Politics, Economy and Startups in Argentina.

Argentina is the country of immigrants. Named ‘crisol de razas’ (a melting pot), it’s rivaled in that notion by United States only. Several immigration waves flowed into La Argentina in years between 1870 and 1914 coming from all across of the European continent. The largest being the one which had landed on the Argentinian Sea cost at the beginning of 20th century coming from Spain and Italy. Different groups of immigrants driven by a competition for land and for trade settled in different country’s regions. Hence, the other specific characteristic of the Argentinian political landscape emerged — its explicit federalism. Argentina has 23 provinces and the Autonomous city (Buenos Aires, the most populous) with each of provinces wielding an unprecedented level of autonomy. Basically, they are framed only by the State’s Constitution (the later version of which was adapted in 1994) in their legislative and administrative acts.

With this super-high level of flexibility built into the political structure several seismic periods of Argentinian history came into life: notably, Argentine Civic Wars (1810–1880), Peronismo (1955–1976, over-powering of the central government’s authority lead by Juan Domingo Peron) and Guerra Sucia (1974–1983), government’s sponsored crackdowns on political oppositions — mostly, lefts — resulting in tens of thousands victims. Arguably, those incidents can be viewed as chained events — intervals of political destabilizations followed by attempts to bring together overstretched pieces by applying brutal and excessive force of the Government.

The same pattern can be observed on the level of Argentinian political parties. Following the historical period in which there were only two unified civic forces in Argentina — Union Civica Radical (UCR, Radical Civic Union, roughly centrist) and Partido Justicialista (PJ, Peronist Party, basically lefties) — hundreds of smaller parties have been spun off from those two since then. Moreover, both UCR and PJ have developed opposing factions within themselves. At the same time, many political parties in Argentina function exclusively on a local, provincial level never trying to raise themselves to federal altitudes.

After 2015 election the Front for Victory (FPV, the left wing faction of PJ) dominates the Senate (the upper chamber of the Argentinian National Congress) keeping 39 out of 72 seats, while the second strongest deputies’ group — UCR — occupies 8 seats. In the Chamber of Deputies (a lower house of the Congress) the positioning of powers is reversed. Cambiemos (“Let’s Change”) — the alliance of right wing forces which among others groups includes UCR — holds 87 out of 257 seats. Existing political balance in Argentina is precarious at best, once again.

The state of economy has always been a prime topic of political wars in Argentina. For the last century Argentina had tried and failed to become a ‘comeback kid’. At the beginning of 1900s Argentina was ranked the seventh biggest economy on the planet with its per capita exceeding those of Spain and Portugal. However, the sharp drop of silver prices and a growing competition on livestock and grain markets — the major Argentine commodities at this time — exacerbated by the Great Depression in USA (1929–1932) resulted in Argentinian economy gradually falling behind the developed countries. Today Argentine ranks 21st in the list of countries by GDP.Since the middle of 19th many left and right wing politicians have tried to implement drastic economical initiatives and reforms (from the Soviet’s central planning to the Adam Smith’s “laissez faire”) in order to recover Argentinian economic stance in the World. None of those attempts has proved to be successful so far. Argentinian GDP growth in 2015 was 2.4% which is very modest even compare to neighboring countries. Argentinian GDP growth in 2016 had been below 3% and it has risen only slightly above zero in 2017.

Argentina has a long record of supporting the development of technologies and science. Among other large-scale and costly initiatives, Argentina had pursued its own nuclear weapons program as well as launched a number of cosmic satellites. Argentinian economy heavily relies on agricultural complex which is one of the major contributors to country’s GDP, therefore, Argentina prises itself for multiple achievements in the field of agro-tech and biotechnology.

Launching a high-tech startup in Argentina is possible and can be profitable.

However, Argentina isn’t widely recognized as the hot-spot for startups. Slowing economy, multiple administrative barriers, political turmoils, sliding national currency, rising unemployment — all of those factors are certainly not positive stimulus for hi-tech startup founders.

Adding to that is the traditionally high division existing on social, economic and educational levels among 23 Argentinian provinces, from which Buenos Aires stands out in all respects including its startup scenery.

Although Internet penetration rate in Argentina exceeds 60% it widely varies from one geographical region to another. Argentinian universities students’ population is one of the largest on the Continent, but unemployment rate, specially among young population, is skyrocketing. Consequently, on a positive side, local startups have received an access to cheep and educated workforce. Additionally, country’s youth population is increasing very fast and it creates the basis for the future high-tech economy growth.

Argentina has a well developed economy and high-tech entrepreneurs may find their path to wealth in such markets as e-commerce, fintech (local financial disorders only help), entertainment, e-ducation.

On the negative side, the dominance of the big corporations on the internal market discourages B2B business. Seed and VC capitals are marginally available in Argentinian capital but practically inaccessible in other regions. On top of that, there is a growing competition from the neighboring countries’ startups, specifically from Chile and Brazil.

Business Notes for Startups Founders:

• political climate: moderately friendly;
• economic climate: not friendly;
• regions to focus: locally, South America;
• industries to focus: e-commerce, fintech, entertainment, food;
• major limitations: high administrative barriers to SME, excessive taxation, over-bureaucratization, high unemployment rate, sluggish economy, high crime rate, growing competition from neighboring countries for South American market;
• opportunities: growing youth population, Internet high penetration rate (around 70%), developed economy.