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Doing business in Argentina

by: Valeria Rodriguez Brondo, Associate Partner of Hofstede Insights

The famous actor, Ricardo Darín, refers to his country: “Argentina remains the same, countries are built over time; We are gymnastics champions when it comes to going through crises and surviving them and being reborn; who knows if that will not be our main characteristic: being reborn all the time. We are a people with many hopes. I am hoping to get out one more time later”.

This phrase reflects the constant ups and downs of Argentine politics, which results in constant economic turmoil. However, Argentines are resilient and despite difficult times, they find a way to move forward and to be one of the most important economies in the region.

Argentina's economy is the second-largest in South America according to 2020 IMF data, surpassed only by Brazil [1]. Argentina and Brazil are the only South American countries to integrate into the G-20, which brings together most of the largest, rich, and industrialized economies on the planet.

Argentina is a country rich in natural resources. The agro-export sector is one of the strongest in the country since the beginning of its history; Argentina is ranked 12th among the largest agro-exporters on the planet and is known worldwide as "the granary of the world”. Slightly more than 60% of the total goods exported by Argentina (approximately 65,000 million dollars in 2019) respond to this sector. Among the most important exports are soybean, corn, wheat, meat and leather, fish, peanut, and barley [2].  

Regarding industrial activity, the food and beverage sectors are the most competitive, followed by basic supplies, pharmaceutical, and petroleum products. Meanwhile, footwear, clothing, wood, office machinery, and auto parts top the list of the least competitive sectors [3].

 

The four most important things for doing business in Argentina:

  1. Individualism – Although Latin Americans are collectivists, Argentina is the most individualistic country in the region, and this characteristic is more accentuated in Buenos Aires. Argentines will do business if the benefit is attractive; they do not feel obliged to do business with people they know or to return favors. While having connections is desirable for things to flow better, it is not exclusive to doing business in the country.

  2. Egalitarianism - Argentina is the most egalitarian country in Latin America after Costa Rica. Although the boss is the one who has the last word, everyone in the organization can give their opinion. Employees are autonomous to carry out their work; they do not wait for all the instructions from their bosses.

  3. Private life and work are separate - No matter how much you are invited to do many activities outside of work, it is still a professional sphere. Argentines do not usually include the family in these outings, as in other Latin American countries.

  4. Buenos Aires is not Argentina – Although most of the businesses are carried out in Buenos Aires and the south-central area of the country, you must bear in mind that the characteristics of the Argentine north are different. Hierarchies are more important, as well as connections to be able to do business.

 

What To Look For In A Business Partner

  • As in almost all Latin American countries, you should look for a partner who knows how to navigate the administrative system and knows who to talk to in the government in case of problems.

  • Likewise, look for a partner who knows the "traps” of the financial system. For example, how to have access to foreign currency, how to transfer money abroad, etc. Remember that Argentina has monetary restrictions and if you do not master this well, it can result in great damage to your business.

  • If your business is related to agriculture, you should look for a partner that has many connections. Being a very well-positioned sector, it is difficult for new players to be accepted unless you know someone who will bring you in.

 

Business Meetings

If you are traveling to Argentina for business, you probably already have visits scheduled in the country. Argentines will have a program ready before your arrival, whether you are traveling as an investor, seller, buyer, or company employee.

The program will include activities during the workday: meetings with them, meeting with external clients, external visits; as well as outside working hours: lunches, after works, dinners, weekend plans, and tourist visits. Bear in mind that extra-work activities are very important to get to know the other party and establish a bond of trust and closeness.

Be aware that the days can be physically exhausting. Distances, especially in the capital of the country, are long and will require you to take a lot of transport. The working day runs from 9 a.m. to 6 p.m., but then you will have extra activities. As in Argentina, they eat late; it may be that your day ends at midnight.

Meetings are planned ahead of time with reasonable advance notice, an invitation is sent to all participants together with the agenda.

The meeting atmosphere is usually informal; there is a tolerance of 15 minutes until all the participants arrive. The ice is broken with small talk about the weekend, the traffic, the weather, news, or an anecdote. Coffee, water, and tea are served, and in meetings that last many hours, breaks can be made where sandwiches and pastries are served.

It is important to clarify that although the boss is the one who has the last word, there is room for all participants to have their say. Discussions are important, a lot is analyzed, and everyone's opinions are taken into account [4].

After the meetings, meeting minutes are sent with the conclusions of the meeting.

 

Behavior & Etiquette

The behavior should be natural; you can say what you think, as long as you say it with respect. The dress is casual chic, they seldom wear a suit and tie unless it is, for example, a public, diplomatic event.

Argentines behave energetically during meetings. If they do not agree, they give their point of view and defend it, even raising their voice and sometimes saying swear words. Do not feel this as something personal; this behavior is more noticeable to people from more restrained cultures.

Please bear in mind that although Argentines tend to criticize their country a lot, they do not like it when a foreigner does it. So if they criticize a lot or discuss politics, try to stay out of it so that you don't create a negative image [4].

 

Business Entertainment

In the business sphere, Argentines will probably invite you to dinner at a restaurant to "seal" the business, as a symbol of goodwill and trust. Sometimes, they may even invite you to dinner at their house, which is a sign of higher confidence that you should honor. Tip: if you are invited to a house, even if they tell you not to bring anything, it is polite to bring a drink and/or dessert, or a gift from your home country.

Whether it is in a restaurant or a house, the food par excellence in Argentina is the "asado"/"parrilla", which consists of a metal grill on charcoal, where various types of meat cuts are cooked. For example, tenderloin, ribeye, and T-bone among others, as well as chorizos, "achuras" (intestines, kidneys, gizzards), provolone cheese, potatoes wrapped in aluminum foil, and sometimes also vegetables such as red bell pepper with an egg within.

When an Argentinean invites you to eat a barbecue, it is not something quick; it is a meal that lasts several hours, where you can talk about various topics. The favorites of Argentines are controversial topics such as politics and soccer, but be careful. Being a foreigner, you should stay on the sidelines and be politically correct so as not to have problems with any diner.

 

Managing People and Building Trust

Although Argentina is more egalitarian and individualistic compared to the rest of the region, it is average when compared with the rest of the world, so collectivist traces can be noticed and also the presence of the hierarchy.

As a result, there is tension between the acceptance of the hierarchy and, on the other hand, a high degree of individualism. The coordination element is accompanied by direct supervision and the standardization of task descriptions [5]. As a consequence, people tend to criticize the decisions of the hierarchy. Society tends to react violently when it does not agree with the decisions made by the government or the top management in the case of companies. The unions are very strong in Argentina, they can stop the whole country if necessary, therefore, it is of great importance that before starting a business, you understand the political situation and how the unions play. Negotiating is essential for the proper development of activities.

Likewise, the tension between the distance of power and individualism sometimes leads to a tendency to never contradict the holders of power in their presence, but rather to "draw their plan" once they are out of reach of the power holder. Due to the high individualism, leadership is not so connected to being a "father of the family", but rather a highly visible, intellectual, technical expert.

Employees are able to work autonomously if they have clear processes. Be aware that Argentines usually prefer a good level of instruction concerning what they do. They will expect the boss to give them guidelines and standardized procedures for how to do things.

Likewise, they will seek to have access to information and expect to be treated in the most equal possible way.

They like to work for objectives and have rewards at the end, especially monetary and public recognition.

Trust is established over time by having open communication, allowing people to express themselves freely without retaliation, and allowing them to grow and develop tasks on their own.

 

Be Especially Careful With

Corporate complexities
The Global Corporate Complexity Index analyzes factors such as tax and accounting payments, difficulty in firing and managing payroll, and regulatory and penalty issues in 77 countries.

Argentina ranks third among the most complex countries to incorporate companies and carry out commercial activities, behind only Indonesia and Brazil, especially in terms of taxes, rules, and regulations. This makes it difficult for foreign companies to establish themselves and carry out commercial activities [6].

Corruption

Keeping business practices open, honest, and compliant is important in a country where corruption is an issue. According to a report on corruption by NGO FORES - OEA, Argentina has serious problems implementing anti-corruption regulations. The country has a very acceptable regulatory system to combat and suppress corruption, but it is not being followed. In reality, it would seem that the country has built a system that is not functional against corruption, whether deliberately, or through omissions or negligence [7]. 

Political-economic instability and exchange rates

One of the biggest problems that Argentina presents is foreign currency exchange restrictions, different types of change (official and black market, named “blue dollar”), and difficulties accessing dollars or euros. In addition, companies must cross an important bureaucratic wall such as presenting documentation to banks and undergoing verifications before being able to transfer and receive money to or from abroad. This considerably slows down the transactions and operations of multinationals [8]. 

An Argentine financial manager in Bolivia

Matias C., an Argentine professional with a high academic level and an excellent career, is hired by an international bank to carry out his tasks in Bolivia. The president of the bank hired him to take on the challenge of modernizing the administration and finance area of ​​the bank.

Matias’ management philosophy was to generate clear processes that people could follow autonomously and to hold periodic meetings to monitor the follow-up where everyone could express their comments and questions.

Likewise, he made it clear that the doors of his office were open to any questions, and he had the idea of ​​holding a meeting every morning to openly share the progress of the projects.

Matias was sure that with these directions he would have very good results to show to his boss.

Additionally, he took the initiative to hire an international firm to carry out an internal audit to identify problems and initiate modernization.

Unfortunately, to Matias' surprise, things did not turn out as he thought.

First of all, in the morning meetings, it was very difficult to find people to express themselves. Apparently, they were afraid to speak, to say what they thought publicly. In addition, although they spent months writing procedures, nobody followed them; they expected direct orders from their superiors.

In this sense, the middle managers began to present disagreement. They were the ones who controlled and gave directives, but with the arrival of Matias, the standardization of processes, and open meetings, they felt that their function was compromised.

Likewise, the President of the Bank felt quite annoyed with the hiring of the audit company, since he considered that Matías was exceeding his level of authority. As for Matías, being the administration and finance manager, he thought he had enough autonomy to execute the budget without having to ask the President for authorization.

A year later, Matias ended up leaving the bank, after successive pressure from the bank manager and the disagreement of middle managers, anguished at not having found his place.

What does this case leave us as learning? Is it something we could have foreseen?

If we look at Argentina through the lens of Hofstede's 6-dimensional model, we can see that it is an individualist society with a low power distance in comparison to the other countries of Latin America, in particular, Bolivia for this case.

Argentines, in general, are open to receiving diverse types of opinions in public and can make their own decisions once the processes are clear.

In the case that we have presented, Matías had the best intentions to empower his team, but they expected a boss with clear directives, who would speak with middle managers, who would, in turn, speak with the rest of the employees following a pre-established hierarchical order. In the same way, the president of the bank was upset as he felt that Matias did not respect his authority enough. On the other hand, for Matias, a good employee understands what to do, follows the procedures and rules, and executes them without having to be inspected all the time, because, for him, this would be a sign of mistrust.

You must bear in mind that if you go to Argentina, it is important to formalize communication and processes so that everyone is clear about what to do and then give autonomy. It is also important to generate space for discussion in case there are problems to be solved and to be an open manager with open doors. 

 

References and Interesting Links

[1]  World Economic Outlook Database - IMF

https://www.imf.org/en/Publications/WEO/weo-database/2020/October/weo-report

[2] Argentina, in the 12th position among the largest agro-exporters on the planet https://www.revistachacra.com.ar/nota/37901-argentina-en-el-puesto-12-entre-los-mayores-agroexportadores-del-planeta/

[3] The ranking of the most and least competitive Argentine industries https://www.iprofesional.com/economia/249634-el-ranking-que-revela-las-i...

[4] Interviews with Argentines and foreigners working in Argentina

[5] Wursten, Huib Mental images of culture A perspective to understand the misunderstanding. In politics, business, religion and to make some sense of the challenges in today’s  confusing world, Itim, 2017

[6] Why Argentina is a haven for corruption https://www.infobae.com/politica/2021/06/16/por-que-la-argentina-es-un-p...

[7] TMF Groupe “Global business complexity index” 

https://www.tmf-group.com/es-co/news-insights/publications/2020/global-business-complexity-index/

[8] Iprofesional “What is the list of problems that businessmen expose about doing business in Argentina”

https://www.iprofesional.com/economia/327614-cual-es-el-listado-de-problemas-que-exponen-los-empresarios

Hofstede Insights “Compare countries”

https://www.hofstede-insights.com/country/argentina/

World Bank “Doing business in Argentina”, June 2020

https://www.doingbusiness.org/en/reports/subnational-reports/argentina

 


 

Edited by Marlond Antunez, Associate Partner of Hofstede Insights
 

Last updated: 10.12.2021 - 04:02
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