Taxation, Investment and Competitiveness in a Changing International Landscape: A Latin American Perspective

1.     Current international tax landscape’s impact on LATAM

The current international tax landscape from a Latin American perspective can be described in just three words: Fragmentation, uncertainty and pragmatism.

Fragmentation, because we are probably witnessing the end of a period of relative international convergence.

Over the past two decades, we witnessed a process of increasing coordination, led primarily by the OECD. The BEPS Project, the Multilateral Instrument (MLI), automatic exchange of information through CRS, and, ultimately, the Two-Pillar project all appeared to be leading towards an increasingly uniform international tax system. Today, that landscape has changed profoundly.

Geopolitical priorities have, to a considerable extent, displaced purely tax-related priorities. Economic competition, national security, industrial policy and international trade are once again significantly influencing the design of tax policies. The result is a world in which international cooperation continues but increasingly coexists with regional tensions [North versus South, West versus East (e.g., The United States v. the European Union)], and unilateral measures everywhere.

Latin America experiences this fragmentation particularly intensely because it simultaneously depends on investment from the United States, Europe and Asia, whose approaches are beginning to diverge.

At the same time, Latin America finds itself navigating between two emerging centers of international tax policymaking: on the one hand, the OECD, through the region's member countries — Mexico, Chile, Colombia and Costa Rica — and the broader group of countries participating in the Inclusive Framework, including Argentina, Brazil, Bolivia, Ecuador, El Salvador, Guatemala, Honduras, Panama, Paraguay, Peru, the Dominican Republic and Uruguay; and, on the other hand, the growing role of the United Nations through the UN Framework Convention on International Tax Cooperation and its protocols.

The second defining characteristic is uncertainty. We still do not know the ultimate fate of Pillar Two, the pace at which many of its rules will be implemented throughout the region, or the OECD's response to Brazil's (and potentially others) request for Side-by-Side (SbS) treatment. Even the QDMTT — essentially a defensive mechanism within GloBE against the application of the IIR by another jurisdiction — remains relatively uncommon in Latin America, with such rules, or comparable mechanisms, currently found only in Brazil, Colombia and Uruguay.

Nor has the region adopted a single or uniform response to the issues originally addressed under Pillar One. Latin American countries appear, however, generally more incline to withholding-tax-based solutions similar to Article 12B of the UNMC than to digital services taxes of the kind adopted in several European jurisdictions.

There is also uncertainty surrounding the very governance model of international taxation: Whether the OECD will remain the principal international tax standard-setting forum, what role the UN Framework Convention will ultimately assume, and how the two processes will coexist.

Underlying all of this is a broader issue: how much tax sovereignty will countries ultimately be willing to relinquish in post of a greater international tax cooperation? For Latin America, this is particularly important. The region needs to preserve its competitiveness in attracting FDI while remaining engaged with evolving international standards.

The third defining characteristic is pragmatism.

Latin American countries are increasingly adopting a practical rather than ideological approach. The region continues to participate actively in multilateral processes while, at the same time, placing greater emphasis on its own development needs. Tax administrations will continue strengthening transparency, information exchange, digitalization and international tax enforcement capabilities. But we are also likely to witness a greater willingness to use tax incentives, special regimes and investment-promotion policies where justified by economic objectives. In other words, economic efficiency is likely to regain a central place in the design of tax policy.

Against this background, at least five issues are likely to dominate the region and overall international tax agenda in the coming years.

First, the future of Pillar Two and the reshaping of GloBE, probably through a considerably less uniform implementation than originally envisaged.

Second, the emergence of the United Nations as an increasingly relevant international tax standard-setting forum, reflecting the aspiration of developing countries to have a significantly greater role in shaping the international tax architecture.

Third, the taxation of the digital economy, a debate that is far from over and will likely continue producing domestic solutions for as long as a genuinely global consensus remains elusive.

Fourth, the strengthening of tax administrations through technology and artificial intelligence. International tax cooperation will increasingly depend not only on exchanging information, but also on the ability to process enormous volumes of data in real time.

And fifth, the growing interaction between taxation, international trade and industrial policy. It will become increasingly difficult to analyze a tax measure without simultaneously considering its effects on global supply chains, the relocation of investment and trade relationships.

For many years, the international tax debate centered on whether the system was moving towards genuine harmonization. I believe the issue is now changing. The relevant challenge will no longer be whether we will have a single international tax system, but rather how we manage the coexistence of multiple supranational centers of tax rulemaking, on one hand, and unilateral policies toward investment, industrial growth, and trade, on the other.

From a Latin American perspective, the answer will probably involve remaining actively engaged in these forums, preserving legal certainty for investors and, at the same time, retaining sufficient flexibility to address domestic development priorities.

Ultimately, the challenge is not to choose between cooperation and sovereignty, but to find an intelligent balance between the two.

2.     Argentina and Pillar Two: A Different approach

Argentina has not yet implemented any of the GloBE rules: It has not introduced a Qualified Domestic Minimum Top-up Tax (QDMTT), nor has it incorporated the IIR or UTPR into domestic law.

As a result, where a top-up tax arises in respect of Argentine operations, it might be collected by the jurisdiction of the UPE or by another jurisdiction applying an IIR or UTPR. Argentina therefore potentially runs the risk of surrendering potential tax revenue to other jurisdictions without participating in that additional collection.

Although Argentina has not adopted a QDMTT, its domestic legislation has long been concerned with a related issue: preventing Argentine tax incentives from increasing the tax revenues of foreign jurisdictions instead of benefitting the targeted taxpayers. Article 28 of the Argentine Income Tax Law and, more recently, Article 196 of Law 27,742 –the piece of legislation establishing the Large Investment Incentive Regime (RIGI)-- contain provisions intended to prevent certain domestic tax benefits from being granted where their economic effect would be to generate a top-up tax payable abroad.

In other words, although Argentina does not itself collect the top-up tax, it seeks to prevent incentives financed by the Argentine Treasury from ultimately being appropriated by a foreign tax authorities, though different mechanisms including top-up taxation under GloBE. This is not equivalent to a genuine QDMTT, since the top-up tax, theoretically, continues to be collected outside Argentina. But it responds to the same underlying economic concern: preserving the effectiveness of domestic incentives and preventing them from becoming merely a source of revenue for foreign tax administrations.

The approach deserves attention because it differs from that adopted by most jurisdictions internalizing GloBE. While a QDMTT seeks to preserve the minimum-tax revenue domestically, the Argentine solution seeks to preserve the economic value of the tax incentive. If the benefit would merely result in a transfer of revenue to a foreign tax authority, e.g., by application of an IIR, the tax incentive is neutralized and is not granted to the taxpayer.

So far, there is no conclusive evidence showing that Pillar Two has significantly altered investment behavior in Argentina.

There are several reasons for this. First, Argentina has historically faced macroeconomic challenges, including high inflation, foreign-exchange restrictions that are only now being dismantled, and regulatory volatility, that have been considerably more important to investment decisions than the potential application of GloBE rules.

Second, Argentina has never been a jurisdiction whose competitiveness depended on low corporate income taxation. Quite the opposite: Argentina maintains one of the higher nominal corporate income tax rates in the region. The direct impact of Pillar Two is therefore naturally more limited than in jurisdictions whose investment strategies relied heavily on low-income tax rates or aggressive tax incentives.

Nor has Argentina undertaken a general redesign of its investment incentives specifically in response to GloBE rules. The most significant example is undoubtedly the Large Investment Incentive Regime (RIGI), introduced in 2024, together with the proposed "Super-RIGI," which has already received approval from the Chamber of Deputies and it is principally aimed at projects involving artificial intelligence, data centers, semiconductors, biotechnology, electric mobility and other high-technology industries.

The RIGI's principal objective is to restore competitiveness through long-term regulatory stability — including 30 years of tax, customs and foreign-exchange stability — for large-scale projects, generally involving investments exceeding USD 200 million, with higher thresholds applying to particular industries. The regime is particularly relevant to mining, energy, oil & gas, infrastructure and strategic industries.

From a GloBE perspective, RIGI has particularly interesting characteristics. Many of its most important benefits do not take the form of permanent reductions in income taxation. Instead, they involve fiscal stability mechanisms, customs benefits, foreign exchange incentives and other investment-promotion measures, including indirect tax measures that, in principle, should not significantly reduce the effective income tax rate calculated under the GloBE rules.

The corporate income tax rate applicable under RIGI is a flat 25%, corresponding to the lowest rate of the general 25%-35% corporate tax scale, while the additional tax on dividends is reduced from 7% to 3.5% beginning in the seventh year of the project.

For this reason, the regime does not appear to create significant difficulties for in-scope multinational groups, and that is one of the reasons why RIGI is so attractive (thus far, investments compromised under RIGI amount to US$ 45 Billion). RIGI can therefore be viewed as an interesting example of indirect adaptation to the GloBE environment. It was not specifically conceived as a response to Pillar Two, but its design appears reasonably compatible with the GloBE rules.

There is a particular case worth mentioning in connection with potential GloBE impact: This is the Tierra del Fuego special tax regime which provides tax exemptions for qualifying manufacturing activities in the territory, including products subsequently sold in continental Argentina or exported. In practice, however, these benefits are granted to Argentine-owned companies that manufacture under toll-manufacturing arrangements with international brands. As a result, the benefits generally fall outside the GloBE scope and do not generate a top-up tax.

There is, however, an important technical issue that deserves particular attention, especially for Argentine subsidiaries of European in-scope multinational groups: the treatment of tax inflation adjustments in Argentina.

Although inflation has fallen sharply in Argentina from 2025 onwards, the country has long operated in an environment characterized by significant, if not rampant, inflation (e.g., exceeding 100% in FY 2024). The Argentine Income Tax Law therefore contains specific rules, operating outside the financial statements, designed to eliminate the purely nominal effects of inflation when determining taxable income. Those rules do not always interact adequately with GloBE methodology, which relies on financial accounting income as the starting point for determining income and calculating the effective tax rate. In certain circumstances, substantial differences may therefore arise between taxable income under Argentine tax law and income determined for GloBE purposes. This can artificially distort the effective tax rate and potentially generate a top-up tax even where, from an economic perspective, the group is already bearing a sufficiently high tax burden.

This is currently a concrete concern for a number of Argentine subsidiaries of in-scope European multinational groups and illustrates one of the difficulties inherent in applying GloBE uniformly to economies experiencing significant inflation. A request has been made by the Argentine business community to OECD for these adjustments to receive a treatment comparable to that afforded to foreign-exchange differences, although the OECD has not yet resolved the Argentine case.

From a broader regional perspective, international tax competition is likely to move progressively away from reductions in nominal corporate income tax rates and towards incentives that are compatible with GloBE rules. We are therefore likely to see increasing reliance on direct subsidies, qualified refundable tax credits, incentives linked to research and development, infrastructure and human-capital development, as well as regulatory simplification, legal stability and improvements in the general business environment.

For Argentina, the challenge is therefore broader than deciding whether to implement a QDMTT. It involves preserving tax sovereignty while preventing potential tax revenue from migrating to other jurisdictions; designing effective incentives that continue to attract investment without conflicting with the GloBE rules; and reconciling an international regime largely designed for relatively stable economies with the reality of countries that may still experience significant inflation.

Pillar Two does not eliminate tax competition. It simply changes its rules. The countries that understand this transformation most quickly will be better positioned to attract international investment over the next decade. For Argentina, this will probably be one of the major tax-policy challenges of the coming years.

3.     Tax certainty, simplicity and the New Competition for Investment

One of the most important lessons of recent decades is that investors do not simply look for low taxes. Above all, they look for predictability. A relatively high tax burden can be incorporated into a financial model. What is far more difficult to price is a system that changes constantly, where administrative interpretations are unstable, procedures are complex, and tax disputes can take many years to resolve. These are actual, unescapable, tax deterrents against FDI attraction.

From this perspective, Latin America presents a highly heterogeneous picture.

For many years, the region concentrated much of its effort on competing through tax incentives. There is now a growing recognition that genuine competitiveness also depends on the institutional quality of the tax systems.

Many countries have made progress in this direction. Tax procedures are increasingly being simplified through digitalization. Advance pricing agreements are becoming more common, as are cooperative compliance programs, binding-ruling mechanisms, stability agreements for major investment projects, and specialized tax courts designed to provide greater legal certainty.

Yet these developments continue to coexist with structural problems that undermine the region's competitiveness, such as frequent legislative changes, the proliferation of special regimes, overlapping national and subnational taxes, shifting administrative interpretations, and excessively lengthy tax disputes. There is still, therefore, an important gap between the stated objective of providing tax certainty and the day-to-day experience of many investors.

Argentina perhaps illustrates this duality better than any other country in the region. Historically, the Argentine tax system has suffered from considerable regulatory volatility. Frequent reforms, the coexistence of national, provincial and municipal taxes, multiple withholding and collection regimes, extensive reporting obligations and substantial tax litigation have made simplicity one of the system's persistent shortcomings. It would nevertheless be unfair to suggest that no concrete measures have been taken. The clearest example is, again, RIGI, which is arguably one of the most ambitious tax and regulatory stability mechanisms adopted in Latin America in recent years.

RIGI goes beyond granting tax benefits. It provides 30 years of regulatory stability, limits the ability to impose new taxes affecting qualifying projects, protects investors against increases in their tax burden and establishes specific dispute-resolution mechanisms. In other words, it attempts to transform one of Argentina's greatest historical liabilities (i.e., regulatory uncertainty) into an asset for attracting large-scale investment. This reflects a more sophisticated understanding of how jurisdictions compete for investment today, and it becomes particularly relevant in the Pillar Two environment.

Tax competition based on reducing effective tax rates loses its effectiveness in the world of GloBE. Factors that minimal global taxation does not neutralize therefore become increasingly important: regulatory stability, administrative simplicity, efficient procedures, the quality of tax administration and legal certainty. Competition among countries in the LATAM region is consequently likely to shift, at least in part, from purely tax incentives towards the institutional quality of their tax systems. Latin America still has considerable ground to cover in this area, but there are also encouraging signs. More governments are recognizing that tax certainty is no longer merely a taxpayer’s protection. It has become an instrument of economic policy and a decisive factor in attracting sustainable, long-term investment.

And perhaps that is the central lesson of the emerging international environment: Tax competitiveness will increasingly depend less on how much a jurisdiction taxes and more on how predictable, simple and reliable its tax system is as a whole.

This article is based on the author’s remarks delivered as panelist during the inaugural roundtable of the Second National Conference on Tax Law (Segundas Jornadas Nacionales de Derecho Tributario), organized by the Uruguayan Institute of Tax Studies (IUET), on August 6-7, 2026. The roundtable was moderated by Andrea Riccardi Sacchi and Andrés Hessdörfer and featured Benjamín Sevilla Bernabéu and Menita Giusy de Flora as fellow panelists.