A new bill in Argentina (the Bill) creates an incentive investment regime called the “RIGI” to foster significant investments in certain sectors.

Under the RIGI regime, the qualification as a “large investment” project requires that the project’s sponsor certifies that the acquisition, production, construction, and/or development of assets that involve an investment amount, per project and in computable assets, is equal to or higher than USD 200,000,000. The Executive Branch may increase such threshold per productive sector or stage up to USD 900,000,000. RIGI may apply to the following sectors: forestry, infrastructure, mining, energy and technology, tourism, oil and gas, and steel.

Large investment projects must comply with a minimum investment in eligible assets for the first and second year, counted as from the date of approval of the investment plan and the application to the RIGI. After the elapse of the first two years, this minimum investment must reach at least the equivalent of forty percent (40%) of the minimum investment amount, as a condition to keep the rights under RIGI.

The Bill mandates to provide a local supplier development plan, allocating at least 20% of the investment amount to hire local suppliers under competitive conditions.

In principle, there is a two-year term to join the RIGI as from the RIGI’s enforcement date.

Single project vehicles (SPVs) with an investment in computable assets equal to or greater than USD 1 billion in projects that may place Argentina as a new long-term supplier in global markets in which it does not have a relevant participation may be qualified as “long-term strategic xxports” and secure and vest the benefits and incentives described below.

A project qualifies as long-term if the ratio between the net present value of the expected cash flow (excluding investments) for the first three years counted as from the first capital disbursement, and the net present value of the projected capital investments during that same period is not higher than 30%.

The following investments may qualify as computable assets to comply with the minimum investment requirements, among others:

1. Acquisition, production, construction, and/or development of assets affected to projects included in the RIGI
2. Acquisition of units, shares, and/or equity interests in corporations, if applicable requirements and limitations are met
3. Acquisition of units, shares, and/or equity interests in a VPU
4. Land or property,
5. Usufruct rights on land or property
6. Mining, oil, and/or gas concessions.

In addition, all assets allocated to the execution of the investment project, regardless of their qualification as investments in computable assets and of the form of contract they were affected thereto, shall be comprised in the incentives, rights and guarantees provided for in RIGI.

Suppliers of goods and services with imported commodities may adhere to the RIGI provided that their imports shall be used for registered VPUs.

The following entities may qualify as VPUs:

1. Public limited companies, including sole proprietorship companies and limited liability companies
2. Branches established by foreign companies under article 118 of the General Companies Law
3. Focused branches, defined in the Bill as the different companies or branches of a company that wish to join the RIGI and develop one or more activities that will not be part of the investment project
4. Joint ventures (such as UTEs) and other associative contracts.

Holders of concessions related to the execution and/or exploitation infrastructure construction works and/or provision, operation and/or administration of services that are performed in competition with other domestic or regional concessionaires, operators or providers and suppliers of goods or services with imported merchandises, may join the RIGI if they comply with both of the following:

1. Present an investment plan that qualifies as a large investments under RIGI
2. Satisfy the other requirements and conditions for their inclusion in RIGI.

 To continue reading this article, including its discussion of tax- and customs-related benefits, as well as issues involving the Foreign Exchange Regime, guarantees, and stability, please read the full article published by Ally Law’s Argentina member firm, Richards, Cardinal, Tützer, Zabala, Zaefferer (RCTZZ) Abogados.