Five Contract Clauses That Protect Foreign Investors
Guest Author
Why the way an investment is structured matters more than the moment it is made.
The first question a foreign client asks me is rarely a legal one. They want to know about politics and the economy. Is Argentina stable? Will it last?
It is a fair question. Over the past few decades this country has given investors more than one surprise, and not all of them were pleasant. So I begin where they begin. I explain the political context and how it shapes the business climate, and today that is a far more comfortable conversation than it used to be. The climate is good, and expectations for the coming years are positive.
But I always add something. A sound investment does not depend on guessing the next political cycle correctly. It depends on structuring the operation so that its risks are measured and managed from the outset. Choose a vehicle that does not suit the sector and the risk grows. Choose the right one and it shrinks, whatever the headlines say that week.
Choosing the vehicle
My starting point is always the sector. Each one has its own rules and, often, its own incentives. The vehicle should come out of that analysis, not the other way round.
For an investor planning a stable, long-term presence, I usually recommend a company: a sociedad anónima (SA) or its single-shareholder form (SAU), useful but costlier to run because it is under permanent state supervision, a simplified company (SAS), or a limited liability company (SRL). I lean towards capital companies rather than structures where the personal element weighs more heavily. The reason is practical. Shares and quotas in a capital company change hands more easily, and sooner or later every investor wants to transfer something.
Where the aim is a lighter, less institutional presence, an agency or distribution agreement may well be enough. A branch of the foreign company is another option, but since it is not a separate entity the parent remains directly answerable for its obligations, which is why I usually prefer a local company. A joint venture with a local partner is another route, particularly for investors who want to learn how this market works from someone already operating in it.
Foreigners also tend to underestimate federalism. The legal foundations are national, but each province has its own tax incentives and its own economic potential, and these differences are real. Where you set up deserves as much thought as how.
A word on RIGI, the incentive regime for large investments introduced in 2024. It has drawn a great deal of attention. Its thresholds, however, place it well above the scale of most small and medium-sized investors, who are the clients I usually advise.
What has changed
Argentina has come a long way in a short time. Structuring a foreign investment is simpler than it was. Financial and banking rules have been relaxed, and the currency restrictions that for years held back our integration into the world economy have been lifted for individuals and substantially eased for companies, which can once again remit dividends on new profits. Some limits remain, and they are worth checking at the time of investing. Legal certainty has improved. Inflation is coming down and appears to be under control. Asset prices, real estate in particular, remain lower than in other countries of the region.
Some things are still pending. Industrial activity and consumption have yet to pick up, and the prices of several services are still finding their level. Taken as a whole, though, I believe this is a good moment to invest in Argentina.
A good moment is not the same thing as a good contract. For Indian investors this carries particular weight. At the time of writing there is no double taxation treaty in force between India and Argentina, and the bilateral investment treaty the two countries signed in 1999 has since been terminated, so it no longer covers new investments. Tax structuring therefore needs attention from day one, and the contract, with its dispute resolution clause, becomes the investor’s main protection.
Five clauses I would not leave out
Governing law and forum. Argentine law lets the parties to an international contract choose the law that governs it. That freedom is worth using with care. Before opting for a foreign law or forum, ask where the contract will eventually have to be enforced. If the assets, the counterparty or the operation are in Argentina, an Argentine court will have a say sooner or later, and the clause should be drafted with that in mind.
Currency, with a fallback. Parties are now free to agree on the currency of payment, and an obligation in dollars is paid in dollars. I still add a safety net. If payment in foreign currency became impossible, in fact or because of a new regulation, the contract requires the debtor to obtain the currency through whatever lawful mechanisms are available at the time, usually on the local capital market, so that the creditor receives what was agreed. The wording needs care, because some of these mechanisms restrict the debtor’s later access to the official exchange market. I do not expect that scenario under current conditions. Contracts are written for the bad days, though.
Sector-specific adjustment. In long-term contracts I prefer adjustment formulas linked to the prices of the goods and services of the sector concerned, rather than to general inflation. A general index can distort a contract whose real costs move at a different pace.
Negotiation first, then arbitration. I build dispute resolution in two stages: a genuine renegotiation period, then arbitration before a recognized institution, national or foreign. Which one usually comes down to the cost of the proceedings. Argentine courts are reasonably predictable, and their judgments are enforced. Time is the weak point, and commercial cases can drag on for years. In the City of Buenos Aires and most provinces, a lawsuit must also be preceded by compulsory mediation. There is a less visible cost as well. In a cross-border dispute I handled, the mere filing of a claim, still at the stage of interim measures, made the other side’s position considerably more rigid. That is why I treat litigation as the last resort, and why the contract should make it one.
The exit. An exit is easier to plan on the day you come in than on the day you need it, so transfer rules for shares or quotas and termination mechanisms belong in the documents from the start. In practice, the best moment to sell a stake in a going concern is while it is still profitable. Wait until the last minute and the options narrow. Repatriating the funds is, whenever possible, the most sensible course. When it is not, there are other lawful ways to divest, and they are better explored early.
Structure before signature
Argentine law now leaves the parties wide room to allocate risk by contract. That freedom is an advantage only if it is used deliberately. The vehicle has to suit the sector, the province has to suit the business plan, and each clause has to anticipate the scenario in which things go wrong rather than the one in which they go well. No two investments call for the same structure, and none of this replaces advice on the specific case.
Investors who settle these questions before they sign will find that Argentina today offers more legal certainty than its reputation suggests. The opportunity is there. Capturing it is a matter of structure.
Five Things to Agree On Before Signing in Argentina
1. Law and forum. Choose them with an eye on where the contract will be enforced.
2. Currency, with a fallback. Agree on the currency and on how it will be obtained if payment becomes impossible.
3. Sector-specific adjustment. Link prices to the real costs of the sector, not to general inflation.
4. Negotiation, then arbitration. Keep the courts as the last resort.
5. The exit. Plan the transfer of shares and the repatriation of funds from day one.
About the Author
Marco Bertossi is an independent lawyer based in Rosario, Argentina, where he continues the practice his father founded in 1969. In 28 years of work in civil, commercial and international law he has advised foreign investors and companies on entering and operating in Argentina, Italian businesses in particular, and has handled complex commercial disputes and negotiations. He works with a close network of correspondent lawyers in different fields of law, both across Argentina and abroad, which allows him to bring in specialist support whenever a matter calls for it. He holds a law degree from the Universidad Católica Argentina and a Master in International Business from MIB School of Management in Trieste, Italy. He is President of WILL Argentina (Worldwide Independent Lawyers League).
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