Utility prices remain frozen, sectoral bottlenecks are emerging, while inflation has accelerated sharply. On the fiscal side, Argentina has restructured the majority of the sovereign bonds defaulted on in December 2001.

In January 2006 the government of former president Néstor Kirchner (2003-2007) put an end to thorny relations with the International Monetary Fund (IMF) by fully repaying its debt to the entity. Uncertainty now hinges on the absence of any programme with the international institution in that the Fund no longer has any sway over the formulation of economic policy. On the political front, the 2005 legislative vote allowed Kirchner to extend his grip on the legislative apparatus and move away from the weak mandate he inherited from the 2003 presidential elections.

He enjoyed eased governance for the remainder of his term, and coasting along on high approval ratings, endorsed the candidacy of his wife, Senator Cristina Fernández de Kirchner, to the presidency. Direct assimilation of the Kirchner couple to the economic recovery ensured her a first-round win. Her 2007-2011 term will bring her to address a series of persistent challenges. Crime remains a top concern for Argentina and piquetero protests, while on the decline, are still staged sporadically, which attests to their disruptive strengths.

The issue of manipulation of inflation figures, which emerged in January 2007, is also to be addressed, along with damage limitation in terms of trust in official figures. On the operational front, corruption, generally weak institutions, and a rising anti-foreign sentiment constitute hurdles to an optimum business environment. Argentina is in dire need of infrastructural upgrades but it is still ahead of most of its Latin American counterparts. Overall the 2001 financial crisis has resulted in significant legal and tax regulation volatility, which has relatively—though not fully—stabilised.

Security: Risks

Public anger at the lengthy recession and widespread disillusionment with the political and economic situation of 2001 initially triggered regular mass demonstrations in the capital, Buenos Aires, and other urban areas.

Violent incidents occasionally arose from these; however they have been, and remain, trouble-free. The frequency of demonstrations has been on the decline since 2004 but occasional sector-inspired strikes or marches do occur.

The year 2007 saw its fair share of protests from the agricultural and educational sectors to name but two—bringing, in some cases, provincial governments to the brink of collapse.

Overall however, federal stability is assured and provincial crises have been addressed in the short term. The piqueteros, a far-left movement that emerged in the wake of the crisis, remains a powerful disruptive force at times.

Since August 2005 however, the government has moved away from a stance of tolerance for piquetero action, bringing some relief to the much-disrupted capital. The departure of a piquetero leader from government in 2006 further contributed to the government distancing itself from the movement. Along with street protests, crime soared in the aftermath of the crisis—kidnappings peaked, casting fear of an Argentine drift towards a Venezuela-like abduction culture.

However, both 2006 and 2007 figures suggest a moderation in crime rates in both the district and the city of Buenos Aires, but opinion polls reveal that security remains a source of primary concern, despite the crime rate remaining low by Latin American standards.

Major Issues: Outlook Public Security and Police Corruption Dominate Security Debate: In the run-up to the Argentine election, thetheme of security once again gained prominence as Argentines expressed anger at the murder of three policemen on government premises in October 2007. Security never left the list of the public's top concerns, but the killings gave a more dramatic edge to the issue and, referred to in electoral speeches, promoted its position as a key governmental challenge for the new Cristina Fernández administration—both at the provincial and federal levels.

The specific theme of police corruption and abuse also gathered pace following this triple murder, which was seen as symbolic of a culture of extra-judicial killings to settle scores. Security has improved since the sharp deterioration prompted by the latest 2001-2002 economic collapse, but Buenos Aires and its province, in particular, remain the focus of rising crime rates, the nation's highest. Such concerns will continue to affect investors as well, though the Argentine situation will remain positive by regional standards.

Major Issues: Key Threats and Areas to Avoid

Visitors should remember to exercise particular caution when travelling in the Buenos Aires area and tourist hotspots, where they should remain on the alert for petty crime, which has failed to fall back to pre-crisis levels.

Kidnapping has increased significantly, although foreigners are not usually the target.

The economic crisis has also led to a plethora of public demonstrations, not just in the capital, Buenos Aires, but also nationwide. The vast majority have been non-violent, though serious rioting and looting has occurred. Such demonstrations are on the decline but may be powerful and disruptive at times.

Visitors to Argentina should not become involved in the possession, use or trafficking of illegal drugs. Penalties for these are severe and convicted offenders can expect long terms in jail or heavy fines.

Domestic: Crime and Policing

Levels of crime in general rose with the onset of the economic crisis. A study carried out in 2002 by the Nueva Mayoria Study Centre, a non-governmental body, revealed that there was a 166% increase in crime from 1991. In 2002, the centre found that there were 148 crimes committed every hour in the country. However, the situation has improved since then.

Although most crime is non-violent, upmarket residential areas, restaurants, and shops have increasingly been targeted for armed robbery. Petty crime is rife, particularly in Buenos Aires and popular tourist destinations such as San Telmo.

Foreign visitors are advised to take preventive measures in order to avoid pickpocketing and purse-snatching on the streets and on public transport. They should also be aware that criminals work in pairs or in small groups. There have been many reports of people having substances such as ketchup "accidentally" smeared onto clothing and while one member of the group offers to clean it off, the victim is robbed by another. It goes without saying that isolated and poorly lit areas should be avoided at night. It is also advisable to avoid carrying large amounts of cash or wearing expensive jewellery in public.

The level of crime has led to a public backlash. In October 2003 thousands of Argentines took to the streets of the capital demanding an improvement in the security situation. Kirchner was quick to take a tough line on crime upon taking office.

His government recognised the severity of the situation and acted to combat it.

In January 2005 the government released recent crime figures for Buenos Aires suggesting a reduction in homicides by 28.5% and robberies by 10.5% since January 2004. Crime still remains high, but Argentina enjoys better security records that most of its Latin American counterparts. Despite apparent improvement, recent polls (in May and September 2005) show that both unemployment and security compete for pole position as Argentines' main concern.

While a decrease has been registered, crime is still high compared with pre-2001 levels.

Organised Crime

Due to poor regulation and enforcement, Argentina was considered a medium- to high-risk centre for money laundering until the passage of new money-laundering laws in early 2000 and up to 2007.

The law levies fines and prison terms of two to 10 years for those caught laundering money in the country. It also established the Financial Information Unit (UIF), which works under the Justice Ministry to lead the government's anti-money laundering drive. Two cases in particular had justified increasing concerns that the country was becoming a centre for international drug-money laundering.

In November 1999 the widow and son of Colombian cocaine giant Pablo Escobar were arrested in Buenos Aires and accused of using the city as a base for money laundering. Also, at the end of 1999, police raided Buenos Aires bank Mercado Abierto, in which millions of U.S. dollars from a Mexican cocaine cartel had allegedly been laundered.

Although Argentina is neither a major producer nor consumer of illegal narcotics, there have been concerns raised over the past few years that the trafficking of cocaine from Bolivia and Peru is on the increase, as well as marijuana from Brazil and Paraguay. This has led to an increase in consumption within the country as drug cartels start to establish themselves in the country's slums.

However, the majority of the cocaine and marijuana that passes through the country is then smuggled out through the ports in Buenos Aires or via couriers on commercial aircraft. The authorities have taken measures to combat drugs trafficking and enforcement by the police is generally efficient.

However, undercover operations have been tainted by allegations of police corruption.

Crime Prevention

Upon taking power the Kirchner administration was quick to announce a shake-up of the police force. This was a key focus of the administration as it sought to restore the credibility of the country's institutions. It went through the force's ranks in an attempt to purge it of corrupt officers and its appalling reputation for corruption, particularly in Buenos Aires.

Many recent kidnappings and crimes have been linked to members of the police force.

In recognition of the country's burgeoning security problem, in April 2004 the government announced a new security plan, the Strategic Plan for Justice and Security, that includes the creation of a Federal Investigation Agency to combat organized crime. The plan then envisaged 6,000 new officers and has a budget of US$24 million. Exacerbating the problem and adding to popular frustration is the fact that corruption is pervasive in the police force, particularly the notorious Buenos Aires police force (whose members are locally known as Bonaerense). Eradicating corrupt elements will be a key focus.

Argentines have repeatedly taken to the streets, demanding an improvement in the security situation and protesting against corruption within the security services. Since the 2004 plans the government has often announced some new ad-hoc security  measure to appease popular discontent.

Domestic: Extortion

There is no report of severe and routine extortion practices targeting Argentina-based investors.

Domestic: Kidnapping

Kidnappings rose vertiginously, especially in Buenos Aires province, in the middle of the economic crisis that gripped the country. So-called "express" or "cash-on-demand" kidnappings in particular are becoming an ever-more-significant problem.

Figures released in July 2002 showed that such kidnappings had rocketed by 505% over the previous twelve months. In November 2003 the Attorney General's office revealed that 207 kidnaps for ransom were reported in the capital's suburbs in the first half of 2003 alone, amounting to over one a day (altogether 217 were reported). What is more, the government has admitted that police officers have been involved in these kidnaps, and given that many kidnaps have most likely gone unreported, the figure is possibly much higher.

In any case, the figure is up sharply from the 165 recorded for the whole of 2002. Express-kidnapping victims are taken and held for a matter of hours, until relatives come forward with instant, relatively modest quantities of cash. Upon taking power the Kirchner administration was quick to announce a crackdown on such kidnapping. In January 2005, the government stated that both extortive and express kidnappings in Buenos Aires had finally decreased by 40-46% since the previous January. In May 2005 Leon Arslanian argued that the government had dealt a crucial blow to kidnapping gangs. Juan Carlos Blumberg, whose son was kidnapped and murdered in 2004, hotly criticised the statement, alleging that kidnappings often go unreported and that the situation has actually worsened. Foreign investors should remain cautious and avoid external signs of wealth. To date foreigners have not been the prime target of kidnapping, though by their associated wealth they make a logical choice.

Domestic: Persecution and Political/Ethnic Violence

After the economic crisis, anti-government demonstrations and protests were occurring almost on a daily basis in Argentina.

In 2004 and 2005 their number significantly decreased, though they are still commonplace. While in the main they have been non-violent, many thousands may participate and those visiting the country are advised to avoid any large demonstrations or protests. To demonstrate the scale of the protest movement, some 16,965 protests were held by the public during the course of 2002, according to official figures. Over 25 people were reported killed during the period of mass public disorder that preceded the collapse of the Fernando de la Rua administration in December 2001. Another serious resurgence of anti-government rioting came in 2002, and two people were killed in the capital.

Banks became regular targets for Argentines during the crisis, as anger erupted at deposit withdrawal controls. In the main, public fury was limited to vandalism and cases of minor infrastructural damage.

Groups of piqueteros (consisting of the poor and unemployed) continue to block roads, protesting their situation. The rest of the population is becoming increasingly frustrated with this disruption to everyday activity. With the economy showing signs of life and former president Néstor Kirchner (2003-2007) taking control of the political situation, things eventually got calmer, though demonstrations still occur.

Common-sense precautions should also be observed at any large gathering where people have assembled to protest or demonstrate. It is advisable to contact the relevant embassy to find out about the potential for any industrial/social action in advance. The policy response favoured by the former Kirchner administration was a hands-off approach.

His government was clearly mindful of the impact the death of two piqueteros had during the presidency of Eduardo Duhalde, providing a focal point for anti-government opposition. However, the Buenos Aires public began to lose patience with the piqueteros and the government's failure to clamp down on their activities. They demanded more forceful intervention. In 2004 a change of tack in piquetero activity, targeting private companies in Argentina, raised specific concerns for foreign investors. In June that year the piqueteros, the majority belonging to the Independent Movement of Unemployed and Retired Workers (MIDJ), again marched on Congress reiterating their demands for jobs and unemployment assistance.

The more hardline protesters also occupied nine McDonalds restaurants and the Sheraton Hotel in the centre of town where an International Monetary Fund (IMF) delegation was staying, as well as targeting the offices of Spanish oil firm Repsol-YPF. In response the economy minister at the time, Roberto Lavagna (2003-2005), expressed concern over the impact of the repeated protests on Argentina's business climate—specifically, the impact on both local and foreign investment in the country as the country struggled to rebuild its economy following the 2001 default and devaluation—and said "maybe it is time to use more actively what the legal system permits" to control the demonstrators.

His comments heralded a shift in focus from the government in September 2005 when it got tougher on the movement with the aim of attracting the middle-class—alienated by frequent road/street blocks—ahead of the 2005 mid-term legislative election. In essence Kirchner forbade piqueteros from occupying the central Plaza de Mayo, as well as certain streets and bridges. In addition, piqueteros now need the prior authorisation of the government before demonstrating. They continue to show their disruptive potential, though their influence in the previous government diminished notably with the ousting of their leader, Land and Social Housing Secretary, Luis D'Elia.

Domestic: Terrorism

Argentina's image abroad has been tainted by the high level of anti-Semitism that appears to exist in the province of Buenos Aires. In March 1992, 28 people were killed when a car bomb exploded outside the Israeli embassy there. In July 1994, another car bomb exploded outside the offices of the Israeli-Argentine Mutual Association (AMIA), killing 86 people.

The Lebanon-based Hizbollah extremist group was implicated, as was the then-Iranian ambassador to Argentina, and there were even initial allegations that the police were involved. The Iranian government was thought to have masterminded and carried out the AMIA attack, and it was claimed that the Argentine president at the time, Carlos Menem (1989-1999), accepted some US$10 million in order to cover up Iran's role in the bombing.

Investigations suggest armed Hizbollah member Ibrahim Hussein Berro, aged  21 at the time, carried out the attack, driving the truck that exploded—such revelations were made 11 years into the probe, in November 2005. He is believed to have illegally entered the country via the porous so-called "tri-border region" between Argentina, Brazil, and Paraguay. In 2006 the judiciary, with implicit approval from the Kirchner government, issued international arrest warrants against a former Iranian president and top officials, including former diplomatic staff in the Islamic Republic’s Buenos Aires-based embassy. The protracted investigation into the event has been controversial, and so has been its outcome. Failure to shed light on the attack and bring individuals to justice is casting doubt on the country's ability to deal with such events in the future.

Beyond the aforementioned events, renewed attention has been paid to Argentina and its "terror potential" in the wake of the 11 September 2001 attacks in the United States. Focus on the tri-border region, which has long had a reputation for harbouring drug traffickers, arms dealers, terrorists, and criminals from around the world, intensified.

Of the approximately 630,000 who live in the area, some 25,000 are thought to be from the Middle East or of Middle-Eastern descent. It is here that the Argentine authorities believe the AMIA attack was planned, and where Hizbollah and Gama'a al-Islamiya are almost certainly active, particularly in raising funds. The relative ease with which money can be laundered in the region is a godsend for terrorist groups. Since September 2001, there is also thought to have been increasing co-operation between al-Qaida and Hizbollah. The first official statement of al-Qaida links to this region appear to have come from Argentina's Secretariat of State Intelligence (SIDE) in 1999, which it passed onto other intelligence agencies. Several U.S. officials seem to believe that al-Qaida is present and planning an attack, and these fears seem to be justified.

In November 2003 the government said it had received information from national intelligence services and two foreign intelligence services that an attack might be on the way. That information referred to U.S., British, and Spanish targets. Then, in December 2003, 16 Bangladeshi citizens were detained at Santa Cruz airport in eastern Bolivia, in a joint operation with French intelligence  officers. The French authorities believe the men were looking to hijack an aircraft bound for the Argentine capital. While the attentions of Islamist militants in Argentina have until now largely focused on the country's sizeable Jewish community, the threat now seems to have a wider target.

The apparent shift in focus would seem to back up the notion that links have developed between Hizbollah (and others) and al-Qaida in the region, and that al-Qaida is operational there.

The authorities have made efforts to improve security and surveillance in relation to foreign-based extremists, but the threat remains real.

Low-Scale Terrorist Attacks

In November 2004 bombs directed at foreign investments exploded in Buenos Aires. The attackers remained anonymous. In October 2005 five incendiary and anti-U.S. pamphlet bombs exploded in the capital, once again targeting U.S. interests in particular. The blasts only caused structural damage. American video-rental chain Blockbuster, Citibank, Ford and a subsidiary of BankBoston were the chief victims.

Two unknown groups, with Spanish-sounding and anti-imperialist-inspired names, claimed responsibility. The perpetrators of the attacks were said to be protesting against U.S. President George W. Bush's presence at the IV Summit of the Americas, which was to take place a few weeks later. The high profile three-day gathering, bringing together 34 presidents of the western hemisphere, raised some concerns about how best to ensure the safety of the prestigious attendees. The airspace around Mar del Plata was closed off to avoid a terrorist attack from the air.

The Summit generated much worries about potential terrorism, but once it was over the country's terrorist risk level returned to "normal". However, it is as well to be aware of the possibility of an anti-imperialist movement, with terrorist tendencies, particularly taking into account Argentina's past record of terrorist activities.

In March 2006, a day before the 30^th anniversary of the 1976 coup that led to a seven-year dictatorial rule, two minor bombs were planted at showrooms owned by Ford and Mercedes-Benz. Both firms had been accused of conspiring with the repressive military regimes. The "Rodolfo Walsh group", named after a journalist who was "disappeared" during the dictatorship, claimed responsibility for the attacks, pointing to a revenge-motivated action.

The minor blasts in 2005 and 2006 hardly suggest the creation of strong terrorist groupings in the country, notably the capital, but rather the propensity for minor ad hoc and politically symbolic attacks to take place. They mainly target physical assets rather than seeking major destruction and human harm on the scale of the AMIA bombing. In essence they seek to gather attention—with a political dimension to the attacks—rather than spread terror.

Terrorist Groups

Hizbollah (Party of God)

Hizbollah is a radical Shi'a group which is vehemently anti-Israeli. It was formed in 1982 when Israel invaded Lebanon, and is known to receive financial assistance, training, weapons, explosives, political and diplomatic support from Iran, as well as more limited support from Syria.

Hizbollah is widely believed to have been responsible for the 1994 AMIA bombing and the Israeli Embassy bombing in 1992, and is known to be present in the tri-border region where it is also involved in fundraising activities. There is thought to have been increasing co-operation between al-Qaida and Hizbollah. The first official and public statement of al-Qaida links to the area appear to have come from Argentina's Secretariat of State Intelligence (SIDE) in 1999, which it passed onto other intelligence agencies outlining links between al-Qaida and other Islamist militant groups in the tri-border area.

Al-Qaida

The group established by Osama Bin Laden is thought to have some presence in the tri-border region. Indeed the investigation into the AMIA bombing, which implicated Hizbollah, also suggested that Bin Laden may have been in some way connected. The evidence to back up the claim of Bin Laden's involvement is sketchy to say the least, but the attack was carried out along the same lines as those against the U.S. embassies in Kenya and Tanzania in 1998.

Since the 11 September 2001 attacks in the United States, however, there is thought to have been increasing co-operation between al-Qaida and Hizbollah. A statement from Argentina's SIDE in 1999, passed on to other intelligence agencies, outlined links between al-Qaida and other Islamist militant groups in the tri-border area. Several U.S. officials seem to believe that al-Qaida is present and planning an attack. Given that al-Qaida serves as a focal point for a worldwide network that includes members of Gama'a al-Islamiya, this comes as no surprise.

Gama'a al-Islamiya

Gama'a al-Islamiya is Egypt's largest terrorist group, although it is thought to have been damaged by a split in 2002 between members favouring violence and those advocating peaceful action. A ceasefire was agreed in March 1999, but spiritual leader Shaykh Umar Abd al-Rahman withdrew support for that in June 2000. In 1998 several members signed Osama Bin Laden's fatwa in February 1998 calling for attacks against the  United States. For those still intent on the violent struggle, the main goal is to overthrow the secular Egyptian government and replace it with an Islamic state. In Argentina the group is present in the tri-border region, but its activities are likely to remain confined to raising funds. It is thought that the group has links to the Iranian government and al-Qaida.

Counter-Terrorism

The intelligence services, the Secretariat of State Intelligence (SIDE) and the National Intelligence Centre (CNI) are responsible for counter-terrorism activities. Since 11 September 2001 co-operation with the United States has been stepped up.

Argentina has also worked, as advised by the United States, on legislation aimed at preventing financial transfers to individual and/or organisations supporting terrorism. Argentina has been striving for some time to change the current lax legislation, which does not oblige banks to report "dubious" intra-family transactions. In mid-2007 Argentine lawmakers approved an anti-terror bill to bring the country's legal framework in line with international standards. Amendments provide for convictions for crimes such as “illicit association” with any group that is conspiring to commit acts of terrorism. It casts a wide net in terms of what is defined as terrorism, including politically and ethnically motivated attacks. Jail sentences have been introduced for those found in the possession of explosives, firearms, and materials that could be used for chemical and biological attacks. Counter-terror-financing measures were also introduced.

External: Threats

Argentina still retains its claims of sovereignty over Las Malvinas/Falkland Islands. It is extremely improbable that the issue will be anything more than a point of diplomatic discussion in the foreseeable future. Politicians have traditionally been firm that Argentina has sovereignty over the islands in order to garner popular support, and the previous Kirchner administration was no different in that respect. However, it is questionable as to whether sovereignty of the islands remains a burning issue for the electorate. Since Argentina returned to civilian rule after its disastrous attempt to win back the islands, the public have become fairly resigned to the status quo.