Supplier opportunities, US$200mn investment floor: Key elements of Argentina’s Rigi rules

Argentina’s Rigi investment incentives regime should generate opportunities for suppliers of goods and services, particularly foreign players.

That’s among takeaways from a decree issued Friday to guide the implementation of Rigi, designed to get billions of dollars in investment flowing in the cash-strapped country.

Under Rigi, qualifying projects will receive tax, customs and forex benefits, with legal and regulatory stability established for 30 years. Projects, according to the law, have two years to seek the benefits and have to deploy, within two years of getting the green light, at least 40% of the minimum investment agreed. 

Rigi is part of Argentina's framework economic reform law, known as Ley Bases, which was approved in June. Jurisdictions seeking to pull in associated Rigi investment need to adhere to the regime via the passage of local legislation. Adhesion may result in the reduction of some local government autonomy. 

Special purpose vehicles (SPV) can apply for the Rigi benefits. As part of the process, SPVs must commit to spending a minimum of 20% of planned outlay on goods or services provided by local players, that is, companies controlled (51% stake or more) by parties domiciled in Argentina for tax purposes. That implies foreign firms could potentially secure contracts for work corresponding to up to 80% of planned investment. The decree has a clause which states that the 20% floor is applied only if local supply is available and “in market conditions regarding price and quality.”

President Javier Milei recently said that US$50bn in projects had been confirmed.

Associated project outlay minimums start at US$200 million, rising to US$600mn for some oil and gas projects and US$2 billion for long-term export initiatives deemed strategic.

Minimum investment amounts by sector and subsector

Hydrocarbons

Midstream hydrocarbons projects are poised to form the vanguard in terms of projects tapping the regime. 

State-controlled oil and gas company YPF, for example, has said multibillion-dollar oil pipeline and LNG projects would need the benefits to support competitiveness. The pipeline project is in the tendering phase. 

These two initiatives are targeting export markets where Argentina, in terms of oil, wants a bigger footprint and, regarding LNG, wants to enter the global arena. 

The Rigi hydrocarbons rules encompass downstream and midstream projects, offshore production, as well as natural gas production for export. 

Electric power

In terms of electric power, two investment areas could form the Rigi vanguard: thermoelectric plants and clean energy supply projects geared to the mining sector.

This year the government scrapped a thermoelectric supply auction, but new generation capacity is evidently still needed, while various generators are working on clean energy-transmission hybrid solutions to provide isolated mines with power.

The Rigi electric power rules encompass generation, energy storage, transport and distribution, low-carbon energy and bioenergy, as well as carbon capture, transport and storage. 

Mining and steelmaking

In the case of mining, it will apply to the activities of prospecting, exploration, development and extraction of minerals, considering that Rigi could give a boost to the copper pipeline projects.

Six copper projects totaling US$20.4bn in investments are considering joining the program to receive its benefits and the stability it promises for 30 years. In lithium, a joint working group between the governors of Salta, Jujuy and Catamarca, anticipates that US$19bn could materialize in these three provinces.

In the steel industry, it applies to the processing and industrialization of iron ore and steel, and actors in the sector are analyzing the projects that will be presented under the new rules.

Infrastructure

In the case of infrastructure, the scheme will apply to logistics projects such as highways, ports, waterways, railways and airports. It will also benefit infrastructure needed to guarantee public services such as water, education, health, telecommunications, defense and security. Public and private structures geared to the leisure industry are also included.

Milei’s decision to halt federal funding for most public works projects has worsened an already dire situation for the local construction sector, which was dealing with high inflation and payment delays. Thousands of projects were halted across the country, and local construction chamber Camarco claims that 100,000 jobs have been lost as a result of the fiscal crackdown on public works. 

Technology

In the technology sphere, the regulations refer to technological goods and services, citing biotechnology, nanotechnology, mobility based on new motorization technologies and energy transition technologies, aerospace and satellite, nuclear, software, robotics, artificial intelligence, and arms and defense.

Rules also encompass development of telecommunication infrastructure and establish benefits for the import of computer and telecoms goods.

Data center facilities are not mentioned but may also benefit as they are related to the software and artificial intelligence industry.

A Rigi annex containing the fine print can be seen in the Documents box in the top-right corner of the page.