 | 2007 | 2006 |
Overall Score: | 43 | 41 |
Regional Ranking: | 8th (tied) | 8th (tied) |
Argentina, an industry darling largely shunned by investors in recent years due to economic crisis and huge losses, saw a modest renewal of private sector activity in 2006. Strong consensus among these new players will be necessary to improve Argentina’s overall business environment for VC/PE, given weak incentives for fund managers and investors, a poor legal framework and ongoing international concerns of corruption and judicial weakness.
Strengths: Improvements in quality of local accounting and use of international standards resulted in a top score. Bankruptcy procedures, creditors’ rights and partner liability also improved. Argentina’s corporate governance score was raised from 2006, as current shareholder law allows for negotiation of shareholder agreements and arbitration clauses.
Challenges: Argentina’s score dropped in three categories: laws on VC/PE fund formation, tax treatment, and restrictions on institutional investors. Despite recent legislation (Regulations 7/05 and 12/05, in effect from February 2006), Argentina’s legal framework for fund formation and operation continues to present difficulties, particularly for foreign-incorporated funds (the vast majority). Tax incentives for VC/PE investment are weak, and Argentina offers few instruments through which pension funds and insurance companies can undertake investment. Restrictions remain for institutional investors, including a prohibition on investments in unlisted firms and PE/VC funds not rated by registered ratings agencies.
| Score | Change |
| Overall score | 43 | ▲ 2 |
| Laws on VC/PE fund formation and operation | 1 | ▼ 1 |
| Tax treatment of VC/PE funds & investments | 1 | ▼ 1 |
| Protection of minority shareholder rights | 2 | |
| Restrictions on institutional investors investing in VC/PE | 1 | ▼ 1 |
| Protection of intellectual property rights | 2 | |
| Bankruptcy procedures/creditors' rights/partner liability | 2 | ▲ 1 |
| Capital markets development and feasibility of exits | 2 | ▲ 1 |
| Registration/reserve requirements on inward investments | 2 | |
| Corporate governance requirements | 2 | ▲ 1 |
| Strength of the judicial system | 1 | |
| Perceived corruption | 1 | |
| Quality of local accounting/use of international standards | 4 | ▲ 1 |
Indicators are scored from 0-4 where 4=best score.
Overall score ranges from 0-100 where 100=best score. |
