After several months, the passing of the Bases Law and, with it, the Incentive Regime for Large Investments (the so-called “RIGI”) was finally completed. Much has been written about the RIGI and the specific benefits it offers, which include tax and customs advantages, exchange rate benefits, the right to freely export and import, protection against government actions that hinder the development, construction and operation of projects, and guarantees of long-term regulatory stability.
While it is possibly one of the most complete and ambitious, RIGI is not the first promotional regime approved in Argentina. In recent decades, there have been many other promotional schemes that, in order to promote investments in certain sectors or types of projects, offered different benefits and incentives. The scope of the benefits may vary in each case, but in many cases there was a common element: non-compliance by the National State.
In the face of a deterioration in the macroeconomic situation or a change in economic policy, various administrations have not hesitated to eliminate, from one day to the next, benefits or flexibilities provided for in current regulations or abruptly modify regulatory frameworks, ignoring the impact that these non-compliances and regulatory changes have, especially (although not exclusively) on long-term and/or capital-intensive projects that require predictability, stability and long-term legal certainty to plan and design projects efficiently, reducing financing costs and allowing their development and operation in the long term.
A recent example is the Investment Promotion Regime for Hydrocarbon Exploitation (Decree No. 929/2013 – Law No. 27,007), in relation to which the Government only formally recognized the benefits in relation to two projects submitted in 2013 and 2015 and developed within the applicable deadlines in 2022. Despite this, the tax benefits of this regime could only be applied from 2023 onwards and the exchange rate benefits are not yet available due to the delay by the BCRA in regulating them.
Another example is the Regime of Access to Foreign Exchange for the Incremental Production of Crude Oil and the Additional Injection of Natural Gas (Decree No. 277/2022). Despite compliance with its conditions by oil companies, the benefits have not been recognized to anyone to date (although they should have been available since the beginning of 2023).
Our history has taught us that, in Argentina, what is essential is not the scope of a promotional regime, but that its provisions are respected in the long term. No investor seriously trusts a country that constantly makes promises and at the same time refuses to allow the repatriation of investment, prevents the repayment of debt incurred to finance a project, prevents securing essential inputs and equipment to build and operate the project, where the tax and exchange regime, and the legal regime in general, can change in minutes. Predictability and legal certainty are key conditions for any project.
What is the objective of RIGI?
He RIGI The government wanted to mitigate these risks by establishing specific written guarantees that also seek to recognize legal and regulatory stability that gives projects the necessary predictability and certainty, and prevent the government in power from interfering in the development and operation of projects with anti-investment and anti-project measures, such as those that have been commonplace for almost the last 25 years. This purpose is obviously very laudable.
Why is this regime different from others?
It’s been a long time since we’ve seen a law that, like the RIGIincludes, on the one hand, such a profuse, casuistic and precise detail of benefits, guarantees and rights for the project holders and, at the same time, significant limitations and prohibitions regarding the measures that could be adopted by the authorities regarding the projects of the RIGI.
Nor has it been common that, as in the RIGI, specific remedies are approved by law to ensure a rapid and effective implementation of the rights granted; and it is expressly recognized that the rights and benefits of the promotional regime are investments protected under the reciprocal investment protection treaties signed by Argentina. This is also good news.
What are RIGI investors asking for?
However, investors – many of whom have been burned by Argentina in the past – need not just promises on paper, but concrete guarantees that the benefits, protections and rights provided for in the agreement will be fulfilled. RIGI This time they will be effectively fulfilled and will be respected by this Administration and the administrations that replace it in the future.
That is why the key to the success of RIGI It does not lie in the scope of its advantages, but in the fact that the National Government (and the provincial and municipal governments that adhere to it) give clear signals that its provisions will be effectively complied with in the long term.
Partner of the MHR studio | Martínez de Hoz & Rueda.
Source: Ambito
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