Economy of Argentina

The economy of Argentina is a high-income economy, Latin America's third largest, and the
fourth largest in the southern hemisphere.
The country benefits from rich natural resources, a highly literate population, an export-oriented
agricultural sector, and a diversified industrial base. 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 Argentina had one of the highest per capita GDP levels in the
world and the third largest economy in the developing world. Today a high-income economy,
Argentina maintains a relatively high quality of life and GDP per capita.
Argentina is considered an emerging market by the FTSE Global Equity Index, and is one of the
G-20 major economies.

History
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, as well as through
British and French investment, marking the beginning of a fifty-year era of significant economic
expansion and mass European immigration.
During its most vigorous period, from 1880 to 1905, this expansion resulted in a 7.5-fold growth
in GDP, averaging about 8% annually. One important measure of development, GDP per capita,
rose from 35% of the United States average to about 80% during that period. Growth then
slowed considerably, such that by 1941 Argentina's real per capita GDP was roughly half that of
the U.S. Throughout the period from 1890 to 1950, the country's per capita income was similar
to that of Western Europe, although income in Argentina remained considerably less evenly
distributed.
The Great Depression caused Argentine GDP to fall by a fourth between 1929 and 1932. 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). The war led to a reduced availability of imports and higher prices for
Argentine exports that combined to create a US$1.6 billion cumulative surplus, a third of which
was blocked as inconvertible deposits in the Bank of England by the RocaRunciman Treaty.
Benefiting from innovative self-financing and government loans alike, value added in
manufacturing nevertheless surpassed that of agriculture for the first time in 1943, employed
over 1 million by 1947, and allowed the need for imported consumer goods to decline from 40%
of the total to 10% by 1950.

The populist administration of Juan Pern nationalized the Central Bank, railways, and other
strategic industries and services from 1945 to 1955. The subsequent enactment of
developmentalism after 1958, though partial, was followed by a promising fifteen years.
Inflation first became a chronic problem during this period (it averaged 26% annually from 1944
to 1974); but though it did not become fully "developed," from 1932 to 1974 Argentina's
economy grew almost fivefold (or 3.8% in annual terms) while its population only 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 as well as the region's highest-paid,
most unionized working class.
The economy, however, declined during the military dictatorship from 1976 to 1983, and for
some time afterwards. The dictatorship's chief economist, Jos Alfredo Martnez de Hoz,
advanced a corrupt, anti-labor policy of financial liberalization that increased the debt burden
and interrupted industrial development and upward social mobility. Over 400,000 companies of
all sizes went bankrupt by 1982, and neoliberal economic policies prevailing from 1983 through
2001 failed to reverse the situation.
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, including a
bout of hyperinflation in 1989 and 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.
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 erratic economic growth
from 1995 and the eventual collapse in 2001. 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.
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, 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), Aerolneas Argentinas, the energy firm YPF, and the railways.
The socio-economic situation in Argentina has been steadily improving. The economy nearly
doubled from 2002 to 2011, growing an average of 7.1% annually and around 9% for five
consecutive years between 2003 and 2007. Real wages rose by around 72% from their low point
in 2003 to 2013. The global recession did affect the economy in 2009, with growth slowing to
nearly zero; but high economic growth then resumed, and GDP expanded by around 9% in both
2010 and 2011. Foreign exchange controls, austerity measures, persistent inflation, and

downturns in Brazil, Europe, and other important trade partners, contributed to slower growth
beginning in 2012, however. Growth averaged just 1.3% from 2012 to 2014.

Sectors
Agriculture
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.[62] 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).
Soy and its byproducts, mainly animal feed and vegetable oils, are major e
The Vaca Muerta shale oil field holds 16.2 billion barrels of oil and 308 cubic feet of natural gas.
It is estimated to be the third largest in the world.

Natural resources
Mining and other extractive activities, such as gas and petroleum, are growing industries,
increasing from 2% of GDP in 1980 to around 4% today. 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, and to over US$3 billion in 2010.
Around 35 million m each of petroleum and petroleum fuels are produced, as well as 50 billion
m 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 Baha Blanca, center of
the petrochemical industry, and to the La Plata-Greater Buenos Aires-Rosario industrial belt.

Services
The service sector is the largest contributor to total GDP, accounting for over 60%. Argentina
enjoys a diversified service sector, which includes well-developed social, corporate, financial,
insurance, real estate, transport, communication services, and tourism.
The telecommunications sector has been growing at a fast pace, and the economy benefits from
widespread access to communications services. These include: 77% of the population with

access to mobile phones, 95% of whom use smartphones; internet (over 32 million users, or 75%
of the population); and broadband services (accounting for nearly all 14 million accounts).
Regular telephone services, with 9.5 million lines, and mail services are also robust. Total
telecom revenues reached more than $17.8 billion in 2013, and while only one in three retail
stores in Argentina accepted online purchases in 2013 E-commerce reached US$4.5 billion in
sales.
Trade in services remained in deficit, however, with US$15 billion in service exports in 2013 and
US$19 billion in imports. Business Process Outsourcing became the leading Argentine service
export, and reached US$3 billion. Advertising revenues from contracts abroad were estimated at
over US$1.2 billion.
Tourism is an increasingly important sector and provided 4% of direct economic output (over
US$17 billion) in 2012; around 70% of tourism sector activity by value is domestic.
Banking
Argentine banking, whose deposits exceeded US$120 billion in December 2012, developed
around public sector banks, but is now dominated by the private sector. The private sector banks
account for most of the 80 active institutions (over 4,000 branches) and holds nearly 60% of
deposits and loans, and as many foreign-owned banks as local ones operate in the country. The
largest bank in Argentina by far, however, has long been the public Banco de la Nacin
Argentina. Not to be confused with the Central Bank, this institution now accounts for 30% of
total deposits and a fifth of its loan portfolio.
During the 1990s, Argentina's financial system was consolidated and strengthened. Deposits
grew from less than US$15 billion in 1991 to over US$80 billion in 2000, while outstanding
credit (70% of it to the private sector) tripled to nearly US$100 billion.
The banks largely lent US dollars and took deposits in Argentine pesos, and when the peso lost
most of its value in early 2002, many borrowers again found themselves hard pressed to keep up.
Delinquencies tripled to about 37%. Over a fifth of deposits had been withdrawn by December
2001, when Economy Minister Domingo Cavallo imposed a near freeze on cash withdrawals.
The lifting of the restriction a year later was bittersweet, being greeted calmly, if with some
umbrage, at not having these funds freed at their full U.S. dollar value. Some fared worse, as
owners of the now-defunct Velox Bank defrauded their clients of up to US$800 million.
Credit in Argentina is still relatively tight. Lending has been increasing 40% a year since 2004,
and delinquencies are down to less than 2%. Still, credit outstanding to the private sector is, in
real terms, slightly below its 1998 peak, and as a percent of GDP (around 18%) quite low by
international standards. The prime rate, which had hovered around 10% in the 1990s, hit 67% in
2002. Although it returned to normal levels quickly, inflation, and more recently, global
instability, have been affecting it again. The prime rate was over 20% for much of 2009, and
around 17% since the first half of 2010.

Partly a function of this and past instability, Argentines have historically held more deposits
overseas than domestically. The estimated US$173 billion in overseas accounts and investment
exceeded the domestic monetary base by nearly US$10 billion in 2012.

Tourism
The World Economic Forum estimated that, in 2012, tourism generated around US$17 billion in
direct economic turnover, another US$30 billion in indirect turnover; the industry employed
650,000 directly and 1.1 million more indirectly. Tourism from abroad contributed
US$5.3 billion, having become the third largest source of foreign exchange in 2004. Around
5.7 million foreign visitors arrived in 2012, reflecting a doubling in visitors since 2002 despite a
relative appreciation of the peso.
Argentines, who have long been active travelers within their own country, accounted for over
80%, and international tourism has also seen healthy growth (nearly doubling since 2001).
Stagnant for over two decades, domestic travel increased strongly in the last few years, and
visitors are flocking to a country seen as affordable, exceptionally diverse, and safe.
Foreign tourism, both to and from Argentina, is increasing as well. INDEC recorded 5.2 million
foreign tourist arrivals and 6.7 million departures in 2013; of these, 32% arrived from Brazil,
19% from Europe, 10% from the United States and Canada, 10% from Chile, 24% from the rest
of the Western Hemisphere, and 5% from the rest of the world. Around 48% of visitors arrived
by commercial flight, 40% by motor travel (mainly from neighboring Brazil), and 12% by sea.
Cruise liner arrivals are the fastest growing type of foreign tourism to Argentina; a total of 160
liners carrying 510,000 passengers arrived at the Port of Buenos Aires in 2013, an eightfold
increase in a just a decade.

GDP by value added

1993-2001 2002-2005 2006-2009 2010-2013

Energy
Electricity generation in Argentina totaled 133.3 billion Kwh in 2013. The electricity sector in
Argentina constitutes the third largest power market in Latin America. It relies mostly on natural
gas power generation (51%), hydroelectricity (28%), and oil-fired generation (12%). Reserves of
shale gas and oil in the Vaca Muerta oil field and elsewhere are estimated to be the world's thirdlargest.
The first of the country's three nuclear reactors was inaugurated in 1974, and nuclear power
generated 7% of the total in 2009. New renewable energy technologies are barely exploited,
however, and the country still has a large untapped hydroelectric potential. Wind energy is the
fastest growing among new renewable sources. Fifteen wind farms have been developed since
1994 in Argentina, the only country in the region to produce wind turbines. The 55 MW of
installed capacity in these in 2010 will increase by 895 MW upon the completion of new wind
farms begun that year. Solar power is also being promoted with the goal of expanding installed
solar capacity from 6 MW to 300, and total renewable energy capacity from 625 MW to 3,000
MW.
Faced with rising electricity demand (over 5% annually) and declining reserve margins, the
government of Argentina is in the process of commissioning large projects, both in the
generation and transmission sectors. To keep up with rising demand, it is estimated that about
1,000 MW of new generation capacity are needed each year. An important number of these
projects are being financed by the government through trust funds, while independent private
initiative is still limited as it has not fully recovered yet from the effects of the Argentine
economic crisis.
The electricity sector was unbundled in generation, transmission and distribution by the reforms
carried out in the early 1990s. Generation occurs in a competitive and mostly liberalized market
in which 75% of the generation capacity is owned by private utilities. In contrast, the
transmission and distribution sectors are highly regulated and much less competitive than
generation.

Infrastructure
Argentina's transport infrastructure is relatively advanced, and at a higher standard than the rest
of Latin America. There are over 230,000 km (144,000 mi) of roads (not including private rural
roads) of which 72,000 km (45,000 mi) are paved, and 2,800 kilometres (1,700 mi) are
expressways, many of which are privatized tollways. Having tripled in length in the last decade,
multilane expressways now connect several major cities with more under construction.

Expressways are, however, currently inadequate to deal with local traffic, as over 12 million
motor vehicles were registered nationally as of 2012 (the highest, proportionately, in the region).
The railway network has a total length of 37,856 kilometres (23,523 mi), though at the network's
peak this figure was 47,000 km (29,204 mi). After decades of declining service and inadequate
maintenance, most intercity passenger services shut down in 1992 following the privatization of
the country's railways and the breaking up of the state rail company, while thousands of
kilometers fell into disuse. Outside Greater Buenos Aires most rail lines still in operation are
freight related, carrying around 23 million tons a year. In April 2015, by overwhelming majority
the Argentine Senate passed a law which re-created Ferrocarriles Argentinos as Nuevos
Ferrocarriles Argentinos, effectively re-nationalising the country's railways. In the years leading
up to this move, the country's railways had seen significant investment from the state, purchasing
new rolling stock, re-opening lines closed under privatization and re-nationalising companies
such as the Belgrano Cargas freight operator. Some of these re-opened services include the
General Roca Railway service to Mar del Plata, the Tren a las Nubes tourist train and the General
Mitre Railway service from Buenos Aires to Crdoba. while brand new services include the
Posadas-Encarnacin International Train.
Inaugurated in 1913, the Buenos Aires Underground was the first underground rail system built
in Latin America, the Spanish speaking world and the Southern Hemisphere. No longer the most
extensive in South America, its 60 kilometres (37 mi) of track carry a million passengers daily.
Argentina has around 11,000 km (6,835 mi) of navigable waterways, and these carry more cargo
than do the country's freight railways. This includes an extensive network of canals, though
Argentina is blessed with ample natural waterways as well, the most significant among these
being the Ro de la Plata, Paran, Uruguay, Ro Negro, and Paraguay rivers. The Port of Buenos
Aires, inaugurated in 1925, is the nation's largest; it handled 11 million tons of freight and
transported 1.8 million passengers in 2013.
Aerolneas Argentinas is the country's main airline, providing both extensive domestic and
international service. Austral Lneas Areas is Aerolneas Argentinas' subsidiary, with a route
system that covers almost all of the country. LADE is a military-run commercial airline that flies
extensive domestic services. The nation's 33 airports handled air travel totalling 25.8 million
passengers in 2013, of which domestic flights carried over 14.5 million; the nation's two busiest
airports, Jorge Newbery and Ministro Pistarini International Airports, boarded around 9 million
flights each.

Foreign trade
Argentine exports are fairly well diversified. However, although agricultural raw materials are
over 20% of the total exports, agricultural goods still account for over 50% of exports when
processed foods are included. Soy products alone (soybeans, vegetable oil) account for almost
one fourth of the total. Cereals, mostly maize and wheat, which were Argentina's leading export
during much of the twentieth century, make up less than one tenth now.

Industrial goods today account for over a third of Argentine exports. Motor vehicles and auto
parts are the leading industrial export, and over 12% of the total merchandise exports.
Chemicals, steel, aluminum, machinery, and plastics account for most of the remaining industrial
exports. Trade in manufactures has historically been in deficit for Argentina, however, and
despite the nation's overall trade surplus, its manufacturing trade deficit exceeded US$30 billion
in 2011. Accordingly, the system of non-automatic import licensing was extended in 2011, and
regulations were enacted for the auto sector establishing a model by which a company's future
imports would be determined by their exports (though not necessarily in the same rubric).
A net energy importer until 1987, Argentina's fuel exports began increasing rapidly in the early
1990s and today account for about an eighth of the total; refined fuels make up about half of that.
Exports of crude petroleum and natural gas have recently been around US$3 billion a year.
Rapidly growing domestic energy demand and a gradual decline in oil production, resulted in a
US$3 billion energy trade deficit in 2011 (the first in 17 years) and a US$6 billion energy deficit
in 2013.
Argentine imports have historically been dominated by the need for industrial and technological
supplies, machinery, and parts, which have averaged US$50 billion since 2011 (two-thirds of
total imports). Consumer goods including motor vehicles make up most of the rest. Trade in
services has historically in deficit for Argentina, and in 2013 this deficit widened to over
US$4 billion with a record US$19 billion in service imports. The nation's chronic current
account deficit was reversed during the 2002 crisis, and an average current account surplus of
US$7 billion was logged between 2002 and 2009; this surplus later narrowed considerably, and
has been slightly negative since 2011.

Issues
The economy recovered strongly from the 200102 crisis, and was the 21st largest in purchasing
power parity terms in 2011; its per capita income on a purchasing power basis was the highest in
Latin America. A lobby representing US creditors who refused to accept Argentina's debt-swap
programmes has campaigned to have the country expelled from the G20. These holdouts include
numerous vulture funds which had rejected the 2005 offer, and had instead resorted to the courts
in a bid for higher returns on their defaulted bonds. These disputes had led to a number of liens
against central bank accounts in New York and, indirectly, to reduced Argentine access to
international credit markets.
Following 25 years of boom and bust stagnation, Argentina's economy doubled in size from 2002
to 2013, and officially, income poverty declined to from 54% in 2002 to 5% by 2013; an
alternative measurement conducted by CONICET found that income poverty declined instead to
15.4%. Poverty measured by living conditions improved more slowly, however, decreasing from
17.7% in the 2001 Census to 12.5% in the 2010 Census. Argentina's unemployment rate
similarly declined from 25% in 2002 to an average of around 7% since 2011 largely because of
both growing global demand for Argentine commodities and strong growth in domestic activity.
Given its ongoing dispute with holdout bondholders, the government has become wary of
sending assets to foreign countries (such as the presidential plane, or artworks sent to foreign

exhibitions) in case they might be impounded by courts at the behest of holdouts. Economic
statistics are manipulated by the government.

Inflation
High inflation has been a weakness of the Argentine economy for decades. Inflation has been
unofficially estimated to be running at around 25% annually since 2008, despite official statistics
indicating less than half that figure; these would be the highest levels since the 2002 devaluation.
A committee was established in 2010 in the Argentine Chamber of Deputies by opposition
Deputies Patricia Bullrich, Ricardo Gil Lavedra, and others to publish an alternative index based
on private estimates. Food price increases, particularly that of beef, began to outstrip wage
increases in 2010, leading Argentines to decrease beef consumption per capita from 69 kg
(152 lb) to 57 kg (125 lb) annually and to increase consumption of other meats.
Consumer inflation expectations of 28 to 30% led the national mint to buy banknotes of its
highest denomination (100 pesos) from Brazil at the end of 2010 to keep up with demand. The
central bank pumped at least 1 billion pesos into the economy in this way during 2011.
As of June 2015, the government said that inflation was at 15.3%; approximately half that of
independent estimates. Supermarkets in Argentina are adopting electronic price tags, allowing
prices to be updated quicker.