Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Friday, September 18, 2020

Knowledge Economy Law remains on hold in the Senate

The project that proposes to modify aspects of Law 27.506 - establishing the Regime for the Promotion of the Knowledge Economy- is on hold in the Senate of the Nation pending its treatment and approval.

At the beginning of 2020, the government of the Frente de Todos proposed to introduce changes to the law approved by congress in May 2019. The reason for the alliance in power was to ensure that the law considered the interest of large operators in the sector such as Mercado Libre but also that of micro, small and medium enterprises.

The changes consisted of reducing the requirements for micro, small, and medium-sized enterprises to join the regime. The percentage of the wage bill for training was lowered to 3% for micro, to 5 for SMEs, and remained at 8% for large companies. The investment required in research and development was also reduced to 1% of the turnover for micro, 2% for SMEs and for large it remained at 3%. In addition, the percentage of exports of goods or services required fell to 4% for micro-enterprises and 10% for SMEs, and remained at 13% for large companies.

A modification of article 7 on stability of benefits and article 9 on additional incentives was also proposed. In income tax established that the beneficiaries will have a 60% reduction. Lastly, the modification includes the creation of the Fonpec (Trust Fund for the Promotion of the Knowledge Economy).

The project advanced in deputies but when it reached the Senate it stagnated. The explanations range between the impact of the Covid-19 pandemic that affected the development of legislative work and the obstacles of political origin, in which, officials say, the internal nuances of the national government are manifested.

In the months that the law has been delayed, companies interested in the regulation lamented the issue at different levels of intensity while the government claims to share the discomfort of the private sector. On one side and the other, the sources acknowledge that they imagined that at this time of year the law would be a reality, especially due to the impetus that the activities included in the quarantine had.

Attention is then diverted to the Senate but their sources attribute the delay to a simple matter of "agenda priorities", which are common in parliamentary work and which, they argue, were complicated due to health reasons.

The political interpretation is more complex. The text came out of Deputies on June 26, well into the quarantine. In that instance, the delay was not minor, but the project left the premises with a broad consensus of all sectors. With that level of political agreement as a precedent, the expectation of the sector was that the next phase would be a procedure. But the bill entered the Senate on August 2 with no progress since then. 

The last thing that happened was the treatment in the Budget and Communications Committees in the first week of August. 

One interpretation suggests that Article 2 of the text, which lists the activities that will be included within the regime, generates resistance from the faction of the ruling alliance that responds to Vice President Cristina Fernández de Kirchner. The argument is that this article has a gray area that favors the large companies of a group in which Mercado Libre stands out, Marcos Galperín's company. According to this version, the market is betting on a mediation by President Alberto Fernández to unlock the situation.

But that look may be the result of a lack of clear information. Close to a legislator very identified with the political color of the vice president, they assured that they share the surprise with private parties: "There are no mysteries involved or anything relevant that prevents treatment."

On the Executive side, the Secretary of the Knowledge Economy, María Apólito, author of the changes that were approved in the Chamber of Deputies, is one more on the list of people who do not know the reasons for the failure in the Senate as recognized by this media.

Incidentally, the Ministry of Productive Development to which this agency reports awaits with particular anxiety the exit of the Knowledge Economy Law in a year with some important troubles.

The Matías Kulfas administration has just relaunched measures for the industry this week without much praise from the sector. In his quarantine, the official had serious problems dealing with the food factories and the increases in retail prices, an issue of deep social sensitivity that was aggravated by the emergency. And lastly he suffered the loss of the Energy area that President Fernández decided to transfer to the orbit of the Ministry of Economy of Martín Guzmán whose figure was affirmed after the negotiation with debt creditors.

In the back and forth of the confidence, there was no shortage of those who suggested that the delays in the Senate could be due to the action of forces interested in contributing to the contradictions suffered by that Ministry, but that may also be part of the hallucination.

The approval of the regime would be great news for Kulfas in his objective of promoting activities with export potential and attracting foreign currency. But strictly speaking, it really would be for the economy in general given the trend that is ready to leave the passage of Covid-19 through the country, the region and the world, and also considering the shadow that seems to be cast over the future of employment.

Companies meanwhile move their chips. Argencom, the most important chamber in the sector, presented its new president Sebastián Mocorrea, who took over as president in replacement of Roberto Alvarez Roldán. Mocorrea is a lawyer with a long history in the corporate world, who came from being vice president of Corporate Affairs, Communication and Marketing at YPF during the government of Mauricio Macri. The market considers him a high-class lobbyist and is betting on that he is the one to untie the knot of the Senate.

 

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