiness Corruption
According to Global Integrity 2007 and other observers, customs administration has been rife with corruption. Some observers suggest that this situation is changing, but companies should note that others still consider the customs officials at border crossings to be coimeros, i.e. officials who receive bribes.
Business surveys by the World Bank & IFC Enterprise Surveys 2006 report ambiguous figures concerning the ease of clearing exports through customs. However, it is reported that a small proportion of companies give gifts in return for obtaining import licences. Political Corruption
Global Integrity 2008 reports that customs laws are not enforced equally and without discrimination and the General Audit Office has detected that Customs has several deficiencies in control, which sometimes is related to poor infrastructure.
According to Momento24, the Ezeiza Customs chief, Carlos Mechetti, along with 11 others were arrested for letting illegal merchandise into the Ezeiza airport in return for bribes. According to Clarin, however, Mechetti was released after having paid a high bail. Frequency
The World Bank & IFC: Doing Business 2010:
- A standard export shipment of goods requires 9 documents and takes 13 days at an average cost of USD 1,480 per container.
- A standard import shipment of goods requires 7 documents and takes 16 days at an average cost of USD 1,810 per container.
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the efficiency of customs procedures (formalities regulating the entry and exit of merchandise) in Argentina a score of 2.8 on a 7-point scale (1 being 'extremely inefficient' and 7 'extremely efficient').
Transparency International: Bribe Payers Index 2008:
- Business executives give the customs a score of 3.6 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').
The World Bank & IFC: Enterprise Surveys 2006:
- It takes an average of 5.5 days to clear direct exports through customs.
- It takes an average of 8 days to clear imports from customs.
- Very few (0.6%) companies report that they expect to give gifts in order to obtain an import licence. Public Procurement and ContractingBusiness Corruption
Although the legal framework for dealing with corruption in public procurement and contracting is in place, companies have identified corruption in procurement as a major impediment to further trade and investment in Argentina. According to the World Bank & IFC Enterprise Surveys 2006, more than one-fourth of the companies surveyed reported that they expected to give gifts in order to secure a government contract. Companies intending to bid on procurement contracts in Argentina should be aware that tender procedures in the provinces have been identified as vulnerable to bribery and nepotism. Companies are recommended to use a specialised due diligence public procurement tool in order to mitigate the corruption risks related to public procurement in Argentina.
According to Global Integrity 2008, unsuccessful bidders can challenge procurement decisions in courts, however, companies should take note that Argentinean courts are frequently cited as suffering from high levels of corruption and politicisation, as reported by the Bertelsmann Foundation 2010. Provisions for the blacklisting of violators of procurement regulations are outlined in Decrees No. 1023/01 and No. 436/00. According to Global Integrity 2008, in practice only small-sized companies are subjected to these laws since many larger companies routinely circumvent blacklisting by changing their financial statements in order to be allowed to participate in future procurement bids. This makes it very difficult to carry out an effective mechanism to prohibit those companies from participating in future procurement bids.
Procurements must be published on the website of the Oficina Nacional de Contrataciones, (in Spanish), but, according to a 2006 Poder Ciudadano study of the public procurement system (in Spanish), the system as a whole suffers from poor access to information about procurement decisions.
See more on public procurement under the section on 'Public Anti-Corruption Initiatives'. Political Corruption
According to the US Department of State 2009, an investigation by the Ministry of Justice's Anti-Corruption Office (ACO) revealed that 75% of the public purchases made by the government of Argentina between 2002 and 2005 were done via direct contracts and not via public tenders, which raised concern over the facilitation of corruption and reduction of competition among providers. Government officials circumvented procurement rules by disaggregating contract components so that no part exceeded the legally-mandated ARS 10,000 limit for sole sourcing, by writing contracts specifications so that only one provider could meet the requirement or by not advertising tenders.
According to the same source, in December 2008, Siemens AG, a German company, acknowledged that its employees paid government officials in several countries. One of the confessions was that Siemens' Argentina had bribed government officials in order to obtain a contract for a USD 1 billion national identity card project. More information on the Siemens Argentina case can be accessed here.
See more on public procurement under the section on 'Public Anti-Corruption Initiatives'. Frequency
World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 2.2 on a 7-point scale (1 being 'very common' and 7 'never occurs').
- Business executives give Argentinian government officials' favouritism towards well-connected companies and individuals when deciding upon policies and contracts a score of 1.9 (1 being 'always show favouritism' and 7 being 'never show favouritism').
The World Bank & IFC: Enterprise Surveys 2006:
- Nearly 26% of companies expect to give gifts in order to secure a government contract.
- The expected value of a gift for securing a government contract is 2.5% of the value of the contract. Environment, Natural Resources and Extractive IndustryPolitical Corruption
Skanska, a Swedish contracting company, is being investigated for its alleged role in a major corruption scandal in Argentina. According to several sources such as Unicorn, the court case started in Buenos Aires on 11 April 2008, but is progressing slowly because the case has been passed from one judge to another judge. The Buenos Aires office of Skanska is accused of having bribed several high-ranking officials in the government tender agency in order to obtain a contract for the expansion of a natural gas pipeline in northern Argentina. The head of the tender agency and the director of the national gas company have been dismissed by President Kirchner. Originally starting as a case of tax evasion in which Skanska admitted to having evaded taxes in Argentina totalling almost USD 6 million, the independent Centro de Investigación y Prevención de la Criminalidad Económica (CIPCE, in Spanish) has discovered systematic use of false invoices and mail-order companies that have been used to cover up corruption. Opposition politicians and a judge have accused some government officials and former Economy Minister Felisa Miceli of receiving about USD 25 million in illegal payments for the government contract. The public prosecutor stated that he could prove that the state paid 152% more than market price, and is now seeking evidence that Skanska bribed officials. An internal audit of Skanska revealed that managers of the company had paid 'undue commissions' to unnamed officials to secure the contract. According to the Argentine online newspaper Momento24, Skanska has fired seven of its executives who were subsequently arrested. Furthermore Skanska has paid the Argentinean tax authorities USD 5 million. Public Anti-Corruption InitiativesLegislation: Corruption is addressed in the Argentinean Criminal Code (in Spanish), which criminalises attempted corruption, extortion, active and passive bribery, bribery of foreign officials, private sector corruption and money laundering. A public official who accepts money in order to refrain from acting in the exercise of his or her duties can be punished with up to 6 years of imprisonment and permanent removal from his or her duties. Similarly, a judge or minister who accepts any undue advantage can be punished with up to 12 years of imprisonment and permanent removal from his or her duties. Argentina is a State Party to the OECD Convention and has signed and ratified the Inter-American Convention Against Corruption as well as the United Nations Convention against Corruption (UNCAC). Consequently, Global Integrity 2008 assesses the legal framework for addressing corruption to be 'very strong'; however the same source also cites a number of legal deficiencies, such as the lack of implementation and enforcement of a specialised law for access to information and the Public Ethics Law, which obliges public officials to declare their assets, as well as formal protection of individuals reporting corruption. According to the Bertelsmann Foundation 2010, after five years in the legislative pipeline, a Freedom of Information Act failed to be passed in 2006. Access the Lexadin World Law Guide for a collection of legislation in Argentina. Government Strategies: After his 2003 election, former President Mr. Kirchner initially made fighting corruption a priority, and various legal measures were enacted and institutions established in order to curb corruption (see descriptions below). According to the US Department of State 2008, the government has been trying to reduce tax evasion since 2006 by stepping up enforcement efforts and encouraging the use of credit card purchases, while at the same time using the media to increase public awareness of tax obligations and to shame evaders. However, although the legal framework and public entities for fighting corruption are largely in place, anti-corruption has not continued to be a key priority for the Kirchners. However, on a more positive note, the Government of Argentina participated in a pilot programme to test methodologies for UNCAC implementation review. The corresponding UNODC 2010 country report is the outcome of a peer review process and assesses the implementation of selected UNCAC articles. Participation in the programme and publication of the report was purely voluntary. Anti-Corruption Agency: The Oficina Anticorrupción (in Spanish) was established under the Ministry of Justice and Human Rights in accordance with Law No. 2.233 of 1999, and is responsible for preparing and coordinating anti-corruption policies as well as investigating cases of corruption. The office's main task is to enforce the provisions of the Inter-American Convention Against Corruption, and hence reflects the preventative and punitive aspects of the convention in its institutional design. The office administers the system of asset disclosure records for public officials and has a whistleblower mechanism (in Spanish) on its website. According to the Bertelsmann Foundation 2010, although the office can independently initiate investigations, it depends on the political will in order to initiate certain types of investigations. The office is generally viewed as a credible institution in the fight against corruption and has indeed presented several independently initiated investigations to the courts, however much of its work is undermined by the inefficiency of the judiciary, which often fails to act or follow up on the cases. Furthermore, the head of the anti-corruption agency is politically appointed, which, according to Global Integrity 2008 causes a lack of the necessary independence for the agency to carry out its duties. Auditor-General: The Auditoría General de la Nación (AGN, in Spanish) is responsible for assisting the Congress in supervising public sector financial activity and audits public expenditures and administration. Several of its auditing functions are coordinated and undertaken in collaboration with the National General Syndicate Office (SIGEN, in Spanish). The AGN publishes public reports on its findings and is able to make its own investigations. However, Global Integrity 2008 reports that the government rarely acts on its findings. The main opposition party in the Congress elects the head of the AGN and the agency is a self-governing office. Read more about AGN's mandate, independence and procedures on the website of INTOSAI, the organisation of supreme audit institutions for UN member countries. Ombudsman: The Defensor del Pueblo de la Nación was created in 1993 to protect human rights and any other rights and interests protected by the constitution and laws. The institution is protected against political interference by law and according to Global Integrity 2008, this is respected in practice. The Ombudsman cannot be removed without justification and no cases of removal without justification have been found. Reports are issued annually and can be found on the website of the Ombudsman. The website also contains a complaints mechanism to which any violations of human rights as well as physical abuses can be reported. However, according to Global Integrity 2008, the authorities do not always act on the findings of the Ombudsman, and by law they are only required to answer and give reasons in cases the Ombudsman asks for them. Nevertheless, the Ombudsman is described by the Global Integrity 2008 as 'very strong'. E-Governance: The official Government of Argentina portal allows individuals and companies to locate useful information on public services. The portal has a guide to obtaining various administrative services in Argentina (in Spanish), many of which are relevant for companies seeking to invest or do business in the country. According to the Follow-Up Mechanism to the Inter-American Convention Against Corruption, e-procurement in Argentina is not well-developed. Yet, the government has taken the initial legal steps to make it possible for public agencies and suppliers to communicate and submit bids electronically. Although still in its early stages of development, the Oficina Nacional de Contrataciones (in Spanish) runs a central database for public tenders known as SIPRO. Public Procurement: Public procurement in Argentina is governed by Decrees No. 436/2000 (in Spanish) and No. 1023/2001 (in Spanish), which apply to those contracting procedures to which the federal government, central or decentralised administration is party. Procurements over ARS 75,000 require competitive bidding. Although observers generally agree that the legal and institutional framework for curbing corruption is adequate, companies have identified corruption in public procurement as a major obstacle for trade and investment in Argentina. According to Global Integrity 2008, some of the deficiencies of the public procurement regime are the poor public access to results of major procurement bids and the absence of an effective system to prevent companies found guilty of major violations of procurement regulations from participating in future bids. A registry of the companies guilty of corruption in procurement exists, but it is common for blacklisted companies to circumvent this by simply changing their names and continuing to bid on future procurement tenders. Also, conflict of interest regulations for public procurement officials are reportedly not enforced in practice. Whistle-Blowing: According to the OECD report in 2008, the Defendants and Witnesses Protection National Program Law of 2003 (Law 25.764) establishes a national witness protection programme, although it only applies to 'organized crime' or to 'institutional violence' such as kidnapping, drug trafficking and terrorism. The law does not specifically include foreign bribery corruption cases. In Argentina, 16 out of the 23 provinces have implemented some sort of witness protection programme, but none have extended to foreign bribery cases. According to Global Integrity 2008, there is no specific law in Argentina that provides for whistleblower protection related to corruption, which is commonly cited as a major drawback in the fight against corruption. Cases of corruption can be reported to the Oficina Anticorrupción (in Spanish) via its online whistleblower mechanism and the Auditorìa General de la Nación (in Spanish) via e-mail, telephone, or in person. Complaints can also be filed to the Oficina del Defensor del Pueblo de la Nación via e-mail. Hence, Global Integrity 2008 describes whistle-blowing measures in Argentina as 'very weak'. General Comments on the Public Anti-Corruption Initiatives: It is widely agreed that Argentina has a well-developed legal and institutional framework for dealing with corruption. However, studies and surveys indicate that cumbersome bureaucracy constitutes a problem, which could explain why Argentina often ranks significantly lower than other Latin American countries on various corruption indices. Several observers have cited the centralised political dominance of the Kirchner government as a factor contributing to corruption, as it undermines a system of checks and balances. Some of the public anti-corruption initiatives have not been implemented due to an inefficient judiciary, which is often characterised as corrupt and subject to political influence. Global Integrity 2007 cites a study of 750 cases of corruption, which reveals that trials of this type last an average of 14 years and hardly ever end in convictions. Critics argue that the original initiative of former President Mr. Kirchner's anti-corruption agenda has lost momentum and anti-corruption was not an issue in President Mrs. Kirchner's campaign platform in 2007.
Private Anti-Corruption InitiativesMedia: Freedom of media and of press is protected under the Constitution (Article 14) and the myriad newspapers, radio stations and television channels in Argentina are generally able to operate freely. In 2008, a ruling by the Supreme Court asserted the press's right to criticise government officials. Notwithstanding that, Freedom House 2009 reports that independent journalists are still verbally mistreated by officials and funds for state advertising are used to reward media considered friendly towards the government. This has led to self-censorship among journalists, and media owners have been pressured into removing critical reporters that could affect their economic interests. According to Global Integrity 2008, journalists and editors sometimes 'sell' their coverage in exchange for favours, gifts or money. Corruption can be a dangerous issue for journalists to report about. According to a 2008 article from Reporters Without Borders, the radio and newspaper journalist Juan Parada is now under police protection after he received several death threats for exposing corruption involving local court, police and municipal officials in the Neuquén province in May 2008. Furthermore, according to Freedom House 2009, despite nearly half of the population having access to the internet, some contents on search engines such as Yahoo! and Google are censored. Reporters Without Borders 2010 ranks Argentina ranks 47th out of 175 countries, while Freedom House 2009 ranks the country 100th out of 195 countries in relation to press freedom and describes the press environment as 'partly free'. Civil Society: The Bertelsmann Foundation 2010 reports that Argentina has a moderate tradition of civil society, but characterises civil society in the country as broadly organised and highly differentiated. According to Freedom House 2009, the rights to freedom of assembly and association are generally respected in Argentina and civil society organisations are strong and play a significant role in society, although some fall victim to the corruption that continues to pervade Argentina's politics and economy. Global Integrity 2008 reports that despite the fact that anti-corruption and good governance organisations operate freely, their relevance in the policy-making process has diminished, although they have received a greater degree of recognition in public opinion and attention from the media. Hence, Global Integrity 2008 describes civil society organisations in Argentina as 'very strong'. Poder Ciudadano (in Spanish): As the Argentinean chapter of Transparency International, Poder Ciudadano has undertaken studies of vulnerabilities in public procurement and is currently working on a sector-specific study of corruption as experienced by small and medium-sized companies. As a result of a 'Transparency Agreement', Poder Ciudadano has been monitoring the bidding process for the local waste collection services contract in one municipality in 2008 with positive impact in terms of increased transparency and citizen participation (read more about the 'Transparency Agreement'). Poder Ciudadano has successfully influenced public opinion on the issue of corruption, but some of its critical publications have also led to criticism from the government. The organisation has supported the first 'Business Sector Agreement' in Argentina signed by nine water-pipe manufacturers, who have agreed to refrain from engaging in corruption and bribery - a kind of Integrity Pact. Poder Ciudadano has a whistleblower mechanism on its website and maintains a list of institutions that receive complaints about corruption (in Spanish). Centro de Investigación y Prevención de la Criminalidad Económica (CIPCE, in Spanish) is an independent organisation dedicated to developing policies to prevent economic crimes. The agency investigates white collar crimes and has been involved in the exposure of a large scale corruption scandal related to the expansion of a natural gas pipeline in northern Argentina.
ResourcesThe websites listed below provide useful facts on Argentina as well as contacts and tools for companies operating in Argentina:
Sources for further reading:
Conventions and IndicesOECD Anti-Bribery Convention Status: Entry into Force of Implementing Legislation 10 November 1999. Deposit of Instrument of Ratification 8 February 2001. Entry into Force 9 April 2001.
This field describes the country's status on the OECD Convention on Bribery of Foreign Officials in International Business Transactions. Please note any declarations and reservations made upon ratification. View the list of signatories to the OECD Convention. Read more about the OECD Convention.
UNCAC Status: Signed 10 December 2003. Ratified 28 August 2006.
This field describes the country's status on the United Nations Convention against Corruption. Please note any declarations and reservations made upon ratification. The list of signatories can be found on the UNODC website. Read more about the UNCAC. The Government of Argentina participated in a pilot programme to test methodologies for UNCAC implementation review. The corresponding Argentina UNCAC Pilot Review Programme Implementation Report 2010 is the outcome of a peer review process and assesses the implementation of selected UNCAC articles. Participation in the programme and publication of the report was purely voluntary.
Other Relevant Conventions or Treaties:
Transparency CPI: 2009: 106/180 (Score: 2.9)
Transparency CPI
This field consists of the score for the country in question on the Corruption Perceptions Index from Transparency International as well as its ranking.
World Bank CORR Index (-2.5 - +2.5): 2008: -0.44
World Bank Corruption Index
This field consists of the score for the country in question on the 'Control of Corruption' indicator in the World Bank Governance Research Indicator Country Snapshot (GRICS): 1996-2008.
OECD Country Risk Classification (0-7): 2010: 7
Country Risk Classification
The classification of countries by risk category has the aim of providing OECD countries with a basis for calculating the premium interest rate to be charged to cover the risk of non-repayment of export credits. Countries are placed in risk categories 0 - 7, with 0 being the lowest risk category and thus the least expensive. Conversely, premium group 7 is the highest risk category. Each classification is comprised of 2 components: 1) an assessment of the country's economic/financial situation, and 2) its overall political stability. Access the complete list of OECD Country Risk Classification figures.
Data Verification:
Latest update: March 2010
Data verified by: Global Advice Network Information NetworkCountry Profile SourcesGeneral Information Sources
Corruption Levels Sources
Judicial System
Police
Licences, Infrastructure and Public Utilities
Land Administration
Tax Administration
Customs Administration
Public Procurement and Contracting
Environment, Natural Resources and Extractive Industry
Public Anti-Corruption Initiatives Sources
Private Anti-Corruption Initiatives Sources
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