Economy of Argentina

Template:Economy of Argentina table

Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base.



When President Carlos Menem took office in 1989, the country had piled up huge external debts, inflation had reached 200% per month, and output was plummeting. To combat the economic crisis, the government embarked on a path of trade liberalization, deregulation, and privatization. In 1991, it implemented radical monetary reforms which pegged the peso to the United States dollar and limited the growth in the monetary base by law to the growth in reserves. Inflation fell sharply in subsequent years. The 1991 convertibility law established a quasi-currency board.

The government privatized most state-controlled companies, opened the economy to foreign trade and investment, improved tax collection, and created private pension and workers compensation systems. As a result of these policies, Argentina experienced a boom in economic growth in the early 1990s, followed by a period of somewhat more erratic growth in the second half of the decade when the country was hit by a series of external economic shocks. While the economy recovered fairly quickly from the effects of the "Tequila" crisis of 1995, Argentina could not return to strong growth after the recession that followed successive shocks from East Asia, Russia, and Brazil.

In 1995, the Mexican peso crisis produced capital flight, the loss of banking system deposits, and a severe, but short-lived, recession; a series of reforms to bolster the domestic banking system followed. Real GDP growth recovered strongly, reaching 8% in 1997. In 1998, international financial turmoil caused by Russia's problems and increasing investor anxiety over Brazil produced the highest domestic interest rates in more than three years, halving the growth rate of the economy.

Structural reforms based on macroeconomic stabilization, trade liberalization, privatization, and public administrative reform had placed the country on a relatively sound economic footing after decades of decline and chronic bouts of high inflation. These reforms fostered major new investment in services and industry in the 1990s, particularly in the telecommunications, food processing, banking, energy, and mining sectors. As a result, Argentina's exports more than doubled, from about $12 billion in 1992 to around $25 billion in 1999. Imports also grew rapidly during the same period, from $15 billion to over $25 billion.

In 1999, however, following the 1998 international crisis, GDP fell by 3% and Argentina entered fully in recession. President Fernando de la Rúa, who took office in December 1999 following the 10-year administration of Carlos Menem, sponsored tax increases and spending cuts to reduce the deficit, which had ballooned to 2.5% of GDP. The new government also arranged a new $7,400 million stand-by facility with the IMF for contingency purposes — almost three times the size of the previous arrangement. The new government passed laws intended to change the country's rigid labour code, and attempted to address the precarious financial situation of several highly indebted provinces.

The crisis

Main article: Argentine economic crisis

The issue of Argentina's massive public debt became a subject of considerable controversy, and increased tension between Argentine governments and the International Monetary Fund. In 2001, capital flight increased, and the government found itself unable to meet debt payments. The crisis exploded after the corralito (an almost complete freezing of bank deposits) caused massive protests. After the December 2001 riots, President De la Rúa resigned.

On December 23, 2001, interim president Adolfo Rodríguez Saá declared a short-lived debt moratorium. After a few days, Argentina officially defaulted on $93,000 million of its debt.

In a speech before the United Nations General Assembly on September 21, 2004, President Néstor Kirchner said that "An urgent, tough, and structural redesign of the International Monetary Fund is needed, to prevent crises and help in [providing] solutions". Implicitly referencing the fact that the intent of the original Bretton Woods system was to encourage economic development, Kirchner warned that the IMF today must "change that direction which took it from being a lender for development to a creditor demanding privileges".

According to Argentine agronomist Alberto Lapolla, who has written extensively on the transformation of Argentina from the "granary of the world" to a "soy republic", 450,000 Argentines died of hunger between 1990 and 2003. Citing the d'études sur l'État et la participation (|Institut) (IDEP), a thinktank, Lapolla adds that every day, 55 children, 35 adults and 15 elderly die in the country from illnesses related to hunger.

Poverty in Argentina
Date Extreme
May 200111.6%35.9%
Oct 200113.6%38.3%
May 200224.8%53.0%
Oct 200227.5%57.5%
May 200326.3%54.7%
2nd sem 200320.5%47.8%
1st sem 200417.0%44.3%
2nd sem 200415.0%40.2%

The table on the left shows statistics of poverty in Argentina, in percent of the population. The first column shows the date of the measurement (note that the method and time changed in 2003; poverty is now measured each semester). Extreme poverty is here defined as not having enough money to eat properly. The poverty line is set higher: it is the minimum income needed for basic needs including food, clothing, shelter, and studies.

During the weekend of October 1-2, 2004, at the annual meeting of the International Monetary Fund/World Bank, leaders of the IMF, the European Union, the Group of Seven industrialized nations, and the Institute of International Finance (IIF), warned President Néstor Kirchner that Argentina must come to a debt-restructuring agreement right away with the speculative "vulture funds", increase its primary budget surplus in order to pay more debt, and impose "structural reform" to prove to the world financial community that it deserves their loans and investments.

The debt restructuring process was long and complex, but Argentina finally settled the matter with over 75% of its defaulted creditors (the default did not include the IMF, which has continued to be paid in due time).

One of Argentina's challenges is to generate growth with more equitable distribution of income and reduced unemployment. The country has seen double-digit unemployment since the mid-1990s, peaking at 18.4% mid-year 1995. The May 2000 unemployment rate was 15.4%; it climbed to 18.3% in December 2001, and by June 2005 it is around 12.5%.

Many problems remain; public sector corruption, commonly acknowledged as being widespread, is another subject of public debate. The Argentine justice system can be politically influenced, is often inefficient, and provides slow due process.


During the 1990s Argentina's financial system saw a significant consolidation and strengthening, in large part through foreign investments. In addition to high reserve and capital-adequacy requirements, the Central Bank of Argentina maintained a repurchase agreement with a consortium of international banks to provide a $6,000 million safety net in the event of a liquidity squeeze. Mergers and acquisitions, which decreased the number of Argentine banks from nearly 300 in 1990 to fewer than 100 at the end of 1999, were expected to continue and lead to improvements in management and efficiency. The foreign currency reserves of the Central Bank stood at nearly $25,000 million in December 1999, or over 9 months of imports. However, by law, these reserves were used to back the monetary liabilities of the Central Bank and were not available for conducting monetary policy.

Despite the recession, bank deposits continued to grow until 2001, although at a much slower rate than in previous years. Total deposits in the banking system stood at nearly $80,000 million by mid 2001 — more than twice that of June 1995, when deposits hit a low of $37,000 million. Foreign-controlled banks held over 40% of total deposits, and six of the top 10 commercial banks were in the hands of U. S. and European financial institutions. Still, the level of bank utilization in Argentina remained relatively low, and bank intermediation represented only about 30% of GDP — a much lower ratio than that in Chile, Mexico, or Brazil, for example.

Nevertheless the banking system sufferd a fatal flaw: it lent dollars and took deposits in pesos (nominally argendollars). By early 2001 deposits reached $87,000 million, when the economy took a second dip, capital started flowing out of Argentina, and deposits started to move away from the weaker players of the financial system, namely provincial banks and large local banks. This eventually led to a run against all banks in the system, a freeze in deposits, and a currency devaluation, which included an asymmetric devaluation of loans and deposits. Banks were forced to collect its dollar loans at a conversion rate much lower than the rate applied to its dollar deposits. This made many banks technically bankrupt and destroyed the confidence of the public on the financial system, which was held responsible for many of the economic ills of the country. Deposits fell to less than $40,000 million by the end of 2002. Foreign banks fled the country during 2002 and 2003, selling its operations to smaller local banks at a fraction of their original investments. Only a few large foreign banks decided to stay in the country.

By 2004 the goverment compensated the banks for the impact of the asymmetric devaluation of deposits and loans through a series of "compensation bonds".

Currently banks are again gaining deposits, which amounted to $38,000 million by December 2004, and are starting to increase its lending portfolios. Their operations are leaner, due to the massive layoffs of 2002, that reduced their working force by more than 30%. However the public still remains weary of taking long term loans and rates are high in real terms given Argentina's low rates of inflation. Banking penetration remains low and banking costs high.

Foreign trade

Argentine firms increased capital goods purchases from 1993 to 1999, taking advantage of the lower tariffs on imports and the low exchange rate. This helped the modernization of the country's industrial base, but negatively impacted its trade balance

The U. S. trade surplus with Argentina was $2,400 million in 1999, down from 1998. Fresh Argentine beef was exported to the U. S. market in 1997 for the first time in over 60 years, and in 1999 its export quota of 20,000 tons was filled. However, beef exports to the U. S. were suspended in August 2000 when some Argentine cattle (near Paraguay) were discovered to have anti-bodies for hoof and mouth disease.

Argentina's trade deficit dropped from $5,000 million in 1998 to $2,200 million in 1999, primarily because the recession lowered demand for imports. The overall value of 1999 Argentine exports fell 12%, due mainly to low international commodity prices, while imports dropped 19% from 1998.

Immediately after the collapse of the Argentine economy and the devaluation of the peso in 2002, imports fell sharply and Argentina's trade deficit became a surplus. As recovery continued and the exchange rate stabilized around 3 pesos/dollar, exports (mainly beef, soy and other agricultural products, as well as petroleum) grew steadily. Imports began recovering in 2003, as the purchasing power of companies and individuals increased, and experienced further growth in 2004.

Missing image
Argentina's exports and imports (FOB), in millions of USD, 1992-2004.


Mercosur, the customs union that includes Argentina, Brazil, Paraguay, and Uruguay, entered into force January 1, 1995. Chile and Bolivia joined the pact subsequently as associate members. Cooperation between Brazil and Argentina —historic competitors— is the key to Mercosur's integration process, which includes political and military elements in addition to a customs union. Brazil accounts for more than 70% of Mercosur GDP and Argentina about 27%. Intra-Mercosur trade rose dramatically from $4,000 million in 1991 to over $23,000 million in 1998. More than 90% of intra-Mercosur trade is duty-free, while the group's common external tariff (CET) applies to more than 85% of imported goods. Remaining goods will be phased into the CET by 2006.

Brazil's higher level of industrialization and production capacity, as well as other economic asymmetries, have been a source of tension with Argentina. In recent years, Argentina's recovering industrial sector has pressured the government to obtain restrictions (especially quotas) on Mercosur's free trade regulations, in order to protect their growth from what they see as disloyal competition from their larger partner to the north.

Intellectual property issues

Argentina adheres to most treaties and international agreements on intellectual property. It is a member of the World Intellectual Property Organization and signed the Uruguay Round agreements in December 1993, including measures related to intellectual property. However, extension of adequate patent protection to pharmaceuticals has been a highly contentious bilateral issue.

In May 1997, the U. S. suspended 50% of Argentina's GSP benefits because of its unsatisfactory pharmaceutical patent law. In May 1999, The U. S. Government initiated consultations under WTO procedures to address these inadequacies and expanded the consultations in May 2000.


U.S. direct investment in Argentina is concentrated in telecommunications, petroleum and gas, electric energy, financial services, chemicals, food processing, and vehicle manufacturing. The stock of U.S. direct investment in Argentina approached $16 billion at the end of 1999, according to embassy estimates. Canadian, European, and Chilean firms--other important sources of capital--also have invested significant amounts. Since 2000 Brazil has also become an important investor in Argentinean assets. Spanish companies in particular have entered the Argentine market aggressively, with major investments in the petroleum and gas, telecommunications, banking, and retail sectors. Several bilateral agreements play an important role in promoting U.S. private investment. Argentina has an Overseas Private Investment Corporation (OPIC) agreement and an active program with the U.S. Export-Import Bank. Under the 1994 U.S.-Argentina Bilateral Investment Treaty, U.S. investors enjoy national treatment in all sectors except shipbuilding, fishing, nuclear-power generation, and uranium production. The treaty allows for international arbitration of investment disputes.

Other statistics

Investment (gross fixed): 18.3% of GDP (2004 est.)

Household income or consumption by percentage share:

  • lowest 10%: NA%
  • highest 10%: NA%

Agriculture - products: sunflower seeds, lemons, soybeans, grapes, corn, tobacco, peanuts, tea, wheat; livestock

Industrial production growth rate: 12% (2004 est.)


  • production: 81.39 TWh (2002)
  • consumption: 81.65 TWh (2002)
  • exports: 2.818 TWh (2002)
  • imports: 8.775 TWh (2002)

Electricity - production by source:

  • fossil fuel: 52.2%
  • hydro: 40.8%
  • other: 0.2% (2001)
  • nuclear: 6.7%


  • production: 755,000 barrel/day (2004 est.)
  • consumption: 486,000 barrel/day (2001 est.)
  • exports: NA
  • imports: NA
  • proved reserves: 2.9 billion barrel (2004 est.)

Natural gas:

  • production: 37.15 billion m³ (2001 est.)
  • consumption: 31.1 billion m³ (2001 est.)
  • exports: 6.05 billion m³ (2001 est.)
  • imports: 0 m³ (2001 est.)
  • proved reserves: 768 billion m³ (2004)

Current account balance: $5.473 billion (2004 est.)

Exports - commodities: edible oils, fuels and energy, cereals, feed, motor vehicles

Imports - commodities: machinery and equipment, motor vehicles, chemicals, metal manufactures, plastics

Reserves of foreign exchange & gold: $19.47 billion (2004 est.)

Debt - external: $157.7 billion (2004 est.)

Exchange rates: Argentine pesos per US dollar - 2.948 (2004), 2.9003 (2003), 3.0633 (2002), 0.9995 (2001), 0.9995 (2000)

See also

Template:Argentina main topics


Much of the material in this article comes from the CIA World Factbook 2000 and the 2003 U.S. Department of State website.

Template:SACN Template:WTOfr:Économie de l'Argentine pt:Economia da Argentina


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