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Is Argentina Latin America’s Startup Hub?

Last week in Buenos Aires a mini Davis was held with nearly 2,000 of the world’s top business leaders in town to hear what the Argentine government has to offer new investors and along with this, their program to attract technology companies to Argentina as a Startup Hub. Last Thursday the CEO’s with elegant ties and smart suits, were replaced by younger faces with longer hair and designers jeans.

The point: to prove that Argentina is not only a country with numerous investment opportunities, but also one with a vibrant start-up scene based in Buenos Aires.

technology-buenos-aires“Argentina can be and is becoming the innovation hub of Latin America,” proclaimed Noah Mamet, US Ambassador to Argentina, during a panel on entrepreneurship. The panel took place on the third and last day of the Argentina Investment and Business Forum, which focused entirely on the theme of innovation in Argentina.

Throughout the day, entrepreneurs and government representatives cited Argentina’s highly-developed human capital as a key advantage for the country to foster entrepreneurship and innovation.

In regional terms at least, Argentina is indeed ahead of the curve in terms of human capital. The country ranks 48 out of 124 in the World Economic Forum’s Human Capital Index, third highest in Latin America after Chile and Uruguay. And, according to World Bank data, 80 percent of those who finish secondary school in Argentina move on to tertiary education. That’s almost twice the average rate for Latin America and the Caribbean.

It is because of this human capital, many panelists proudly said, that four out of the five biggest unicorns in Latin America were founded in Argentina — Mercado Libre, Despegar, Globant and OLX.

But, as some were quick to point out yesterday, human capital is not the only important component to spur innovation. Paul Ahlstrom, co-founder and executive director of Alta Ventures believes that there are three keys to fostering innovation: a culture of entrepreneurship, the capacity for innovation itself and the ability to attract investment capital.

“If I had to grade Argentina, I would give it an A or A+ on entrepreneurship, a C going up on innovation capacity, and an F on investment capital,” Ahlstrom said.

Many speakers at the forum agreed one of the main reasons why Argentina has found it difficult to attract venture capital is the country’s  recent history of unpredictable economic and political policies tied with a strong bureaucracy. In 2013, the Global Entrepreneurship Monitor (GEM) described Argentina as “A vibrant entrepreneurial ecosystem with high potential entrepreneurs, held back by political, institutional, and economic instability and a lack of support from the national government.”

The World Bank Doing Business Report ranks Argentina at 121 out of 189 countries in terms of ease of doing business. That is the worst ranking in South America after Bolivia and Venezuela. According to the World Bank, it takes 14 procedures and at least 25 days to start a business in Argentina. In Chile, it’s 7 procedures and 5.5 days and in Uruguay, 5 procedures and 6.5 days. The new government has stated that it has as a priority to change these impediments and has started the process.

The average monthly salary for high-skilled workers in the country is of AR$16,400 (around US$1,151) according to Argentina’s Ministry of Work and Social Security. In comparison, high-skilled workers in the US earn an average US$4,130. Even regionally Argentina is at a slight disadvantage: high-skilled workers in Chile earn an average US$1,800 and those in Brazil, US$1,240.

Despite these setbacks there was plenty of excitement and optimism to go around at the forum due to the new policies President Mauricio Macri’s administration is implementing to foster entrepreneurship and simplify the red tape.

Last month, Macri unveiled a new Entrepreneurship Law that is currently under review in Congress. It calls for a new business registration system that would allow the creation of businesses in just one day. It would also create 10 capital funds for entrepreneurs in the next four years, and would provide tax benefits for people who decide to start their own business.

While the law hasn’t been approved yet, entrepreneurs at the forum seemed optimistic about the prospects of a changing business environment.

Sonis, the 25-year old entrepreneur, was one of the optimists.

“Last year, Santiago or São Paulo were considered much more important innovation hubs than Buenos Aires. But I think that today everyone is looking toward Buenos Aires in terms of entrepreneurship,” Sonis, who founded a startup called Reservaturno two years ago, said. “We’re seeing more investment, more venture capital, more accelerators holding investment rounds. That didn’t happen a year ago.”

Part of an article from the Bubble

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and disposal.

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