82767 Economy Profile: Argentina Doing Business 2014 Argentina 2 © 2013 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Cover design: The Word Express Doing Business 2014 Argentina 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 38 Registering property .................................................................................................................. 46 Getting credit .............................................................................................................................. 56 Protecting investors ................................................................................................................... 63 Paying taxes ................................................................................................................................ 72 Trading across borders .............................................................................................................. 79 Enforcing contracts .................................................................................................................... 87 Resolving insolvency .................................................................................................................. 97 Employing workers .................................................................................................................. 102 Data notes ................................................................................................................................. 109 Resources on the Doing Business website ............................................................................ 115 Doing Business 2014 Argentina 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2012). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Argentina. To allow useful comparison, it business regulatory reforms. The data, along with also provides data for other selected economies information on ordering Doing Business 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 Argentina 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: Latin America & Caribbean business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Upper middle income medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of Population: 41,086,927 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 9,740 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 126 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 121* investors, paying taxes, trading across borders, Change in rank: -5 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 55.79 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 55.75 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: -0.01 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2014 Argentina 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2014 Argentina 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy’s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Argentina and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Argentina 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Argentina ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Argentina 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Argentina come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 Argentina 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Argentina Best performer globally Argentina DB2014 Argentina DB2013 Colombia DB2014 Uruguay DB2014 Mexico DB2014 Indicator Brazil DB2014 Chile DB2014 Peru DB2014 DB2014 Starting a Business 164 155 123 22 79 48 63 43 New Zealand (1) (rank) Procedures (number) 14 14 13 7 9 6 5 5 New Zealand (1)* Time (days) 25.0 25.0 107.5 5.5 15.0 6.0 25.0 6.5 New Zealand (0.5) Cost (% of income per 19.9 12.3 4.6 0.7 7.5 19.7 10.1 22.7 Slovenia (0.0) capita) Paid-in Min. Capital (% 5.7 5.7 0.0 0.0 0.0 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 181 181 130 101 24 40 117 154 China (1) (rank) Hong Kong SAR, Procedures (number) 24 24 15 15 8 11 14 22 China (6) Time (days) 365.0 365.0 400.0 155.0 54.0 82.0 173.0 256.0 Singapore (26.0) Doing Business 2014 Argentina 11 Best performer globally Argentina DB2014 Argentina DB2013 Colombia DB2014 Uruguay DB2014 Mexico DB2014 Indicator Brazil DB2014 Chile DB2014 Peru DB2014 DB2014 Cost (% of income per 234.1 177.9 34.8 69.9 295.4 353.1 109.3 46.7 Qatar (1.1) capita) Getting Electricity 80 77 14 43 101 133 79 23 Iceland (1) (rank) Procedures (number) 6 6 4 6 5 7 5 5 10 Economies (3)* Time (days) 91 91 58 30 105 85 100 48 Germany (17) Cost (% of income per 40.3 36.0 34.4 63.9 541.6 369.1 353.7 16.5 Japan (0.0) capita) Registering Property 138 134 107 55 53 150 22 167 Georgia (1) (rank) Procedures (number) 7 7 14 6 7 7 4 8 4 Economies (1)* Time (days) 53.5 53.5 30.0 28.5 13.0 74.0 6.5 66.0 New Zealand (1.0)* Cost (% of property 6.6 7.0 2.6 1.2 2.0 5.3 3.3 7.1 5 Economies (0.0)* value) Getting Credit (rank) 73 71 109 55 73 42 28 73 Malaysia (1)* Strength of legal rights 4 4 3 6 5 6 7 4 10 Economies (10)* index (0-10) Depth of credit 6 6 5 5 5 6 6 6 31 Economies (6)* information index (0-6) Public registry coverage 41.9 37.0 50.4 40.5 0.0 0.0 31.7 80.2 Portugal (100.0)* (% of adults) Private bureau 100.0 100.0 63.4 5.9 83.8 100.0 41.5 100.0 22 Economies (100.0)* coverage (% of adults) Protecting Investors 98 95 80 34 6 68 16 98 New Zealand (1) (rank) Extent of disclosure 7 7 5 8 9 8 9 3 10 Economies (10)* Doing Business 2014 Argentina 12 Best performer globally Argentina DB2014 Argentina DB2013 Colombia DB2014 Uruguay DB2014 Mexico DB2014 Indicator Brazil DB2014 Chile DB2014 Peru DB2014 DB2014 index (0-10) Extent of director 2 2 8 6 8 5 6 4 Cambodia (10) liability index (0-10) Ease of shareholder 6 6 3 5 8 4 6 8 3 Economies (10)* suits index (0-10) Strength of investor 5.0 5.0 5.3 6.3 8.3 5.7 7.0 5.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 153 152 159 38 104 118 73 146 (1) Payments (number per Hong Kong SAR, 9 9 9 7 10 6 9 33 year) China (3)* United Arab Emirates Time (hours per year) 405 405 2,600 291 203 334 293 310 (12) Trading Across Borders 129 134 124 40 94 59 55 90 Singapore (1) (rank) Documents to export 6 6 6 5 4 4 5 6 Ireland (2)* (number) Time to export (days) 12 13 13 15 14 11 12 16 5 Economies (6)* Cost to export (US$ per 1,650 1,650 2,215 980 2,355 1,450 890 1,125 Malaysia (450) container) Documents to import 8 9 8 5 6 4 7 7 Ireland (2)* (number) Time to import (days) 30 30 17 12 13 11 17 16 Singapore (4) Cost to import (US$ per 2,260 2,260 2,275 930 2,470 1,740 1,010 1,440 Singapore (440) container) Enforcing Contracts 57 49 121 64 155 71 105 105 Luxembourg (1) (rank) Doing Business 2014 Argentina 13 Best performer globally Argentina DB2014 Argentina DB2013 Colombia DB2014 Uruguay DB2014 Mexico DB2014 Indicator Brazil DB2014 Chile DB2014 Peru DB2014 DB2014 Time (days) 590 590 731 480 1,288 400 426 725 Singapore (150) Cost (% of claim) 20.5 18.5 16.5 28.6 47.9 31.0 35.7 19.0 Bhutan (0.1) Procedures (number) 36 36 44 36 34 38 41 41 Singapore (21)* Resolving Insolvency 97 94 135 102 25 26 110 51 Japan (1) (rank) Time (years) 2.8 2.8 4.0 3.2 1.7 1.8 3.1 1.8 Ireland (0.4) Cost (% of estate) 12 12 12 15 6 18 7 7 Norway (1) Outcome (0 as piecemeal sale and 1 as 0 0 1 0 1 1 0 0 going concern) Recovery rate (cents on 30.8 30.8 19.5 29.1 70.3 67.6 27.7 45.1 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Argentina 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Argentina 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Argentina? days, costs 19.9% of income per capita and requires According to data collected by Doing Business, starting paid-in minimum capital of 5.7% of income per capita a business there requires 14 procedures, takes 25.0 (figure 2.1). Figure 2.1 What it takes to start a business in Argentina Paid-in minimum capital (% of income per capita): 5.7 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Argentina 16 STARTING A BUSINESS Globally, Argentina stands at 164 in the ranking of 189 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Argentina to start a business. Figure 2.2 How Argentina and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 Argentina 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Argentina is keeping up—and where minimum capital required to start a business (figure it is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Argentina 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Argentina 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Argentina (table 2.1)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.1 How has Argentina made starting a business easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Argentina no longer requires registration at the private DB2010 pension and the publication process is expedited, thus easing the process of business start-up. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Argentina made starting a business more difficult by DB2014 increasing the incorporation costs. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Argentina is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Buenos Aires (Ciudad autonoma de) firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Sociedad de Responsabilidad Limitada professionals and the study of laws, regulations and (SRL) publicly available information on business entry in Paid in Minimum Capital Requirement: ARS 2,500 that economy. Following is a detailed summary of those procedures, along with the associated time Start-up Capital: 10 times GNI per capita and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Argentina—and the time and cost Time to No. Procedure Cost to complete complete The name of the company is verified by the Office of Corporations (Inspección General de Justicia) (IGJ) The corporate name must be reserved to incorporate a new company.. A request must be submitted using the reservation of name form 1 (reserva de nombre) for a cost of ARS 150. Such request expires in 30 1 day ARS 150 days. The Inspección General de Justicia also provides online services for name verification at http://www.jus.gov.ar/igj/servicios-en- linea/servicios-disponibles/consulta-de-homonimia.aspx Certify signatures of partners by a notary public The company is not obliged to notarize its bylaws, which can be Approximately ARS formally constituted under a private document. However, the signatures 1 day 1000 to ARS 1500 2 of the founding partners have to be certified by a notary public. Each (cost of 5 notarized signature certification costs around ARS 200. signatures) Deposit initial capital in National Bank (Banco de la Nación Argentina) and obtain proof of payment The company must deposit at least 25% of the subscribed capital in the National Bank and a obtain proof of payment. The deposit must be ARS 30 (VAT 3 1 day made at the central office of the national bank (Banco de la Nación excluded) Argentina) or at the branch corresponding to the company's domicile. It can be withdrawn once the company's bylaws are registered by the Office of Corporations. Doing Business 2014 Argentina 21 Time to No. Procedure Cost to complete complete Publish the new company’s notice in the official paper (Boletín Oficial) approximately ARS 2,500 (expedited The publication fees will depend of the time of publication chosen (24 publication fee)+ 4 1-3 days hours, 48 hours and 72 hours) and on the length of the notice. ARS 100 (legalization of signature) Payment of the incorporation fee The invoice shall be downloaded from http://www2.jus.gov.ar/igj-tasas/, 5 paid in Banco Nación and submitted to the Public Registry of 1 day ARS 100 Commerce. Registration with the Public Registro of Commerce of the City of Buenos Aires Companies located in the City of Buenos Aires must register their by- laws and other documents related to their incorporation. The Company must file the proposed Articles of Association and By-laws, the publication in the Official Gazette, evidence of managers' and syndics' (the latter, if applicable) acceptance of position, evidence of the deposit of the cash contributions in the Banco de la Nación Argentina, evidence 5 to 10 days ARS 2,400 for 6 of compliance with the managers' guarantee regime (filing of (expedited expedited managers' performance bonds) and evidence of the reservation of the procedure) procedure corporate name, for approval with the Office of Corporations. Filing Time: - Regular filing: 5 to 20 days (10 days, if no objection). - Special and urgent filing: 1 to 5 days. Buy special books The books are purchased at commercial bookstores. Once purchased, fees included in 7 they should be recorded at the Office of Corporations, as detailed in the 1 day procedure 8 following procedure. Get a form from the Public Notaries College and have a notary public submit the company books for rubrication by the General Inspection of Justice (IGJ) 5 days (urgent 8 ARS 2350 filling) Once the General Inspection of Justice (Inspección General de Justicia, IGJ) registers the SRL, the company must obtain the rubric of at least a Doing Business 2014 Argentina 22 Time to No. Procedure Cost to complete complete Book of Minutes of Partners' and Managers' Meetings and four accounting books (Buyers VAT Book, Sellers VAT Book, Inventory and Balance Book, and Journal). This procedure can only be started once the company is registered. A notary public has to request a form from the Notary Public's College and submit the rubric request of the company books to the IGJ. The form includes up to five books for their rubric. If the company needs to obtain the rubric for more than five books, another form of the same value has to be filed. According to Resolution 15/2012 the new values for rubrication of corporate books are: (1) cost of 5 books (ARS 920 approximately). The price of the books can vary depending on the bookstore and the number of sheets. (2) cost of the IGJ form (ARS 800 for urgent filing; ARS 350 for ordinary filing) (3) notary fees (about ARS 600 for urgent filing + VAT; ARS 470 + VAT for ordinary filing) (4) book registration fees (ARS 30) Corporate manager needs to obtain a Fiscal Code (Clave Fiscal) "Fiscal Codes" are required for individuals and companies to file affidavits and information with the National Tax Office (AFIP) through the online tax system. Pursuant to National Tax Regulations (AFIP) No.2239/2007, local companies shall make filings through the referred online tax system once their Tax Identification Number (Clave Unica de Identificación Tributaria or CUIT) is linked with the Fiscal Code of the manager appointed as sole legal representative or the manager appointed as "administrator" (if more than one manager have been 1 day no charge 9 appointed legal representative). The sole legal representative or the "administrator", to obtain his/her Fiscal Code, must file the AFIP form 3282/A, signed and certified by a notary public, with the corresponding AFIP agency, along with a copy of the company's bylaws certified by a notary public and evidence that he/she has first obtained his/her CUIT (as manager of local companies). The form includes information about the fiscal address where the individuals will render services as corporate managers. Obtain a tax identification number (CUIT) from the National Tax Office (Administración Federal de Ingresos Públicos, AFIP) and register for social security Tax and social security registration can be done jointly at the National 10 Tax Office (Administración Federal de Ingresos Públicos, AFIP). For a 4 days no charge company to obtain its Tax Identification Number (Código de Identificación Tributaria, CUIT), all of the individuals that have been appointed as managers of such company need to have previously obtained their respective CUITs (as managers of local companies) and the sole legal representative or the "administrator" (if more than one Doing Business 2014 Argentina 23 Time to No. Procedure Cost to complete complete manager has been appointed legal representative) needs to have obtained his/her Fiscal Code (Clave Fiscal) (see procedure 9). Since 2007, pursuant to AFIP's General Resolution 2337/2007, the sole legal representative or the "administrator" with Fiscal Code must file AFIP form F. 420/J though the online tax system. If the form is correctly completed, an "approval certificate" will be issued by such online tax system. Upon that, the sole legal representative or the "administrator" will have to file with the corresponding agency of the AFIP: (a) the AFIP form F. 420/J (listing the number of employees and the date of hire), as filed with the online tax system, signed by this individual before a notary public; (b) evidence of filing of such form with the online tax system; (c) the "approval certificate"; (d) a certified copy of the SRL's bylaws, duly registered with the Office of Corporations; (e) two documents evidencing the SRL's fiscal domicile (i.e. any service invoice, police's domicile certification, lease or commodatum agreement, etc.). Upon approval of the filed documentation, the AFIP will issue the SRL's CUIT. Afterwards, the sole legal representative or the "administrator" should link his/her personal Fiscal Code with the SRL's CUIT (by evidencing that he/she is the sole legal representative or the "administrator" at the SRL; in the latter case by filing with the AFIP the form detailed as Annex IV to AFIP's General Resolution 2239/2007, signed before a notary public). Register turnover tax at local level at the Dirección General de Rentas (DGR) in the City of Buenos Aires Each of the 24 jurisdictions -23 Argentine Provinces and the City of Buenos Aires - impose a tax on turnover (sales) generated within its boundaries, regardless whether the beneficiary of such sales maintains a domicile or place of business in its jurisdiction. The related rates of tax, rules, and other assessment procedures are determinable solely by each jurisdiction's government authority. Main activities are included in the following items but there are many special rates depending on the activity. - Primary production: 1% - Production of woods: 3% (special activities: 4.9%) Less than one day 11 ARS 50 - Industrial production: 1% (online procedure) - Financial activities: between 5 and 5.50% The following documentation must be filed with the General Directory of Income (Dirección General de Rentas, DGR): (a) duly completed form FN 009/0024 (download: http://www.agip.gov.ar/web/impuestos/archivos/IB_F%20009-0024.pdf ) executed by the SRL's legal representative or partner, before a notary public or bank; (b) national identity card of the legal representative or partner who signs the above form; (c) documentation evidencing the registration of the partner or legal representative as SRL's manager with the Office of Corporations; (d) power of attorney of the individual who carries out the filing, if applicable; (e) evidence of the SRL's CUIT; (f) Doing Business 2014 Argentina 24 Time to No. Procedure Cost to complete complete SRL's by laws registered with the Office of Corporations; and (g) document evidencing SRL's commercial domicile (e.g. any public service invoice, police's commercial domicile certification or lease agreement). Procedure can be done online Register with the Sistema Unico de Seguridad Social (SUSS) Once the employer files the registration of its employees before the AFIP, they are automatically registered in the Unified System for Labor Registration (USLR). To pay its social security contributions, the company has to fill out and submit electronically with its Fiscal Code the AFIP form 931 in order to obtain the registration. Less than one day 12 no charge Employers must make social security withholdings and pay (online procedure) contributions to the USLR, calculated on the salaries paid to employees under labor relationship. This entity manages (a) the retirement pension fund, (b) the family allowances fund, (c) the social security fund, and (d) the unemployment fund. Procedure can be done online Contract an insurance for employees with a risk labor company (ART, Aseguradora de Riesgos del Trabajo) 13 Risk Labor Companies (Aseguradora de Riesgos del Trabajo, ART) are 1 day no charge private companies. Rubricate books of wages in the Ministerio de Trabajo (Ministry of Labor) Every jurisdiction has its own rules regarding the cost of rubricating books of wages in the Argentine Ministry of Labor. 1 day ARS 75 14 In the City of Buenos Aires, books of wages are registered with the Dirección General de Protección del Trabajo de la Ciudad de Buenos Aires (Labor Protection Agency of the City of Buenos Aires). * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Argentina 25 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Argentina 26 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 24 procedures, takes 365.0 days build a warehouse in Argentina? According to data and costs 234.1% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Argentina Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Argentina 27 DEALING WITH CONSTRUCTION PERMITS Globally, Argentina stands at 181 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Argentina to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Argentina and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 Argentina 28 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Argentina is keeping up— deal with construction permits (figure 3.3) help show and where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Argentina 29 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Argentina 30 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Argentina (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Argentina made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 31 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Argentina are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Buenos Aires (Ciudad information collected from experts in construction City : autonoma de) licensing, including architects, civil engineers, construction lawyers, construction firms, utility Estimated service providers and public officials who deal with ARS 2,367,785 Warehouse Value : building regulations. These procedures are those that apply to a company and structure matching The procedures, along with the associated time and the standard assumptions used by Doing Business cost, are summarized below. in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Argentina —and the time and cost Time to No. Procedure Cost to complete complete Cadastral Consultation with Authorities Consultation is a prerequisite for clarifying subsequent procedures. The 1 land ownership certificate, the plot surface area, and the terrain and 1 day ARS 35 cadastral measurements are confirmed. Proof is issued. Request and obtain Perimetral Measurements 2 2 days ARS 150 Request and obtain Land Title (nomenclatura parcelaria) from Cadastral System (Sistema Cadastrales Sociedad Anonima) 3 2 days ARS 150 Request and obtain Certificate of Level (la certificacion de nivel) The certificate is required for areas that do not have definite leveling maps. Nonelevated industrial zones have updated, precise level outlines. Along with the land specifications (parcel nomenclature), the 2 days ARS 150 4 authority will require this certificate and will make a note in the “certificate of line and dimensions of district” (Certificado de Medidas Perimetrales y Anchos de Calles). Doing Business 2014 Argentina 32 Time to No. Procedure Cost to complete complete Obtain Certificate of Line and Dimensions (Certificado de Medidas Perimetrales y Anchos de Calles) 5 2 days ARS 33 Obtain construction work use form (formulario Uso Conforme) Similar to a zoning certificate, the form is issued according to the Urban 1 day ARS 33 6 Planning Code. Request and obtain Certificate of Project Drawings (Certificado de Encomienda) 7 The fee for the certificate of project drawings is ARS 1,550 for areas 1 day ARS 1,550 between 1,000 sq. m. and 2,500 sq. m. Present the designs and layouts to Cadastral System (Sistema Cadastrales Sociedad Anonima) 8 The fee is ARS 3.31 per sq. m. On average, the time required is 48 -- 72 3 days ARS 4,305 hours. * Request and obtain a Form for construction works 9 1 day ARS 50 * Request and obtain a “Volante Ochava” form 10 1 day ARS 150 * Request and obtain Sanitary Installation Plans (Plano de Instalación Sanitaria) 11 45 days ARS 4,500 * Request and obtain Delineation and Construction Rights (Derechos de delineación y construcción) This fee base is provided for by the Classification of Tariff Law. After 1 day ARS 59,984 12 completing the form and paying the fee, the company representative receives an attestation. Doing Business 2014 Argentina 33 Time to No. Procedure Cost to complete complete Request and obtain a new construction project permit (Permiso de Obra Nueva) The permit fee is ARS 4.00 per sq. m. In this case, the total fee would be about ARS 5,202.40. To request and obtain a new construction project permit, BuildCo must submit the following plans and documentation: • Affidavit for the construction project • Particulars on the signatory • Building company details • Certificate of use pursuant to the provisions contained in the Urban Planning Code • Property titles and purchase agreement (boleto de compra de venta), which is proof of ownership of land for warehouse construction • Project plans • Cadastral plan, delimiting the plot for warehouse construction • Fire station installation map • Sanitary installation plan • Electromechanical plans (elevators, pumps) • Structure plan • Land survey 90 days ARS 5,202 13 • Excavation record, if applicable • Land titles (certificados parcelarios) of construction work layout After the application, the city of Buenos Aires (Gobierno de la Ciudad de Buenos Aires, GCBA) approves the company's project drawings (which determine the cost) and issues the project record number. If construction work has not yet started during a 3-year period (from the plan registration date to the granting of the respective permit), the permit and the respective record will expire. The construction fees and approved delineation will be forfeited. After the Accounting Department (Dirección de Fiscalización de Obras y Catastro) issues the relevant resolution (disposición), the expired record is sent to the general files for permanent and final storage. The developer must notify the Instituto de Estadistica y Registro de la Industria de la Construcción (IERIC) once during its "existence," but it is compelled to notify each construction startup through the completion of an enclosed form. Before starting construction, the company posts the announcement of machinery works. * Request and obtain Environmental Impact Assessment Certificate Other documents needed include the following: • Environmental Assessment Impact form (Formulario Categorización Impacto Ambiental Tipo Ie) • DDJJ through Form Annex II Dcto 1352/02 60 days ARS 375 14 • Formula Polinómica s/ Annex VIII de Resol. 873–SSMAMB/ 04 • Aide memoire (memoria descriptiva) with the signature of the main representative (firma del titular) s/ Annex Vd Decree 1352/02 that includes: 1. Description of the activity, including materials and inputs, supply and storage processes, operation and location of the machinery used, Doing Business 2014 Argentina 34 Time to No. Procedure Cost to complete complete logistics to deliver products and services, and the like. 2. Further details or clarifications on emissions, solid waste, noise vibrations from machinery, and so forth (including results from the formula polinómica). 3. Detailed information on cargo-handling logistics. 4. Detailed information of construction projects designed to mitigate negative impacts. 5. Detailed information on land usage. 6. Fire prevention plan. 7. Waste management plan. • Environmental impact map • Registration number in the Registry for Consultants and Professionals (Reg. No. 344 Evaluac. Ambtal. 4/10/00) • Encomienda to the Professional Council • Notarized copy of the property title Receive construction startup inspection A record of inspection agents may be found at the city of Buenos Aires Web site (www.buenosaires.gov.ar). 1.2.1.3. Inspection Schedule (Building Code) All inspections must be completed within 24 hours of such request, no matter where the building is located, and according to construction industry schedules and working days, except for municipal schedules and holidays. After the application is submitted at the public works office counter, the 15 inspection schedule will be fixed for the following day, depending on 1 day ARS 23,678 the radius within which the construction work is located. In practice, inspectors visit the location in 7 --14 days. Suspension of construction is not required. There are four inspections for each type of work, but each one is processed through professional supervisors (Profesionales Verificadores de Obra, PVO). The inspection fee is paid, before registration, together with that for construction rights. The construction inspection fee is 1% of project value. The inspection fee is paid while applying for construction rights. The average wait time is 7 -- 10 days. Notify the DGROC on completion of the construction work foundation and receive inspection 16 In practice, the inspectors visit the location in 7 -- 14 days. Suspension 1 day no charge of construction is not required. Notify the DGROC on completion of the construction work structure and receive inspection 17 In practice, the inspectors visit the location in 7 -- 14 days. Suspension 1 day no charge of construction is not required. Doing Business 2014 Argentina 35 Time to No. Procedure Cost to complete complete Notify the DGROC on completion of the construction work masonry and receive inspection 18 In practice, the inspectors visit the location in 7 -- 14 days. Suspension 1 day no charge of construction is not required. Notify the DGROC on completion of construction work and receive inspection To receive a work completion notice, BuildCo must submit the following documents to the city of Buenos Aires: • A document from Directorate of Real Estate and Registry, proving the sworn declaration of completed work. That form is obtained in that directorate and displays the proprietor’s signature, in addition to a simple heliographic copy of the building plan • Original plan of the work in fabric or film transparent polyester, which can be unified (architecture and structures) or displayed in two separated originals • Architecture plans (six heliographic copies) and structure plans (six heliographic copies) • Plans on fire protection (two copies) • Descriptive record with detail of materials and elements used in the completed work (original and copy) • Form of statistics 19 • Request of sworn declaration of completion (triplicate) 1 day no charge • Plan showing medical facility BuildCo must submit an affidavit on completion of the construction work. After that, the administrative authority has 60 working days to verify the affidavit’s accuracy and truthfulness. According to the Building Code, this action releases contractors involved in the construction from liability, leaving the owner as the sole liable party. Even so, neither the final approval nor the affidavit nor the final construction plans are required for municipal approval of the warehouse. In practice, the inspectors visit the location in 7 -- 14 days. Suspension of construction is not required. The city of Buenos Aires verifies compliance of construction work with the approved plans and grants a fire inspection certificate (previously a fire department responsibility). Notarize the forms required for final authorization A notary public draws up the authorization deed (escritura de 7 days ARS 1,000 20 habilitación). The fee depends on the size of the work. Request and obtain final authorization (Habilitacion Municipal) According to applicable regulations, authorization may be granted 173 days ARS 696 21 provisionally (pending final authorization) for the construction of either (a) a new facility or any of its parts or (b) any extension or modification to an existing one. However, the use must coincide with that stated on Doing Business 2014 Argentina 36 Time to No. Procedure Cost to complete complete the documents for the project approved for execution, provided that the relevant part has been completed pursuant to applicable regulations. Final authorization must be requested within 30 days of work completion. In practice, this takes 6 months after the authorization file is submitted. As required by the type of authorization procedure, the construction professional (architect, engineer, construction foreman, land surveyor) must prepare the documents. The following forms must be purchased from the corresponding professional board (consejo profesional): • Request for authorization • Usage certificate (certificado de uso conforme) • Building design affidavit (declaración jurada de conformación del local) • Overload certificate (certificado de sobrecarga), if applicable • Site layout, if applicable • Plans or final certificate of fire, ventilation, and mechanical installation, if applicable • Certificate or supporting document attesting to the submittal of the environmental aptitude application (solicitud de aptitud ambiental) (Law 123, Law 452, and regulatory decrees) For this purpose, if requested, the construction professional must verify whether the site’s building conditions conforms to the pertinent zoning. If necessary, the professional must also consult with the Urban Planning Institute (Consultora Planificacion Urbana, CPU) before starting the procedure. The cost is ARS 1,635.60 (ARS 335.00 plus an honorarium for the participating independent professional of ARS 1.00/sq. m.). In this case, the professional can be part BuildCo. Register the building The building must be registered at the Revenue Department (Dirección 1 day no charge 22 de Rentas) by submitting final approved plans. * Request and connect to telephone services No additional requirements exist for obtaining telephone service. 23 Within 10 working days of the phone request, an installation invoice is 30 days ARS 182 issued. The connection is made within 17 working days. * Request and connect to water services To obtain a connection to potable water service, the final construction work layout (with the relevant certificate issued by the municipal 14 days ARS 977 24 authorities) must be submitted at the commercial office in the zone where the construction site is located. On submittal, a provisional invoice will be issued according to the size of the construction site. Once the application for connection is filed, an inspector visits the Doing Business 2014 Argentina 37 Time to No. Procedure Cost to complete complete construction site to verify the type of connection required. The connection is made within 72 -- 92 hours of that determination. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Argentina 38 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Argentina 39 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 91 days and costs 40.3% of income connection in Argentina? According to data collected per capita (figure 4.1). by Doing Business, getting electricity there requires 6 Figure 4.1 What it takes to obtain an electricity connection in Argentina Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Argentina 40 GETTING ELECTRICITY Globally, Argentina stands at 80 in the ranking of 189 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in 4.2). The rankings for comparator economies and the Argentina to connect a warehouse to electricity. Figure 4.2 How Argentina and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 Argentina 41 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Argentina Best performer in Best performer Indicator Argentina DB2014 Argentina DB2013 Latin America & globally DB2014 Caribbean DB2014 Rank Trinidad and Tobago 80 77 Iceland (1) (10) Procedures (number) St. Vincent and the 6 6 10 Economies* (3) Grenadines (3) Time (days) 91 91 St. Kitts and Nevis (18) Germany (17) Cost (% of income per Trinidad and Tobago capita) 40.3 36.0 Japan (0.0) (7.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Argentina 42 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Argentina (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Argentina made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Argentina 43 GETTING ELECTRICITY What are the details? The indicators reported here for Argentina are based OBTAINING AN ELECTRICITY CONNECTION on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution Buenos Aires (Ciudad City: utility—identified by Doing Business. Data are collected autonoma de) from the distribution utility, then completed and verified by electricity regulatory agencies and Name of Utility: EDESUR independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Argentina—and the time and cost Time to No. Procedure Cost to complete complete Obtain approval of electrical plans from relevant Municipality ("Habilitacion Municipal del plano electromecánico and del plano de la instalación eléctrica") The customer has to submit, together with the application for a service connection, a receipt of the application to the Municipality for approval of the electrical plans ("Habilitacion Municipal del plano electromecánico and del plano de la instalación eléctrica"). The two sets of electrical plans detail respectively: (1) the location of the machines and 45 calendar days ARS 2,680.0 1 their respective electricity needs and (2) the design of the internal wiring installation. The customer has to present the approved municipal clearance at the end of the connection process but a receipt attesting that the procedure has been initiated already has to be submitted at the time of the application. The municipal clearance is required for all new industrial constructions. This procedure happens after obtaining the building permit which only covers the civil works of the building. Customer submits service application to EDESUR and awaits estimate of the connection costs The application for the service connection can be submitted online, in person, by mail or fax. The following documents are required with the 30 calendar days no charge 2 application: • Letterhead indicating the name and coordinates of the authorized applying customer • Details on the required electricity load and the simultaneity factor (this Doing Business 2014 Argentina 44 Time to No. Procedure Cost to complete complete factor specifies how much electrical equipment will be consuming electricity at the same time). • Sketch of the geographic location of the construction • Document clarifying the ownership of the building • Application for the Municipal approval of electrical plans (if the building is still under construction the approved building plans are also required). • Identification document for the owner of the building • A valid document indicating the directors of the company • Document certifying the customer is authorized to submit application and copy of his national identity document (Documento Nacional de Identidad -DNI) • Proof of registration with the Federal Tax Authority (Administración Federal de Ingresos Públicos - AFIP) • DCI -an internal wiring certificate (DCI - Declaración de conformidad Res. ENRE 207/95) issued by an electrician registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E."). It is not compulsory. • If the customer is not the owner of the building a security deposit is required equivalent to two months of future consumption. Receive external inspection from EDESUR Edesur carries out an external inspection to prepare the technical report and to prepare an estimate of the connection costs. It is preferable that a representative of the customer is present at the time of the inspection. The inspector establishes the connection point and the best location for 11 calendar days no charge 3 the chamber for the distribution transformer. On the basis of the information a technical project detailing the required works is elaborated. The project also indicates which part of the works is done by the customer or his/her sub-contractor. Customer hires an electrician registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E.") to obtain an internal wiring certification for the building In the waiting of the approval from the municipality, a customer presents an internal wiring certificate DCI (DCI - Declaración de conformidad) in order to continue the procedures with Edesur. The DCI is issued by an 4 electrician registered with the Association for the Promotion of Electrical 7 calendar days ARS 6,500.0 Safety ("Asociación para la Promoción de la Seguridad Eléctrica - A.P.S.E."). The internal wiring of the building is the responsibility of the user/owner of the building. Not all electricians in Buenos Aires are registered with the Association for the Promotion of Electrical Safety ("Asociación para la Promoción de la Seguridad Eléctrica -A.P.S.E."). Doing Business 2014 Argentina 45 Time to No. Procedure Cost to complete complete The customer's subcontractor carries out the civil part of the works required by EDESUR After the customer receives the cost estimate and the details of the external connection works needed from EDESUR, he hires a 25 calendar days ARS 7,500.0 5 subcontractor to carry out the civil part of the works required by EDESUR. EDESUR does the connection works and installs the meter EDESUR approves the works that the electrical contractor of the customer did, obtains the relevant approvals from the municipality to do the excavation works in public spaces and finalizes the rest of the connection works. The installation of the meter happens on the same day that the connection works are carried out and the electricity starts flowing right away. The signed supply contract is a prerequisite for EDESUR to start its part of the connection works. By means of the supply contract the client commits to paying the electricity that will be consumed and to not lower the initial load estimate on which the connection works are based. In this moment, the client also has to present the electrical plans approved by the relevant Municipality ("Habilitacion Municipal del plano 6 electromecánico and del plano de la instalación eléctrica"). After the 21 calendar days ARS 1,100.0 supply contract has been signed, EDESUR inspects the part of the connection works that was carried out by the electrical contractor of the customer. EDESUR will only start its part of the works once the civil works for the connection have been finalized by the electrical contractor of the customer. Since August 2012, according to the Resolución ENRE 0215/2012, the EDESUR charges a contribución especial reembolsable (CER) for new connections. The CER is reimbursed to the client through electricity bills. The reimbursement happens in a maximum of 48 equal payments reimbursed with interests . * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 Argentina 46 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day. time and cost. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Argentina 47 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 53.5 days and costs 6.6% of the Argentina? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 7 Figure 5.1 What it takes to register property in Argentina Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Argentina 48 REGISTERING PROPERTY Globally, Argentina stands at 138 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Argentina to transfer property. Figure 5.2 How Argentina and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2014 Argentina 49 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Argentina is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Argentina 50 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Argentina 51 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Argentina (table 5.1)? Table 5.1 How has Argentina made registering property easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Argentina made it more difficult to register property by adding DB2010 a new requirement to declare all transactions over AR$ 300.000 DB2011 No reform as measured by Doing Business. Argentina made transferring property more difficult by adding DB2012 a requirement that the notary obtain the tax agency’s reference value for property before notarizing the sale deed. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 52 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business Buenos Aires through information collected from local property City: (Ciudad autonoma lawyers, notaries and property registries. These de) procedures are those that apply to a transaction matching the standard assumptions used by Doing Property Value: ARS 2,204,582 Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Summary of procedures for registering property in Argentina—and the time and cost Time to No. Procedure Cost to complete complete * Seller must obtain a certificate of ownership ("dominio") and a certificate of good standing ("inhibiciones") from the Real Property Registry The certificate of ownership ("Certificado de dominio") proves that the property is free and clear of liens and or encumbrances. According to Executive Order No. 2080/80, article 8, it is mandatory to obtain the non- 7 days (regular encumbrance certificate.The certificate of personal annotation Domain procedure for ("Certificado de inhibiciones") proves that there is no judicial order Certificate: ARS domain certificate restraining the seller from encumbering or disposing of his assets. 230 (urgent) or and personal ARS 130 (regular) The domain certificate and a personal annotation are valid for 15 days, annotation Personal and they are both requested with a unified form. certificate), Less Annotation 1 When a notary from the Capital Federal requests a domain certificate, than a day (online Certificate: ARS the property is “reserved” for 60 days. If a new Domain certificate is procedure) for 205 (urgent) or requested during this period, it will state that a transaction is in process. the urgent ARS 105 (regular) procedure Pursuant to Technical Resolution N°5/2008 of the Registry of Property Certificate of Good (simultaneous dated September 5, 2008, the certificate of personal annotation can be with procedures Standing: ARS 56 obtained online at the Registry website www.dnrpi.jus.gov.ar, with a cost 2, 3 and 4) of AR$ 56. Only interested parties pursuant to sections 6,7 and 22, Law No. 17,801 can obtain the certificate online, and they also need to be registered users of the website (notaries, accountants, lawyers,...). Doing Business 2014 Argentina 53 Time to No. Procedure Cost to complete complete * Obtain a Real Estate Reference Value (Valor Inmobiliario de Referencia) Property transfers in the City of Buenos Aires and some parts of the Province of Buenos Aires require a “Valor Inmobiliario de Referencia (VIR)” (Real Estate Reference Value”). The VIR was introduced by Resolutión Nº 67-AGIP-10 of February 10, 2010 and later amended by Resolutión Nº 435-AGIP-11 of August 3, 2011. A VIR is assigned to every property by the revenue agency and it sets a minimum base to calculate the stamp tax. The VIR aims to prevent the undervaluation of properties Less than a day done to pay less stamp duty on property transfers. (online procedure 2 and simultaneous no cost The notary has the responsibility to check the VIR, since the stamp duty with procedures will be calculated on the greater value between VIR, the fiscal valuation 1, 3 and 4) ('valuación fiscal') and the sale price agreed by parties. The procedure is free and it can be obtained online by the notary through the revenue agency website www.agip.gob.ar. However, not all the properties in the City of Buenos Aires have been assigned a VIR yet. In these cases the notary must obtain a certificate stating that there is no VIR for the property. * Obtain a cadastral certificate ("certificado catastral") The notary requests the cadastral certificate (with measures, boundaries and fiscal valuation) at the Cadastral office (“Oficina catastral”). The 1 day certificate is valid for one year. In the Capital Federal, there is no need for (simultaneous ARS 150 3 a surveyor to measure the property. with procedures 1, 2 and 4) * Obtain a certificate stating that no local taxes related to the property are due (ABL) This certificate ("Certificado de libre deuda de impuestos municipales- ABL") is obtained at the Notaries’ association ("Colegio de Escribanos"). 3 days Local taxes related to the property being sold are known as ABL (simultaneous 4 (“alumbrado, barrido y limpieza”, street light and cleaning). The ARS 115 with procedures certificate is valid for 30 days (or the current month), according to the 1, 2 and 3) 2009 “Código Fiscal” of the city of Buenos Aires, which shortened the original 1 year validity. Doing Business 2014 Argentina 54 Time to No. Procedure Cost to complete complete Obtain "Code of Offer of Transfer of a Property" (COTI) at tax agency AFIP Sellers have to declare property transfers of over ARS 600.000 to the tax authorities in the City (AFIP). The declaration shall include the names of the buyer and seller, the property being transferred and the value of the transaction. Once the transaction is declared, the seller will obtain a "Code of Offer of Transfer of a Property" (COTI) from AFIP. The COTI has a validity of 24 months (extendable 12 months if a construction is to be made). The "Code of Offer of Transfer of a Property" (COTI) may be obtained: Less than a day 5 - online: through www.afip.gov.ar, accessing to the system with a tax (online no cost code; or procedure) -on the phone (0800-999-2347), in which case it will be necessary to print a certificate afterwards from www.afip.gov.ar (access to the system is with a tax code); or - via sms, texting 2347: the user will receive a reply with the number of procedure and will be contacted later by the Information Call Center to continue with the procedure. The COTI was implemented to fight tax evasion on March 1, 2008, through the Resolución General N° 2371 Año 2007 from 14/12/2007. Notary public fees: The public deed is executed by the parties with the intervention of a notary public 1-1.5% of the purchase price The public deed is the only document which is mandatory by law to (usually paid by transfer a property's ownership. Transactions subject to Capital Gains Tax buyer) are not subject to Transfer Tax (this is the case when companies are Stamp Tax: 3.6 % parties to the transaction). Capital Gains Tax is paid by the seller. of the greater However, this tax is not applicable if the money collected by seller for the value between the transfer of property is used to buy another property within a year of the VIR, the fiscal sale or for the construction of a new property. In this last case, for the tax valuation and the waiver to apply, the construction has to start a year after or a year before 20 days purchase price 6 the transaction and it has to be completed 4 years after the date of the (usually paid transaction. jointly) The notary will retain the 1.5% for the transfer tax, but if the transaction Transfer Tax: 1.5% is subject to Capital Gains Tax (CGT), he will use this amount to pay the of the purchase CGT. If the transaction has been arranged through a broker, his fees will price (Income Tax be about 3% of the purchase price. applicable to companies, paid by seller) Doing Business 2014 Argentina 55 Time to No. Procedure Cost to complete complete The notary public files the property transfer for registration with the Real Property Register Upon registration, the buyer will have perfect and complete title to the ARS 113.5 property, opposable to third parties. The registration fees are usually (regular) or ARS paid by the buyer. The notary has 45 days to register the property 251.5 (urgent) + 7 28 days transfer. At this stage, the property title can be used as collateral for a 0.2% property loan, or the property can be resold. price additional stamp tax The majority of registrations are made following the regular procedure. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Argentina 56 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has up to 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Argentina 57 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Argentina stands at 73 in the ranking of 189 collateral and bankruptcy laws in Argentina facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 6 on the The rankings for comparator economies and the depth of credit information index and a score of 4 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Argentina support lending and scores indicate more credit information and stronger borrowing. legal rights for borrowers and lenders. Figure 6.1 How Argentina and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 Argentina 58 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened — well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Argentina support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Argentina over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 71 73 Strength of legal rights 4 4 4 4 4 4 4 4 4 4 index (0-10) Depth of credit 6 6 6 6 6 6 6 6 6 6 information index (0-6) Public registry coverage 20.1 22.1 25.4 25.5 31.2 34.3 30.8 35.9 37.0 41.9 (% of adults) Private bureau 73.3 95.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Argentina 59 GETTING CREDIT One way to put an economy’s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2013 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Argentina in 2013 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Argentina 60 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Argentina (table 6.2)? Table 6.2 How has Argentina made getting credit easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 61 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders Argentina are based on detailed information collected are gathered through a survey of financial lawyers and in that economy. The data on credit information verified through analysis of laws and regulations as sharing are collected through a survey of a credit well as public sources of information on collateral and registry and/or credit bureau (if one exists). To bankruptcy laws. For the strength of legal rights index, construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in credit registry or credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Argentina Latin America & OECD high income Indicator Argentina Caribbean average average Strength of legal rights index (0-10) 4 6 7 Depth of credit information index (0-6) 6 5 5 Public registry coverage (% of adults) 41.9 31.5 42.9 Private bureau coverage (% of adults) 100.0 63.1 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 4 Can any business use movable assets as collateral while keeping possession of the assets; and Yes any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of No its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically No to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Doing Business 2014 Argentina 62 Strength of legal rights index (0–10) Index score: 4 Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured Yes creditors with grounds for relief from an automatic stay or/and sets a time limit to it? Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 6 Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? Yes Yes 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes Yes 1 distributed? Is it guaranteed by law that borrowers can inspect Yes Yes 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 1,300,000 147,111 Number of individuals 39,000,000 10,995,791 Source: Doing Business database. Doing Business 2014 Argentina 63 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Argentina 64 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Argentina? The economy has a score of 5.0 measure all aspects related to the protection of on the strength of investor protection index, with a minority investors, a higher ranking does indicate that higher score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Argentina stands at 98 in the ranking of 189 economies on the strength of investor protection Figure 7.1 How Argentina and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 Argentina 65 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Argentina protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Argentina over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. 95 98 Extent of disclosure 7 7 7 7 7 7 7 7 7 index (0-10) Extent of director 2 2 2 2 2 2 2 2 2 liability index (0-10) Ease of shareholder 6 6 6 6 6 6 6 6 6 suits index (0-10) Strength of investor protection index (0- 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Argentina 66 PROTECTING INVESTORS One way to put an economy’s scores on the protecting shows the number of economies with this score in investors indicators into context is to see where the 2013 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across applies to the extent of director liability index, and economies. Figure 7.2 highlights the score on the figure 7.4 to the ease of shareholder suits index. extent of disclosure index for Argentina in 2013 and Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Argentina 67 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Argentina 68 PROTECTING INVESTORS The scores recorded over time for Argentina on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Argentina 69 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Argentina (table 7.2)? Table 7.2 How has Argentina strengthened investor protections—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 70 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Argentina are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the scores for Argentina. Summary of scoring for the protecting investors indicators in Argentina Latin America & OECD high income Indicator Argentina Caribbean average average Extent of disclosure index (0-10) 7 4 7 Extent of director liability index (0-10) 2 5 5 Ease of shareholder suits index (0-10) 6 6 7 Strength of investor protection index (0-10) 5.0 4.9 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 7 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. 2 Full disclosure of all material facts James to the board of directors is required? Whether immediate disclosure of the transaction to Disclosure on the transaction and Mr. 2 the public and/or shareholders is required? James' conflict of interest Whether disclosure of the transaction in published 1 Disclosure on the transaction only periodic filings (annual reports) is required? Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 2 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 1 Yes causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes 0 Not liable to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 0 Not liable Seller transaction causes to the company? Doing Business 2014 Argentina 71 Score Score description Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 No filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 1 Yes transaction? Whether the plaintiff can obtain any documents from Any information that may lead to the 4 the defendant and witnesses during trial? discovery of relevant information Whether the plaintiff can request categories of documents from the defendant without identifying 1 Yes specific ones? Whether the plaintiff can directly question the 0 No defendant and witnesses during trial? Whether the level of proof required for civil suits is 0 No lower than that of criminal cases? Strength of investor protection index (0-10) 5.0 Source: Doing Business database. Doing Business 2014 Argentina 72 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 25.5%. Doing Business 2014 Argentina 73 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Argentina stands at 153 in the ranking of 189 taxes in Argentina—and how much do firms pay in economies on the ease of paying taxes (figure 8.1). The taxes? On average, firms make 9 tax payments a year, rankings for comparator economies and the regional spend 405 hours a year filing, preparing and paying average ranking provide other useful information for taxes and pay total taxes amounting to 107.8% of assessing the tax compliance burden for businesses in profit (see the summary at the end of this chapter for Argentina. details). Figure 8.1 How Argentina and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2014 Argentina 74 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Argentina is keeping up— required to prepare and file taxes (figure 8.2) help and where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Argentina 75 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Argentina 76 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Argentina (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Argentina made paying taxes easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 77 PAYING TAXES What are the details? The indicators reported here for Argentina are LOCATION OF STANDARDIZED COMPANY based on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see City: Buenos Aires (Ciudad autonoma de) the section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Argentina Latin America & OECD high income Indicator Argentina Caribbean average average Payments (number per year) 9 30 12 Time (hours per year) 405 369 175 Profit tax (%) 3.0 20.5 16.1 Labor tax and contributions (%) 29.4 14.7 23.1 Other taxes (%) 75.4 12.1 2.0 Total tax rate (% profit) 107.8 47.3 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Turnover tax by City of 1 online filing 0 3% turnover 53 Buenos Aires Employer paid - Social gross 1 online filing 84 23% 25.9 security contributions salaries Doing Business 2014 Argentina 78 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate any amount Tax on financial (check) debited or 1 0 0.6% 17.6 transactions credited to bank accounts varies fiscal (0,582% value of Property tax 1 online filing 0 3.7 plus AR$ building 14,364 ) and land 3% (+ AR$ 0.6 per gross Labor risk insurance 0 paid jointly 0 3.4 employee salaries per month) taxable Corporate income tax 1 online filing 105 35% 3 profit Stamp tax on sale of a real 50% of 1 0 sale price 0.8 estate 2.5% fiscal Vehicle tax 1 0 2.3% value of 0.3 vehicle vehicle included in Subway tax 0 paid jointly 0 10% 0 tax paid other taxes gross Employer paid - Payroll tax 0 paid jointly 0 17% 0 withheld salaries liter AR small Fuel tax 1 0 consumpti 0 0.81/liter amount on value not Value added tax (VAT) 1 online filing 216 21% 0 added included Totals 9 405 107.8 Source: Doing Business database. Doing Business 2014 Argentina 79 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: military items.  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy’s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy’s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include Doing Business 2014 Argentina 80 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Argentina? Globally, Argentina stands at 129 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 6 (figure 9.1). The rankings for comparator economies documents, takes 12 days and costs $1650. Importing and the regional average ranking provide other useful the same container of goods requires 8 documents, information for assessing how easy it is for a business takes 30 days and costs $2260 (see the summary of in Argentina to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Argentina and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Argentina 81 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Argentina is keeping up—and where it is falling export or import (figure 9.2) help show what is behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Argentina 82 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Argentina 83 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Argentina 84 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Argentina (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Argentina made trading across borders easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. Argentina increased the time, cost and number of documents needed to import by expanding the list of products requiring DB2013 nonautomatic licenses and introducing new preapproval procedures for all imports. Argentina reduced the number of documents necessary for DB2014 importing by eliminating nonautomatic license requirements. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 85 TRADING ACROSS BORDERS What are the details? The indicators reported here for Argentina are LOCATION OF STANDARDIZED COMPANY based on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Buenos Aires (Ciudad autonoma de) the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Argentina Latin America & OECD high income Indicator Argentina Caribbean average average Documents to export (number) 6 6 4 Time to export (days) 12 17 11 Cost to export (US$ per container) 1,650 1,283 1,070 Documents to import (number) 8 7 4 Time to import (days) 30 19 10 Cost to import (US$ per container) 2,260 1,676 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 6 450 Customs clearance and technical control 2 150 Ports and terminal handling 2 550 Inland transportation and handling 2 500 Totals 12 1,650 Procedures to import Time (days) Cost (US$) Documents preparation 22 610 Doing Business 2014 Argentina 86 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 3 400 Ports and terminal handling 3 800 Inland transportation and handling 2 450 Totals 30 2,260 Documents to export Documents to import Bill of Lading Bill of lading Commercial Invoice Commercial invoice Customs export declaration Customs import declaration Packing List Packing list Tax certificate Secretariat of Interior Commerce form (Nota de pedido) Terminal handling receipts Sworn Affidavit of Intention to Import (DJAI) Source: Doing Business database. Technical standard/health certificate Terminal handling receipts Doing Business 2014 Argentina 87 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Argentina 88 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Argentina stands at 57 in the ranking of 189 dispute through the courts in Argentina? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 590 days, costs 20.5% of the value of the claim regional average ranking provide other useful and requires 36 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Argentina. Figure 10.1 How Argentina and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Argentina 89 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Argentina is keeping up— to enforce a contract through the courts (figure 10.2) and where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Argentina 90 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Argentina 91 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Argentina (table 10.1)? Table 10.1 How has Argentina made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 92 ENFORCING CONTRACTS What are the details? The indicators reported here for Argentina are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this Buenos Aires (Ciudad chapter on what the indicators cover). These City: autonoma de) procedures, and the time and cost of completing them, are identified through study of the codes of Claim Value LCU: 88183 civil procedure and other court regulations, as well as through surveys completed by local litigation Buenos Aires First lawyers (and, in a quarter of the economies Court Name: Instance Court, covered by Doing Business, by judges as well). Commercial Section The procedures for resolving a commercial lawsuit, and the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Argentina—and the time and cost Latin America & OECD high income Indicator Argentina Caribbean average average Time (days) 590 734 529 Filing and service 150 Trial and judgment 320 Enforcement of judgment 120 Cost (% of claim) 20.5 31.0 21.0 Attorney cost (% of claim) 15.0 Court cost (% of claim) 4.5 Enforcement Cost (% of claim) 1.0 Procedures (number) 36 40 31 Number of procedures (without bonus points) 37 Specialized commercial courts -1 Total number of procedures (including bonus 36 points) Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Argentina 93 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. Mandatory conciliation or mediation: Plaintiff invites Defendant to settle the dispute. Because conciliation 2 or mediation fails, Plaintiff is required to submit a written document to the judge proving that conciliation or mediation- prior to initiating the lawsuit- has failed. 3 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before the court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 4 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Court scrutiny of summons and complaint: A judge examines Plaintiff's summons and complaint for 5 formal requirements. Judge admits summons and complaint: After verifying the formal requirements, the judge decides to * admit Plaintiff’s summons and complaint. 6 Court order for service: Upon Plaintiff’s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 7 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 8 Defendant is successful in the majority of cases. Second attempt at physical delivery: If a first attempt was not successful, a second attempt to physically 9 deliver the summons and complaint to Defendant is required by law or standard practice. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Pla intiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Guarantees securing attached property: Plaintiff typically submits guarantees or bonds to secure 10 Defendant against possible damages to attached property. (see assumption 5) Doing Business 2014 Argentina 94 No. Procedure Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 11 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a 12 report on the attachment of Defendant’s property to the judge. (see assumption 5) Trial and judgment: Defendant’s filing of preliminary exemptions: Defendant presents preliminary exemptions to the court. * Preliminary exemptions differ from answers on the merits of the claim. Examples of preliminary exemptions are statute of limitations, jurisdictions, etc. Plaintiff’s answer to preliminary exemptions: Plaintiff responds to the preliminary exemptions raised by * Defendant. Judge’s resolution on preliminary exemptions: Judge decides on preliminary exemptions sepa rately from 13 the merits of the case. Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 14 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Notification of court-appointment of independent expert: The court notifies both parties that the court is 15 appointing an independent expert. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court * delivers his or her expert report to the court. (see assumption 6-b of this case) Pre-trial conference on procedure: The judge meets with the parties to discuss procedural issues (for 16 example which applications and motions parties intend to file, which documents parties intend to rely on, what will be presented as evidence the oral hearing or trial, etc.) Setting of date for mediation hearing: The judge sets a date for a mediation hearing, sometimes also * called a 'pre-trial conference,' and notifies the parties of the hearing date. Mediation hearing: The judge during this informal meeting with the parties encourages them to settle the 17 case. The judge acts as mediator. If the case cannot be settled, the judge may draft a pre-trial conference report, after which the case may be allocated to another judg Request for closing of the evidence period: Plaintiff or Defendant requests the judge to close the evidence * period. 18 Closing of the evidence period: The court makes the formal decision to close the evidence period. Order for submission of final arguments: The judge sets the deadline for the submission of final factual 19 and legal arguments. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. Doing Business 2014 Argentina 95 No. Procedure 20 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 21 judgment. 22 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. 23 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 24 the law. Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse 25 Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented * by a lawyer during the enforcement of judgment phase. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 26 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a (private) bailiff. Plaintiff’s request for physical enforcement: As Plaintiff fears that Defendant might physically resist the * attachment of its movable goods, Plaintiff addresses a request to the judge or to the police authorities to obtain police assistance during the attachment of Defendant's movable goods. Judge's order for physical enforcement: The judge orders the police to assist with the physical 27 enforcement of the attachment of Defendant's movable goods. Plaintiff’s identification of Defendant's assets for attachment: Plaintiff identifies Defendant's assets for 28 attachment. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 29 assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report 30 on the attachment of Defendant's movable goods to the judge. Valuation or appraisal of attached movable goods: The court or court appointed valuation expert 31 evaluates the attached goods. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 32 newspapers. 33 Sale through public auction: The Defendant’s movable property is sold at public auction. 34 Judge's decision on bids: The judge determines the adequacy of the bids presented at public auction. Doing Business 2014 Argentina 96 No. Procedure Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 35 Plaintiff), according to the rules of priority. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 36 Plaintiff had advanced previously. 37 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Argentina 97 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Argentina 98 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 30.8 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Argentina? Globally, Argentina stands at 97 in the ranking of 189 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 2.8 years on average and 11.1). The rankings for comparator economies and the costs 12% of the debtor’s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Argentina. Figure 11.1 How Argentina and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Argentina 99 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Argentina is keeping up—and where it is or on the recovery rate (figure 11.2) help show what is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Argentina 100 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. “No practice” indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for “no practice” economies is 0. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Argentina 101 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Argentina (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Argentina made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Argentina 102 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Argentina 103 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Argentina other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Argentina 104 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Argentina adopt that contracting between employers and workers. Many affected the Doing Business indicators on employing economies that changed their labor regulations in the workers (table 12.1)? Table 12.1 What changes did Argentina make in employing workers in 2013? DB year Reform Argentina reduced the severance pay applicable in cases of DB2009 redundancy dismissals DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Argentina 105 EMPLOYING WORKERS What are the details? The data on employing workers reported here for lawyers and public officials. Employment laws and Argentina are based on a detailed survey of regulations as well as secondary sources are reviewed employment regulations that is completed by local to ensure accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy’s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 60 (Art. 93 - Ley 20.744) Maximum length of fixed-term contracts, including renewals (months) 60 Minimum wage for a 19-year old worker or an apprentice (US$/month) 635.1 Ratio of minimum wage to value added per worker 0.51 Source: Doing Business database. Doing Business 2014 Argentina 106 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 6.0 Premium for night work (% of hourly pay) in case of continuous 13% operations Premium for work on weekly rest day (% of hourly pay) in case of 50% continuous operations Major restrictions on night work in case of continuous operations? No Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 12.0 Paid annual leave for a worker with 5 years of tenure (in working days) 18.0 Paid annual leave for a worker with 10 years of tenure (in working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 18.0 working days) Source: Doing Business database. Doing Business 2014 Argentina 107 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2014 Argentina 108 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 4.3 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 8.7 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 8.7 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 7.2 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 4.3 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 21.7 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 43.3 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 23.1 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Argentina 109 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Argentina 110 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Argentina 111 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Argentina 112 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Argentina 113 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Argentina 115 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Argentina 116