Can the tech industry benefit from Argentina's Rigi investment regime?

The Rigi investment-promotion regime approved in Argentina, which offers tax breaks for projects involving investments of more than US$200 million, is expected to have its greatest impact in the mining and hydrocarbons sectors, but it could also help leverage the technology industry.

Congress highlighted the technology sector as a possible beneficiary of Rigi, although its actual scope is not entirely clear and careful scrutiny of the regulations will be required to understand its true impact.

“The type of technology projects that can apply to Rigi isn't as obvious as it is in mining or hydrocarbons,” Ignacio Aquino, partner at PwC Argentina and leader of the firm's Deals practice, told BNamericas.

Aquino believes that it is important to wait and see the associated regulations because it is still necessary to clarify how the US$200mn minimum investment required to benefit from the regime will be interpreted. The PwC executive said it is necessary to clarify whether the investment will include capex, civil works, services or hiring of human resources.

Meanwhile, KPMG suggests that the opportunities that will be opened up for the technology sector thanks to Rigi will relate to the installation of datacenters, the creation of knowledge hubs, technological renewal projects and artificial intelligence.

“Depending on the regulations, there could be room for the development of technology in agriculture, such as the development of new germplasms of seeds or bioplastics,” Gonzalo Brest, partner in KPMG Argentina's tax & legal department, and Franco Basile, partner responsible for technology, media and telecommunications, told BNamericas by email.

President Javier Milei intends to turn Argentina into a hub of innovation in artificial intelligence and he paid a visit to several large technology companies in the US when on an official trip there.

The AI ecosystem requires investment in large datacenters, but also in human resources.

“Argentine talent is highly valued by technology companies abroad, but unfortunately in recent years the country context hasn't helped to fully develop the potential that our people have,” the two KPMG executives said.

According to the latest data from Argentine software chamber CESSI, the domestic IT sector employed nearly 142,000 people in 2023, about 6,300 more than a year earlier.

Although Argentina's exports of computer services dipped 6.8% last year as a result of the economic crisis, foreign sales of knowledge-based services rose 2.9% to US$8.1 billion thanks to a 9.2% increase in exports of professional services, according to a report on the knowledge economy from business chamber Argenconomics.

CHALLENGES

Rigi could stimulate big investments in the technology sector by the major companies, which could once again start considering Argentina as a springboard for operations in the region, according to the KPMG executives.

However, the challenge remains the country's macroeconomic situation. 

"The macroeconomic variables (inflation, exchange rate and, above all, the persistence of exchange controls) are the negative points that large corporations analyze when deciding to invest in the country. The signals that the government can send to ensure economic stability will surely be very important in making Rigi completely successful," they added.