Buenos Aires Weather | Capital controls on tech companies and easing employees to stop ‘brain drain’

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The Argentine government has announced that it will grant companies in the information technology sector better access to foreign exchange markets in order to increase their exports compared to last year.

The new measure envisages “the sector’s access to the foreign exchange markets for half of the growth of their exports as long as this is exclusively reserved for 20% of the wages paid”.

This week, IT businessmen learned about the new situation through the mouth of the horse – or rather the three main horses of the economic sphere.

“Today we were received by [Economy Minister Martín] Guzman, [Productive Development Minister Matías] Kulfas and the Governor of the Central Bank [Miguel Pesce] to inform us of the standard, although we do not yet know the instrumental aspects”, explained the executive director of Argencon, Luis Galeazzi, in dialogue with Profile Thursday.

Last year, Argentina’s information technology and knowledge-economy sectors suffered from what experts called a “brain drain”, with its exports falling, estimated by Argencon at 1, 8 billion dollars in a “hostile climate” for companies. Employees are leaving formal employment in favor of off-the-books work for foreign companies by “earning cryptocurrencies and exchanging them for blue (parallel) dollars,” Galeazzi said.

“It addresses a core issue in our business which is talent retention,” he said, in connection with the relaxation of capital controls for these companies.

“Having no dollars, these companies cannot compete with dollar compensation offers from outside for employees to resort to the informal market, leading to an exodus from the formal economy that has been estimated at 1.8 billion dollars, a central issue detrimental to the ability of companies to maintain their working capital”, explained Galeazzi.

Development

The measure aims to “promote the development of the sector and its exports, stimulate new projects, retain Argentine talent and promote the accumulation of reserves”, according to the government.

The measure will be made operational via a communication from the monetary authorities allowing the sector to access the foreign exchange markets for half of the growth in its exports, provided that this is exclusively affected up to 20% of the wages paid,

In addition, self-employed workers in the sector will be able to earn up to $1,000 per month abroad without having to cash it in at the official exchange rate.

Guzmán stressed that this initiative aims to benefit the IT sector and improve “Argentina’s learning capacity” and pointed out that the state has redefined the use of public funds to invest more in science, technology and education, describing the IT sector as “very important for adding value, creating jobs and bringing in foreign currency.

Kulfas said that the measures announced by the government “are important to give more dynamism to the exports of the very dynamic IT sector. We have a growth plan to allow this sector to increase by 1,000 formal jobs every month, also a key to retaining talent in a global context where competition for qualified human resources is enormous. Argentina has this potential and we must be able to develop it to its full extent.

Pesce elaborated on the measure to his business audience, noting that the government has decided “to move forward with companies exporting very valuable services because they create jobs and use an important resource like human capital.”

The Central Bank Governor also said that exports “are growing strongly by around 25% in the first third of the year, which provides a good outlook.”

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