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Bloomberg

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Argentine Tech Industry Earns Billions of Dollars Off the Books

Companies and freelance workers aim to avoid FX controls

Argencon says currency distortions cause “brain drain” in tech

An Argentine flag stands on display in Plaza de Mayo in Buenos Aires.

Billions of dollars in Argentine technology exports are going unreported as companies and freelance workers skirt currency controls, according to an industry group.

About $2.2 billion of service exports from the country’s technology sector may go unreported in official data this year, according to Luis Galeazzi, executive director of Argencon, an advocacy group that published its semiannual report on Thursday. Last year, the figure was about $1.8 billion, Galeazzi said.

The phenomenon is due to the distortions caused by the nation’s different exchange rates, which create incentives to under-report export earnings. Two forces are at play. On one hand, high-skilled tech workers are increasingly taking jobs off the books as freelancers to earn dollars from companies abroad.

On the other, some Argentine tech firms aren’t registering all their service exports to avoid a local law that they must exchange dollars for pesos at the official rate of 114 pesos per dollar, well below the parallel rate of 205 per dollar, a benchmark for tech salaries.

To retain workers with dollar-denominated salaries, some local companies don’t declare service exports, even if the employee is based in Argentina. Earlier this year, Galeazzi estimated that between 100,000 to 200,000 tech workers are living in Argentina but working off the books, outside the formal economy.

The growing tech sector is one of Argentina’s biggest success stories in recent years. Government data show that the sector has added about 50,000 new jobs since 2017, while many others were shedding payrolls during a severe recession. Yet official data aren’t capturing this growth: the country’s tech exports are still below levels seen in 2018, as so much of the activity goes unreported, according to Argencon.

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