A New Zealand Manufacturer in Argentina succeeds
The Personal Experience of a New Zealand Manufacturer entering the Argentine Market
A New Zealand Manufacturer with more than a decade of experience making industrial generators and air compressors in his home country and over two decades manufacturing in Argentina, David Irvine director & CEO of Condor Group SRL (pictured left), is in a unique position to make comparisons between the business environments in each country and to offer strategies for anyone thinking of a profitable business in Argentina .
But first, the inevitable question. Why consider Argentina as a manufacturing base in the first place? For manufacturers of capital goods Argentina has its attractions. It is ten times the size of New Zealand in both population and area. It has heavy industry on a scale not known in New Zealand – car, truck, and bus manufacture, shipbuilding, aircraft construction, nuclear power generation, a space industry, oil, gas, and mineral extraction on a world scale, and large-scale civil engineering construction. It has an educated workforce, and a European culture.
But most of all Argentina is playing catch-up on infrastructure, making it a promising potential market for companies involved in civil works, energy, services, telecommunications, and agribusiness. On the geopolitical front, Argentina and New Zealand have similarities. Both are relatively young countries, both have an agriculturally based economy, and both have a similar population distribution with one-third of the population living in a central urban area with the remainder sparsely distributed through the rest of the country.
Argentina even has a rugby team, the Pumas. For lovers of a friendly society, consistently pleasant weather, fine food and wine, and a vigorous culture, Argentina can be a great place to live.
So what are the catches?
Drawing from Condor’s experience, here are some of them, with associated tips on how to steer around them. Kiwis hate bureaucracy. Argentina is full of it. Starting a business, depending on location and type, needs at least a month and 14 separate procedures. This is well above the OECD average but on a par with other countries in Latin America and the Caribbean. Building permits may need over 24 procedures and a year to complete.
Getting remote power connections can be an odyssey. Registering property requires at least seven procedures and an average of 55 days. Other business procedures can be equally onerous by New Zealand standards. From Condor’s experience the most efficient way through these tangles, at least in the initial stages, is through the use of specialised experts. Their charges, when converted to New Zealand dollars are low – certainly lower than the consequences of lost time or a stalled project.
How are the solutions found to start problems ?
Always through personal recommendations. Read that again: always through personal recommendations. And how are these recommendations found? One of the spinoffs from increasing cooperation between Argentina and New Zealand in the past is a small but vigorous expat community of resident New Zealanders. It is a great place to start for recommendations, and, as experience grows, one recommendation leads to another. Third-party specialists help in another more sinister areas, too.
The continual elephant in the room in Argentina is corruption. A simple, straight-from-the-shoulder tip: never pay a bribe. Apart from the ethical considerations, it can only lead to further enmeshment down the line with undesirable people. As an example, it is compulsory to use third parties for import and export operations, but their methods can be best left to them. It is nice to know that the current new administration in Argentina is light-years ahead of its predecessor in business-friendly practices and basic honesty so many clumsy procedures are now being streamlined and improved.
However, it will be years before all the roadblocks are cleared. Keep calm. Ask for advice. Press on. The effort is inevitably worth it. It is common for new businesses to concentrate their initial investigations in Buenos Aires. After all, this is where 30% of the people live. However, that in turn means that 70% of the people don’t. The interior of the country is well worth a thorough investigation. Smaller communities often offer tax incentives, more accommodating regulations and procedures, savings in wages, and a much more pleasant lifestyle. As an example, Condor Group assessed Rosario as being the nearest major urban centre to Argentina’s vast shale fields (not immediately obvious from a glance at a map) and has been rewarded by its choice of location.
Condor Group is located in a world-class industrial park administered by a small municipality on the outskirts of Rosario, which offers excellent world-class facilities, a high level of security, and a much more relaxed approach to bureaucracy. With good planning, even Argentina’s cyclic instability can be turned into an advantage. Following the difficulties of 2001, it became obvious to Condor management that in times of tight sales of capital items, sales of services or repairs soared.
Drawing on previous experience in New Zealand, the company set up a separate division dedicated to tyre recapping (retreading) for trucks and buses. The move has been a great success, providing a profitable hedge against market cycles. A final but inevitable point: Argentina is not an English-speaking country. Yes, there are many people who speak passable English, but the official and street language is Spanish. While the use of bilingual third parties, who are relatively easily found, makes a detailed knowledge of Spanish avoidable, having a basic grasp of the language is helpful.
Argentina can be a rewarding market for innovative operators and is entering a new phase of promise.
The current government, unlike preceding populist administrations, is populated by former business people who understand what is needed to steer the country to a brighter future. Investment is being actively sought. Now, more than ever, is a useful time to consider entering a new emerging market.
David Irvine was interviewed by Thomas Manning of Transpacific Business Digest.
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.