Kirchner Targets Foreign Funds

Argentina president Cristina Kirchner has announced a number of measures she hopes will improve the country’s ailing economy. Among ideas being included in a bill to be sent to congress today is the repatriation of funds held abroad, which an Argentine economist – who asked not to be identified – says amount to around $150bn. Kirchner has said that funds declared but not brought back to Argentina will pay an 8% tax. Funds that are declared and brought back will pay a 6% tax and funds that are brought back and invested in local debt will pay a 3% tax. “It’s very strange, it’s a puzzling proposition,” says a Wall Street analyst covering the credit. Also, infrastructure, real estate, agricultural or industrial investments made with repatriated funds will be taxed 1%. Other measures announced include payroll tax reductions for businesses employing 10 people or fewer, and the creation of a ministry of production, which according to media reports will be headed by Debora Giorgi, who leads ministry of production of Buenos Aires province. “The measures announced by the president are likely to be largely ineffective to attract any significant amounts of investment or mitigate the effects of the global financial crisis on the local economy,” says Goldman Sachs. It adds that local and foreign investors remain concerned about macro stability, respect for property rights and the rule of law. “Instead of providing tax incentives, we believe the government should focus on strengthening all the latter to successfully attract meaningful amounts of investment by either local or foreign investors into the country,” says the shop.