Economy of Argentina From Wikipedia, the free encyclopedia The economy of Argentina is an upper middle-income economy,[19] and Latin America's third-largest.[20] The country benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector and a diversified industrial base. An upper-middle income economy, Argentina maintains a relatively high quality of life and GDP per capita.[21] Argentina is considered an emerging market by the FTSE Global Equity Index, and is one of the G-20 major economies. Argentina's economic performance has historically been very uneven, in which high economic growth alternated with severe recessions, particularly during the late twentieth century, and income maldistribution and poverty increased. Early in the twentieth century it was one of the richest countries in the world and the third largest in the Southern hemisphere.[22] History Main article: Economic history of Argentina Prior to the 1880s, Argentina was a relatively isolated backwater, dependent on the salted meat, wool, leather, and hide industries for both the greater part of its foreign exchange and the generation of domestic income and profits. The Argentine economy began to experience swift growth after 1880 through the export of livestock and grain commodities,[23] as well as through British and French investment, marking the beginning of a significant era of economic expansion.[24] During its most vigorous period, from 1880 to 1905, this expansion resulted in a 7.5-fold growth in GDP, averaging about 8% annually.[25] One important measure of development, GDP per capita, rose from 35% of the United States average to about 80% during that period.[25] Growth then slowed considerably, though throughout the period from 1890 to 1939, the country's per capita income was similar to that of France, Germany and Canada[26] (although income in Argentina remained considerably less evenly distributed).[23] The Great Depression caused Argentine GDP to fall by a fourth between 1929 and 1932.[27] Having recovered its lost ground by the late 1930s partly through import substitution, the economy continued to grow modestly during World War II (in contrast to the recession caused by the previous world war). Indeed, the reduced availability of imports and the war's beneficial effects on both the quantity and price of Argentine exports combined to create a US$ 1.7 billion cumulative surplus during those years.[28] Benefiting from innovative self-financing and government loans alike, value added in manufacturing surpassed that of agriculture for the first time in 1943, and employed over 1 million by 1947.[29] The populist administration of Juan Perón nationalized strategic industries and services like the railroads from 1945 to 1955, and the partial enactment of developmentalism after 1958 was followed by a promising fifteen years. Inflation first became a chronic problem during this period[27] (it averaged 26% annually from 1944 to 1974) and Argentina did not become "industrialized" or fully "developed".[30] From 1932 to 1974, Argentina's economy grew almost fivefold (or 3.8% in annual terms),[30] while its population doubled. While unremarkable, this expansion was well-distributed and so resulted in several noteworthy changes in Argentine society, most notably the development of the largest proportional middle class (40% of the population by the 1960s) in Latin America[30] as well as the region's highest-paid, most unionized working class.[31] The economy declined during the military dictatorship from 1976 to 1983, and for some time afterwards.[32] The dictatorship's chief economist, José Alfredo Martínez de Hoz, advanced a corrupt, anti-labor, monetarist policy of financial liberalization that increased the debt burden and interrupted industrial development and upward social mobility.[33][34] Over 400,000 companies of all sizes went bankrupt by 1982,[27] and neoliberal economic policies prevailing from 1983 through 2001 failed to reverse the situation.[35][36] Record foreign debt interest payments, tax evasion and capital flight resulted in a balance of payments crisis that plagued Argentina with severe stagflation from 1975 to 1990. Attempting to remedy this, economist Domingo Cavallo pegged the peso to the U.S. dollar in 1991 and limited the growth in the money supply. His team then embarked on a path of trade liberalization, deregulation, and privatization. Inflation dropped to single digits and GDP grew by one third in four years;[2] External economic shocks, as well as a dependency on volatile short-term capital and debt to maintain the overvalued fixed exchange rate, diluted benefits, causing the economy to crumble slowly from 1995 until the collapse in 2001.[35] That year and the next, the economy suffered its sharpest decline since 1930; by 2002, Argentina had defaulted on its debt, its GDP had declined by nearly 20% in four years, unemployment reached 25%, and the peso had depreciated 70% after being devalued and floated.[2] Expansionary policies and commodity exports triggered a rebound in GDP from 2003 onwards. This trend has been largely maintained, creating over five million jobs and encouraging domestic consumption and fixed investment. Social programs were strengthened,[37] and a number of important firms privatized during the 1990s were renationalized beginning in 2003. These include the Postal service, AySA (the water utility serving Buenos Aires), Pension funds (transferred to ANSES), Aerolíneas Argentinas, and the energy firm YPF.[38] The socio-economic situation has been steadily improving and the economy grew around 9% annually for five consecutive years between 2003 and 2007, and 7% in 2008. The global recession of 2007–10 affected the economy in 2009, with growth slowing to 0.8%.[2] High economic growth resumed, and GDP expanded by around 9% in both 2010 and 2011.[2] Foreign exchange controls, austerity measures, persistent inflation, and downturns in Brazil, Europe, and other important trade partners, contributed to slower growth (1.9%) during 2012.[39] Broad-based recoveries in the agricultural, construction, auto, and energy sectors led to 4% growth in 2013.[40] The Argentine government bond market is based on GDP-linked bonds, and investors, both foreign and domestic, netted record yields amid renewed growth.[41] Argentine debt restructuring offers in 2005 and 2010 resumed payments on the majority of its almost $100 billion in defaulted bonds and other debt from 2001.[42] Holdouts controlling 7% of the bonds, including some small investors, hedge funds, and vulture funds such as Paul Singer's Cayman Islands-based NML Capital Limited, rejected the 2005 and 2010 offers to exchange their defaulted bonds, resorting instead to attempts to seize Argentine government assets abroad[43] and lawsuits to stop payments from Argentina to the 93% who had accepted the earlier swaps despite the steep discount.[44] Bondholders who instead accepted the 2005 offer of 30 cents on the dollar, had by 2012 received returns of about 90 percent according to estimates by Morgan Stanley.[45] Sectors Agriculture Main article: Agriculture in Argentina Soy field in Argentina's fertile Pampas. The versatile legume makes up about half the nation's crop production and a fourth of its exports. Argentina is one of the world's major agricultural producers, ranking among the top producers and, in most of the following, exporters of beef, citrus fruit, grapes, honey, maize, sorghum, soybeans, squash, sunflower seeds, wheat, and yerba mate.[46] Agriculture accounted for 9% of GDP in 2010, and around one fifth of all exports (not including processed food and feed, which are another third). Commercial harvests reached 103 million tons in 2010, of which over 54 million were oilseeds (mainly soy and sunflower), and over 46 million were cereals (mainly maize, wheat, and sorghum).[47] Soy and its byproducts, mainly animal feed and vegetable oils, are major export commodities with one fourth of the total; cereals added another 10%. Cattle-raising is also a major industry, though mostly for domestic consumption; beef, leather and dairy were 5% of total exports.[12] Sheep-raising and wool are important in Patagonia, though these activities have declined by half since 1990.[3] Biodiesel, however, has become one of the fastest growing agro-industrial activities, with over US$2 billion in exports in 2011.[12] Fruits and vegetables made up 4% of exports: apples and pears in the Río Negro valley; rice, oranges and other citrus in the northwest and Mesopotamia; grapes and strawberries in Cuyo (the west), and berries in the far south. Cotton and tobacco are major crops in the Gran Chaco, sugarcane and chile peppers in the northwest, and olives and garlic in the west. Yerba mate tea (Misiones), tomatoes (Salta) and peaches (Mendoza) are grown for domestic consumption. Organic farming is growing in Argentina, and the nearly 3 million hectares (7.5 million acres) of organic cultivation is second only to Australia.[48] Argentina is the world's fifth-largest wine producer, and fine wine production has taken major leaps in quality. A growing export, total viticulture potential is far from having been met. Mendoza is the largest wine region, followed by San Juan.[49] Government policy towards the lucrative agrarian sector is a subject of, at times, contentious debate in Argentina. A grain embargo by farmers protesting an increase in export taxes for their products began in March 2008,[50] and, following a series of failed negotiations, strikes and lockouts largely subsided only with the July 16, defeat of the export tax-hike in the Senate.[51] Argentine fisheries bring in about a million tons of catch annually,[3] and are centered around Argentine hake, which makes up 50% of the catch; pollock, squid, and centolla crab are also widely harvested. Forestry has long history in every Argentine region, apart from the pampas, accounting for almost 14 million m³ of roundwood harvests.[52] Eucalyptus, pine, and elm (for cellulose) are also grown, mainly for domestic furniture, as well as paper products (1.5 million tons). Fisheries and logging each account for 2% of exports.[3] Natural resources See also: Mining in Argentina Mining and other extractive activities, such as gas and petroleum, are growing industries, increasing from 2% of GDP in 1980 to nearly 4% today.[3] The northwest and San Juan Province are the main regions of activity. Coal is mined in Santa Cruz Province. Metals and minerals mined include borate, copper, lead, magnesium, sulfur, tungsten, uranium, zinc, silver, and gold, whose production was boosted after 1997 by the Bajo de Alumbrera mine in Catamarca Province and Barrick Gold investments a decade later in San Juan. Metal ore exports soared from US$ 200 million in 1996 to US$ 1.2 billion in 2004,[53] and to over US$ 3 billion in 2010.[12] Around 35 million m³ each of petroleum and petroleum fuels are produced, as well as 50 billion m³ of natural gas, making the nation self-sufficient in these staples, and generating around 10% of exports. The most important oil fields lie in Patagonia and Cuyo. A network of pipelines (next to Mexico's, the second-longest in Latin America) send raw product to Bahía Blanca, center of the petrochemical industry, and to the La Plata-Greater Buenos Aires-Rosario industrial belt. Industry Manufacturing is the largest single sector in the nation's economy (16% of GDP), and is well-integrated into Argentine agriculture, with half the nation's industrial exports being agricultural in nature.[3] Based on food processing and textiles during its early development in the first half of the 20th century, industrial production has become highly diversified in Argentina.[54] Leading sectors by production value are: Food processing and beverages; motor vehicles and auto parts; refinery products, and biodiesel; chemicals and pharmaceuticals; steel and aluminium; and industrial and farm machinery; electronics and home appliances. These latter include over three million big ticket items, as well as an array of electronics, kitchen appliances and cellular phones, among others.[2] Argentina's auto industry produced 791,000 motor vehicles in 2013, and exported 433,000 (mainly to Brazil, which in turn exported a somewhat larger number to Argentina); Argentina's domestic new auto market reached a record 964,000 in 2013.[55] Beverages are another significant sector, and Argentina has long been among the top five wine producing countries in the world; beer overtook wine production in 2000, and today leads by nearly two billion liters a year to one.[2] Other manufactured goods include: glass and cement; plastics and tires; lumber products; textiles; tobacco products; recording and print media; furniture; apparel and leather.[2] Most manufacturing is organized in the 314 industrial parks operating nationwide as of 2012, a fourfold increase over the past decade.[56] Nearly half the industries are based in the Greater Buenos Aires area, although Córdoba, Rosario, and Ushuaia are also significant industrial centers; the latter city became the nation's leading center of electronics production during the 1980s.[57] The production of computers, laptops, and servers grew by 160% in 2011, to nearly 3.4 million units, and covered two-thirds of local demand.[58] Another important rubric historically dominated by imports - farm machinery - will likewise mainly be manufactured domestically by 2014.[59] Construction permits nationwide covered nearly 19 million m² (205 million ft²) in 2008. The construction sector accounts for over 5% of GDP, and two-thirds of the construction was for residential buildings.[3] Argentine electric output totaled over 133 billion Kwh in 2013.[2] This was generated in large part through well developed natural gas and hydroelectric resources. Nuclear energy is also of high importance,[60] and the country is one of the largest producers and exporters, alongside Canada and Russia of cobalt-60, a radioactive isotope widely used in cancer therapy. Services
