Argantina Country Case Report Argentina

Argantina Country Case Report

Argentina Country Case Report

Argentina was once one of the most prosperous economies in the world. Yet, the twentieth century presented it with an impressive challenge, as the country faced severe crises. Today, following the international trend, Argentina struggles with the negative effects of the internationalized financial depression.

Long-term economic growth

In terms of the gross domestic product realized ($558 billion for 2009), Argentina is situated on the 24th position in the CIA's top of 226 countries, outrunning states such as Austria or Switzerland. Unlike the previous years which have witnessed GDP increases of up to 7%, 2009 ended with a national output 2.5% lower than that of 2008. In terms of individual income, this has followed the same trend as the GDP, and is now at a current value of $13,800. In 2009, nearly 14% (13.9%) of the Argentinean population was living below the poverty line; these are however the official estimates, whereas the unofficial estimates indicate 30, up to 35, percent of the population living below the poverty line (Central Intelligence Agency, 2010). The numbers have gradually improved since the nineteenth century, when nearly 90% of the entire population was living in poverty. The same trend can be observed in terms of income inequality, which, while still exists, is becoming more balanced.

The primary source of economic growth is represented by the services sector, which generates 59.3% of the entire revenues to the state budget. The second most important generator is the industry sector, with a 32.2% contribution to the gross domestic product. Finally, the remaining 8.5% are retrieved from the agricultural sector. In terms of infrastructure, the inclination is that of an alignment to global trends in the sense of increasing telecommunications means and improving infrastructure.

Business cycles

Economic crisis are no strangers to Argentina and they have tormented the state throughout most of the nineteenth century. As the country revived from its internal problems, it was hit by the internationalized economic crisis emerged within the United States real estate sector and soon expanded throughout the rest of the world. Two of the most recent and familiar crises include the 1997-119 crisis, immediately followed by the 2002-2202 crisis. In most cases, the crises impeded with the country's ability to sustain exports, attract resources and repay its debts, with the final outcome of decreasing living standards for the population and deepening debt for the country.

Trade

Until the 1980s decade, Argentina had been a relatively enclosed economy, becoming engaged in limited operations of international trade. Throughout the decade however, it implemented various economic reforms towards the liberalization of trade. It for instance reduced quotas and tariffs and removed several other entry barriers. In time, the country signed open trade agreements with countries such as Brazil, Uruguay or Paraguay and its trade revenues increased.

Problems emerged with the devaluation of the pesos, phenomenon which significantly reduced trade revenues (Encyclopedia of Nations, 2010). Exports for 2009 amounted to $58.87 billion and included primarily soybeans, gas, petroleum, vehicles, corn and wheat, sold to Brazil, China, the United States, Chile and the Netherlands. Imports amounted to $37.61 billion and included machineries, motor vehicles or chemicals from Brazil, China, the U.S. And Germany (Central Intelligence Agency).

Labor markets

The first movements towards the creation of the modern Argentinean labor market were made in early 1990s, as the authorities of the day introduced a series of economic reforms, some of them including the restriction of the working age to 13 or not allowing women and children to perform dangerous jobs. The working conditions gradually improved and the labor market eventually came to a situation in which the income inequalities became less obvious.

Today, the Argentinean labor force is composed of 16.38 million individuals (only considering the population in the urban areas) -- the 37th largest market place in the world. In terms of distribution, most of the people are employed within the services sector (76% to be precise), 23% are employed in the industry sector and only the remaining 1% are employed in the agricultural sector. In 2009, the unemployment rate was of 9.6%, having registered an estimated 2.5% increase since its values at the end of the 1980s decade.

While the income per capita remains low in comparison to that in the United States or in other developed nations, it does still sustain itself above the global average of $10,500. The income per capita in the twenty-first century has maintained a relative positive growth trend, with the exception of 2009, when the income per capita decreased from $14,400 to $13,800. Today, Argentineans are the recipients of the 81st largest income per capita at the international level (Central Intelligence Agency).

Rates and monetary policy

Argentina's monetary policy has undergone several processes of change, all with the scope of making the country's economy more stable. Starting in the middle of the 1970s decade, inflation in Argentina followed an ascendant trend. In response, the authorities implemented the convertibility regime in early 1990s. Its declared scope was that of increasing the fiscal stability of the state, and the objective would be achieved through the pegging of the pesos to the dollar, the granting of more autonomy to the central bank or the restriction of borrowings.

As the pesos suffered drastic devaluations and the country's economic relationships in the global arena were impeded, the Argentinean authorities decided upon the removal of the convertibility regime in 2002 (Center for Economic and Policy Research, 2007). The central bank still interferes to regulate the exchange rate, but it mostly does this through the purchasing or the issuing of currency. Today's rate and monetary policies are centered on a combination of free market regulations and protectionism. The International Monetary Fund has helped the Argentinean authorities develop and implement new fiscal measures. An important aid from the IMF has been constituted by the support offered in the restructuring of the country's amounting federal debt.