The ruling coalition scored two key legislative victories on Wednesday as the Chamber of Deputies approved both a new investment incentives regime for emerging industries — dubbed “Super RIGI” — and a settlement with hedge funds holding bonds from Argentina’s 2001 default.

The new Incentive Regime for Large Investments in New Industries (RIGI for New Industries) offers tax stability and foreign-exchange benefits for 30 years to projects worth at least US$1 billion in sectors considered new or still in their early stages of development in Argentina.

While the agreement to pay the so-called “holdouts” means the country can put an end to lengthy litigation over bonds issued before the country defaulted on its debt in December 2001. 

“Vulture funds”

On Wednesday afternoon, the Lower House sanctioned a US$171 million payout to hedge funds Bainbridge Ltd. and Attestor Value Master Fund, which the Senate had approved earlier in June.

The investment groups purchased defaulted Argentine bonds and refused to participate in the country’s major debt restructurings in 2005 and 2010, as well as a 2016 settlement reached with most remaining holdout creditors.

Instead, they sued the country in United States courts, triggering a discovery process aimed at identifying Argentine assets that could potentially be seized to satisfy the claims. 

Under the terms of the litigation, Congress had until June 30 to approve the settlement.

Defending the deal, libertarian Deputy Alberto “Bertie” Benegas Lynch described the default as an “infamous” episode and said Congress had an opportunity to “heal this wound of international dishonor.”

Opposition lawmaker Itaí Hagman criticized the agreement, arguing that “what is being discussed here is paying vulture funds, even if the government refers to them as holdouts.” 

He said the administration’s economic strategy was focused on reducing country risk “in order to plunge Argentina into debt once again.”

The agreement was sanctioned with 139 votes in favor and 91 against.

‘Super RIGI’ approved

Promoted by the Economy Ministry, the bill — which must now be voted on by the Senate — seeks to attract large-scale investments in high-tech sectors through a package of tax, customs and foreign-exchange incentives. 

The regime applies to projects in activities that are either not currently developed in Argentina or remain at an experimental stage.

The initiative passed by 130 votes to 106, with seven abstentions. Support came from La Libertad Avanza, PRO, the UCR, MID and several provincial allies. Unión por la Patria, Provincias Unidas, the Coalición Cívica and the Left Front voted against.

To secure broader backing, the government incorporated several changes during committee discussions, including a requirement that at least 20% of project inputs be sourced locally, incentives for research and development spending, a public project registry and a formal evaluation process for extensions.

During the debate, Benegas Lynch argued that “capital goes where there is business and institutional security,” while Unión por la Patria Deputy Mario Manrique said the proposal amounted to “a deal between private individuals.”

“We need investments and we are not against capital,” Manrique said. “But we cannot allow so many benefits to be granted to investors whose exact activities remain unknown, to the detriment of those who have been producing and creating quality jobs in Argentina for many years.”

Key provisions

The regime applies to projects involving at least US$1 billion in investment, with 20% committed within the first two years. It includes:

• A five-year window to join the regime and 30 years of regulatory stability backed by international arbitration.
• A reduced corporate income tax rate of 15%, compared with 25% under the standard RIGI.
• A prohibition on participating jurisdictions imposing new local taxes, and a 0.5% cap on gross turnover taxes in adhering provinces.
• Unlimited carry-forward of tax losses.
• A 3.5% tax rate on dividends and distributed profits.
• Exemptions from import and export duties linked to approved investment plans.
• A reduction in employer social security contributions to 10%.
• A research and development incentive allowing each dollar invested in R&D to count as two dollars toward the US$1 billion threshold.
• A requirement that at least 20% of total project spending be directed to local suppliers.