1.1 Background Of Study
The economy of Argentina is Latin America’s third largest, with a high quality of life and GDP per capita. An upper middle-income economy, Argentina has a firm foundation for future growth for its market size, the levels of foreign direct investment, and percentage of high-tech exports as share of total manufactured goods.
The country benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector and a diversified industrial base. Historically, however, Argentina's economic performance has 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 richest in the Southern hemisphere, though it is now an upper-middle income country.
Prior to the 1880s, Argentina was a relatively isolated backwater, dependent on the wool, leather and hide industry 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 1875 through the export of livestock and grain commodities, however, as well as through British and French investment, marking the beginning of a significant era of economic expansion.
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, though throughout the period from 1890 to 1939, the country's per capita income was similar to that of France, Germany and Canada[(although income in Argentina remained considerably less evenly distributed).
The fact is, we can describe that country Argentina appear to the world economy was aided by several factors, namely:
1) The development of land
2) The development of the labor market
3) The development of capital markets
4) Appraisal and the twilight of export-led growth
5) The industrial era
6) Import substitution industrialization
Prior to the 1880s, Argentina was a relatively isolated backwater, dependent on the wool, leather and hide industry 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 1875 through the export of livestock and grain commodities, however,as well as through British and French investment, marking the beginning of a significant era of economic expansion.
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, though throughout the period from 1890 to 1939, the country's per capita income was similar to that of France, Germany and Canada (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 sharp contrast to what had happened in 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.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.
The administration of Juan Perón nationalized strategic industries and services from 1945 to 1955. Inflation first became a chronic problem during this period (it averaged 26% annually from 1944 to 1974) and Argentina did not become "industrialized" or fully "developed"; but, from 1932 to 1974, Argentina's economy grew almost fivefold (or 3.8% in annual terms), while its population only doubled. Though unremarkable, this expansion was well-distributed and so resulted in very positive 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 best-paid, most unionized working class.
The partial enactment of Developmentalism after 1958 was followed by a promising fifteen years. The economy, however, declined during the military dictatorship from 1976 to 1983, and for some time afterwards.The dictatorship's chief economist, José Alfredo Martínez de Hoz, advanced a disorganized, corrupt, monetarist 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 economic decisions made 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. 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 and GDP grew by one third in four years; but external economic shocks and failures of the system diluted benefits, causing the economy to crumble slowly from 1995 until the 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 shrunk, unemployment reached 25% and the peso had depreciated 70% after being devalued and floated. Argentine debt restructuring offers in 2005 and 2010 resumed payments on the majority of its almost $100 billion in defaulted bonds from 2001. The economic minister Amado Boudou said that with the offer, the Argentine government hoped "to end the shame of 2001 once and for all."
Expansionary policies and commodity exports triggered a rebound in GDP from 2003 onwards. This trend has been largely maintained, creating millions of jobs and encouraging internal consumption. 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%..High economic growth resumed in 2010, and GDP expanded by 8.5%.
1.2 Recently Condition
The current development of the country's economy, Argentina has experienced rapid growth. economic growth may be due to the sectors of Argentina has much to contribute in the advancement of the economy. These sectors are:
2) Natural resources
7) Trade and investment
11) Reliability of official statistics
13) Income inequality
The fact is, we can describe that country Argentina appear to the world economy was aided by several factors, namely:
1) The development of land
2) The development of the labor market
3) The development of capital markets
4) Appraisal and the twilight of export-led growth
5) The industrial era
6) Import substitution industrialization
1.3 Main Problems
Argentina has many State sectors which helps in terms of the economy of the country. Of the many sectors of the formal sector and the informal sector. from the explanation of some of the above techniques section later, can be stretched several issues, namely:
1. What is contribute to income economy of the country Argentina ?
2. If Argentina could be hit by the crisis economy ?
2.1 Brief Overview Of Theoritical Framework
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic models emerged from the broader field of political economy in the late 19th century. A primary stimulus for the development of modern economics was the desire to use an empirical approach more akin to the physical sciences.Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war,and science. The expanding domain of economics in the social sciences has been described as economic imperialism.
Common distinctions are drawn between various dimensions of economics. The primary textbook distinction is between microeconomics, which examines the behavior of basic elements in the economy, including individual markets and agents (such as consumers and firms, buyers and sellers), and macroeconomics, which addresses issues affecting an entire economy, including unemployment, inflation, economic growth, and monetary and fiscal policy. Other distinctions include: between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between mainstream economics (more "orthodox" dealing with the "rationality-individualism-equilibrium nexus") and heterodox economics (more "radical" dealing with the "institutions-history-social structure nexus"); and between rational and behavioral economics.
Mainstream economic theory relies upon a priori quantitative economic models, which employ a variety of concepts. Theory typically proceeds with an assumption of ceteris paribus, which means holding constant explanatory variables other than the one under consideration. When creating theories, the objective is to find ones which are at least as simple in information requirements, more precise in predictions, and more fruitful in generating additional research than prior theories.In microeconomics, principal concepts include supply and demand, marginalism, rational choice theory, opportunity cost, budget constraints, utility, and the theory of the firm.Early macroeconomic models focused on modeling the relationships between aggregate variables, but as the relationships appeared to change over time macroeconomists were pressured to base their models in microfoundations.
The aforementioned microeconomic concepts play a major part in macroeconomic models – for instance, in monetary theory, the quantity theory of money predicts that increases in the money supply increase inflation, and inflation is assumed to be influenced by rational expectations. In development economics, slower growth in developed nations has been sometimes predicted because of the declining marginal returns of investment and capital, and this has been observed in the Four Asian Tigers. Sometimes an economic hypothesis is only qualitative, not quantitative. Expositions of economic reasoning often use two-dimensional graphs to illustrate theoretical relationships. At a higher level of generality, Paul Samuelson's treatise Foundations of Economic Analysis (1947) used mathematical methods to represent the theory, particularly as to maximizing behavioral relations of agents reaching equilibrium. The book focused on examining the class of statements called operationally meaningful theorems in economics, which are theorems that can conceivably be refuted by empirical data.
Economic theories are frequently tested empirically, largely through the use of econometrics using economic data. The controlled experiments common to the physical sciences are difficult and uncommon in economics,and instead broad data is observationally studied; this type of testing is typically regarded as less rigorous than controlled experimentation, and the conclusions typically more tentative. However, the field of experimental economics is growing, and increasing use is being made of natural experiments.
Statistical methods such as regression analysis are common. Practitioners use such methods to estimate the size, economic significance, and statistical significance ("signal strength") of the hypothesized relation(s) and to adjust for noise from other variables. By such means, a hypothesis may gain acceptance, although in a probabilistic, rather than certain, sense. Acceptance is dependent upon the falsifiable hypothesis surviving tests. Use of commonly accepted methods need not produce a final conclusion or even a consensus on a particular question, given different tests, data sets, and prior beliefs.Criticism based on professional standards and non-replicability of results serve as further checks against bias, errors, and over-generalization,although much economic research has been accused of being non-replicable, and prestigious journals have been accused of not facilitating replication through the provision of the code and data. Like theories, uses of test statistics are themselves open to critical analysis,]although critical commentary on papers in economics in prestigious journals such as the American Economic Review has declined precipitously in the past 40 years. This has been attributed to journals' incentives to maximize citations in order to rank higher on the Social Science Citation Index (SSCI).
In applied economics, input-output models employing linear programming methods are quite common. Large amounts of data are run through computer programs to analyze the impact of certain policies; IMPLAN is one well-known example.Experimental economics has promoted the use of scientifically controlled experiments. This has reduced long-noted distinction of economics from natural sciences allowed direct tests of what were previously taken as axioms.In some cases these have found that the axioms are not entirely correct; for example, the ultimatum game has revealed that people reject unequal offers.
In behavioral economics, psychologists Daniel Kahneman and Amos Tversky have won Nobel Prizes in economics for their empirical discovery of several cognitive biases and heuristics. Similar empirical testing occurs in neuroeconomics. Another example is the assumption of narrowly selfish preferences versus a model that tests for selfish, altruistic, and cooperative preferences. These techniques have led some to argue that economics is a "genuine science."
The professionalization of economics, reflected in the growth of graduate programs on the subject, has been described as "the main change in economics since around 1900". Most major universities and many colleges have a major, school, or department in which academic degrees are awarded in the subject, whether in the liberal arts, business, or for professional study; see Master of Economics.
The Nobel Memorial Prize in Economic Sciences (commonly known as the Nobel Prize in Economics) is a prize awarded to economists each year for outstanding intellectual contributions in the field. In the private sector, professional economists are employed as consultants and in industry, including banking and finance. Economists also work for various government departments and agencies, for example, the national Treasury, Central Bank or Bureau of Statistics.
The fact is, we can describe that country Argentina appear to the world economy was aided by several factors, namely:
8) The development of land
Since becoming a nation in 1816, Argentina, being the eighth largest country in the world by area, has held an advantage in this factor of production. The rural economy was almost entirely devoted to subsistence farming in the early nineteenth century and above all, livestock raising, which spread quickly in Argentina's mild climate. Moreover, during periods of falling prices for their products ranchers were able to maintain positive returns, proving their resilience in a volatile market. Over the next few decades, cattle and sheep ranchers became the most influential men in Argentina, as their exports became the unstable young country's nearly sole source of foreign exchange.
Labor-intensive crop farming languished for much of this era, the victim of internecine wars, an acute shortage of labor, a lack of qualified agronomists and livestock ranchers' opposition. Following a decade of revolution, however, focus changed toward the development of grain farming and after 1861, during Bartolomé Mitre's difficult presidency, the first institute of Agronomy and the first initiatives encouraging immigration were given life.
Livestock raising required relatively few gauchos and continued to dominate land use; but, in 1875, the first Argentine grain shipment to arrive intact in Europe ignited an agricultural boom that soon replaced vast tracts of lands once devoted to livestock with "waves of grain." The leading outlet of European investment in Argentina after 1875, railways, themselves helped harness the country's vast land resources, reducing a typical journey from the hinterland to port for both crops and passengers from a month to two days. British capital and European immigration quickly followed, easing capital, skills and labor shortfalls without which the development of modern Argentina would not have been possible.
9) The development of the labor market
Immigration was central to Argentina's development. Prior to the 1860s, there was relatively little migration into the country; the population in 1869 was less than 2 million and, due to the sparse population, vast tracts of land remained unutilized. Labour shortages became widespread, resulting in the growth of real wages and, consequently, an increasing gap between the wage rates of Argentina and Europe. This facilitated a nearly-uninterrupted mass immigration until World War I and by 1914, one third of Argentina's 8 million people had been born elsewhere, mostly in Italy and Spain. Eighty percent of Argentina's population were, by then, European immigrants, their children, or grandchildren.
In all, over 4 million Europeans migrated to Argentina permanently between 1857 and 1950, and another 3 million passed through as seasonal workers, often moving on to the United States. Because the immigrants that stayed were much less likely to be field laborers than those that moved on, immigration helped quickly urbanize Argentina and its urban population tripled to over 4 million between 1895 and 1914, alone. The establishment of a national system of free, universal grade schools by Education Minister (and later, President) Domingo Sarmiento during the 1860s and 1870s raised literacy rates from 22% in 1869 to 65% in 1914 and helped further consolidate a modern labor structure.
This mending of the labor problem facilitated economic development. Immigrants, as an important factor of production, were able to alleviate the labor shortage and so, helped diversify Argentina's commodity exports. The livestock, leather and wool sectors had dominated production since the eighteenth century; but the sudden abundance in labor supply allowed the development of the arable sector.
Argentina's commodity export market became less dependent on beef and quickly diversified into wheat and maize. Accessible education and the relatively capital-intensive nature of Argentine agriculture itself (which, as early as 1895, employed only a third of all labor) helped likewise redirect most of this immigrant labor into the service and industrial sectors and for the most part, this helped fortify the country against market shocks (though certainly not internal, social or political disturbances). Many of the social upheavals during this period of emergence were caused by poor labor conditions and standards of living. Argentina's economy and labor movement developed almost in parallel. The first to organize were the printing workers, in 1872, and the retail workers soon followed. These development later caught the attention of the administration of President Julio Roca, whose hostility against trade unions culminated in an 1888 massacre. These excesses helped lead to the formation of the Argentine Workers' Federation, the first national trade union center in the country.
Resisted by successive administrations, the drive for reform gained momentum following the election to the Argentine Chamber of Deputies of its first Socialist Congressman, Alfredo Palacios, in 1904. Commissioning a study on contemporary urban social conditions, Palacios demonstrated that poverty rates approached 90%, helping lead to the 1905 prohibition of women and children from risky occupations, the establishment of a minimum working age (13), and the introduction of a 60-hour, six-day workweek. These reforms did not improve the lot of most unskilled workers in the then-feudal north, least of all the several hundred thousand sugarcane, cotton and tobacco plantation workers, who began migrating in large numbers to urban areas in their own region and in the more prosperous central areas of the country. The distribution of income largely improved, however, and improving social conditions contributed to the overall, successful level of development the country experienced between 1870 and 1930.
10) The development of capital markets
Like immigration, foreign investment played a central role in Argentina's economic development. Prior to World War I, it could be said that Argentina's capital investment was foreign capital investment and immigrants as well as foreign investment flocked to Argentina.
The United Kingdom contributed more direct investment into Argentina during this period than all other sources combined, as it did for many other Latin American states in that era. Large-scale British investment began around 1875 and by 1890, British nationals held a cumulative 180 million pounds Sterling (over US$800 million) in direct investments. Argentina had become, by then, the leading destination for British investment in the world. Though most of these funds found their way into productive activities such as rail transport, port development, mortgage banking and public services, fully a third was channelled into Argentine government bonds.
The boom in foreign capital during the 1880s was able to cover, by some estimates, a current account deficit of 30 percent of GDP. It also financed a dual currency system: gold pesos, for use mainly in foreign trade and financial markets, and paper pesos worth roughly half the former's value, for use as monetary base. Lured by high rates of return, underwriters such as the influential Barings Bank made Argentine and Uruguayan bonds the darlings of London speculators during the 1880s. These instruments began to lose value towards 1890, however, and before most investors could unload them, the pyramid scheme Barings built up collapsed. So serious were these losses (some involving the most prominent British families), only intervention by the Bank of England averted a financial collapse.The crisis led to President Carlos Pellegrini's introduction of the first currency board in Argentina, which helped stabilize the currency, and maintain the Investment and thus the economy soon recovered; by 1914, Argentina's public external debt stood at US$784 million in (mostly) 41/2% bonds, with a further US$3.217 billion in foreign direct investment. Argentina stood out among Latin American states in terms of foreign direct investment received during this era; nearly half of all British direct investment worldwide had, by then, been plowed into the Argentine economy.
The relatively sudden modernization in the Argentine economy in the generation until 1914 was achieved through investment from and exports to Europe. Dependent upon beef jerky and hides until the advent of refrigerated shipping in 1876, exports diversified into chilled beef and mutton, to cereals and eventually to some processed goods like flour, lard, canned luncheon meat and linseed oil. These were sent off to Europe, where rising living standards created a booming market for imported foodstuffs and other raw materials. In return, Great Britain, France and Germany invested in the development of Argentina, particularly in sectors that were oriented toward exports (such as Argentina's railways, still the most extensive in Latin America). The most important aspect of foreign investment was its share in Argentina's capital stock relative to the size of domestic contributions. Argentine development, the railways and meat-packing industry in particular, would have been severely limited without these investments. Domestic credit was scarce and start-up costs were often beyond the reach of local investors. Argentina's agricultural sector itself, however, developed into an export powerhouse that alone brought in nearly a billion dollars a year by the late 1920s with virtually no foreign investment and comparatively little domestic credit; in all, foreign investment accounted for one third of the nation's capital stock (buildings and equipment) by 1900, and nearly half by 1913.
11) Appraisal and the twilight of export-led growth
While many Argentines saw the foreign exchange their booming export sector brought in as central to the development of a national market, export volumes themselves did not outstrip the economy as a whole. Exports averaged 15–20% of GDP during the era between 1870 and 1913 (far less a proportion than, say, Cuba).Growing domestic activity accounted for most of the era's economic growth itself, though the country's financial stability still remained deeply dependent on foreign investment and international economic sentiment
Foreign investment and the commodity market can be extremely volatile. Because Argentina's economy relied so heavily on foreign credit and a demand for its agricultural products, it was particularly susceptible to these periods of volatility, which brought about severe repercussions for the country's economic growth. Foreign investment for Argentina, then, was a double-edged sword. While it contributed to the long period of growth between the late 19th and early 20th centuries, foreign investment dried up during World War I. Because national markets had not yet matured, the domestic economy was unprepared to make up for losses incurred by the international market shock and the economy, which had grown by an average of about 6% until 1913, shrank by 10% in 1914 and remained in low gear during the war.
12) The industrial era
The period between 1914 and 1945 challenged the Argentine economy, as it did most of the world's. Foreign investment disappeared during World War I to finance the European war effort, and failed to return after the peace. The Argentine economy retained close links to British trade and investment; but after 1918, a stronger commercial relationship emerged with the United States and Wall Street, which now dominated the international economic stage.
The now indispensable urban working and middle classes had recently secured universal male suffrage and, in 1916, elected the country's first populist leadership. The new administration of longtime activist Hipolito Yrigoyen extended subsidized loans to Argentina's then-sizable peasant class and translated recently-found oil deposits into the country's first significant experiment with public enterprise, the 1922 creation of the state oil concern YPF. Though it did not become a monopoly in the way Mexico's PEMEX did, YPF yielded about 15,000 barrels (2,400 m3) daily by 1930 (a fourth of Argentina's oil needs) and its success (albeit modest) made it a target of Standard Oil.
Economic growth returned to around 6% annually during the 1920s, making it the richest country in the region on a per capita basis; by 1929, for instance, there were over 400,000 motor vehicles in the country (more than any other in Latin America).The 1929 stock market collapse, however, marked the end of Argentine hopes for a return to the export-led growth model. Suffering the brunt of public discontent (including at least one assassination attempt), the aging Yrigoyen was deposed in a quiet 1930 coup d'état that placed him under house arrest and his point man at YPF, Enrique Mosconi, into exile. Per capita GDP, meanwhile, plummeted almost as quickly as it did in the United States: in 1932 it reached its lowest level since 1902.
13) Import substitution industrialization
Even before World War II, a new model of economic growth began to emerge. The Economic Census of 1935 counted over 600,000 workers in manufacturing (mostly in firms with fewer than five employees).Import substitution industrialization, or ISI, was adopted into Argentina's economic policy and where the government had adopted a more laissez-faire approach with export-led growth, ISI meant direct government intervention. Though it had been larded with Standard Oil and Royal Dutch Shell lobbyists since after the 1930 coup, the Argentine government took a quick turn and by 1932, for example, it began levying gasoline taxes to fund its new highway bureau and began Argentina's first large-scale hydroelectric projects.The 1933 Roca-Runciman Agreement further regulated monetary and trade policy by tying both more closely to British markets, encouraging Argentine exports to markets in the U.K. and its colonies on condition that these surpluses be deposited in the Bank of England.
Having recovered its lost ground by the late 1930s partly through import substitution, the economy continued to grow modestly during World War II (in sharp contrast to what had happened in 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.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.What followed was one of the most contentious periods in modern Argentine history and the source of many of the political divisions that continue to exist in Argentina. Even before he took office in 1946, President Juan Perón took dramatic steps that he felt would result in a more economically independent Argentina, better insulated from events such as World War II; Perón believed there would be a third.In his first two years in office alone, he nationalized the Central Bank, paid off its billion-dollar debt to the Bank of England while repatriating frozen trade funds therein, nationalized the railways (mostly owned by British and French companies), merchant marine, universities, public utilities, public transport (then, mostly tramways) and, probably most significantly, created a single purchaser for the nation's mostly export-oriented grains and oilseeds: the IAPI.
Soon the central government's chief source of non-tax revenue, the IAPI benefited from the jump in international grain demand and high prices during 1946-47. It helped finance generous social reforms and record public works investments (in particular, the construction of over 4000 hospitals and clinics and of over 8000 schools). Dormant mortgage and development loan programs were revitalized and the economy grew by over a fourth in 1946-48. These programs, among other things, eradicated tropical diseases in the underdeveloped north and the country's recurrent problem with locusts; but the IAPI soon began shortchanging growers and, when world grain prices dropped in the late 1940s, it stifled agricultural production, exports and business sentiment, in general. Argentine exports were, moreover, largely shut out of booming European markets by political pressure from the administration of U.S. President Harry S. Truman (which regarded Perón as an unapologetic fascist) and the resulting trade deficits of 1949-52 brought Argentina its first serious bout of stagflation since World War I.
This crisis as well as the passing of the most influential and populist adviser in Perón's inner circle (his wife, Eva Perón) led the President to adopt more business-friendly policies after 1952.His new policies reinvigorated exports and stimulated badly needed foreign investments in petroleum and the auto industry, while keeping wages high, labor rights strong and investment in public works in high gear;even after a conflict with the Roman Catholic Church resulted in his overthrow (1955), this combination of policies remained (more or less) the general blueprint for economic policy for the next twenty years.
Though Argentine conservatives saw Perón's fall as an opportunity to return to the mercantile model, the new regime's Civilian Advisory Board advised against drastic policy changes. This still left the question of the country's chronic trade deficits, which, though a modest US$200 million a year (2% of GDP), proved difficult to finance and was, thus, leading to periodic bouts of inflation.Elections in 1958 brought the moderate Arturo Frondizi to office and with him, two approaches to the problem. The first was a policy shared by Pres. Frondizi and his personal friend, businessman Rogelio Frigerio: developmentalism. Encouraging investment in energy, industry and public works, as well a subsidies for domestic mortgage and business lending, it drew from previous efforts (such as Perón's post-1952 approach), though it was more ambitious in its bid for foreign investment and rather resembled Pres. Juscelino Kubitschek's policies in Brazil. The second entailed an austerity package of wage freezes, curbs on subsidies, credit controls and a sharp devaluation of the peso and was not supported by the president or Frigerio; but was imposed on Frondizi by the military through economist Alvaro Alsogaray, a defense contractor close to the landowing elite.
Bereft of a choice, Frondizi enacted these policies simultaneously and the results largely reflected it: Alsogaray's austerity measures (including a sharp devaluation) led to a sudden doubling of prices (a record at the time) and a consequent recession in 1959, the sharpest since 1930; but a wave of domestic and foreign investment from 1958 to 1962 resulted in three times more oil, steel and cement production, twice as much oil refining capacity and electric output and a several-fold increase in the production of consumer durables (in particular, auto production, which rose fourfold to 136,000 units, covering the domestic market).The combined slowing of domestic demand and sudden industrialization was consistent in one regard: the era of chronic trade deficits, for the time, ended in 1963.Their overcoming this obstacle allowed the new Administration of Dr. Arturo Illia to pursue vigorously pro-growth policies that included record public mortgage and business lending and generous wage guidelines, while balancing the national budget. The working and middle-classes benefited equally: poverty and unemployment fell sharply, while appliance, auto and home sales leapt to record levels. Pres. Illia, however, canceled important oil exploration contracts with foreign oil giants and, as Frondizi had done, allowed Peronist candidates for local and governors' posts to take office — concessions the military had forbidden. Prosperity notwithstanding, these moves threw conservatives and most of the media against Illia, who was deposed in a quiet 1966 coup.
The new regime tried austerity initially; but strenuous opposition from the newly powerful manufacturers' lobby, the Argentine Industrial Union (UIA), resulted in a general return to developmentalism around 1968. Record public works and business investment reignited economic growth and by 1970, for instance, GDP had grown by 50% from 1963 levels, industrial production by 60% and auto sales had doubled.The boom's resulting rise in imports renewed calls for austerity among inflation hawks which, in 1970, placed the new de facto President, Gen. Roberto M. Levingston, in a position similar to Frondizi's a decade earlier. Like Frondizi, he appointed a conservative Economy Minister; but relied on a pro-industry policy maker, Production Minister Aldo Ferrer. The pragmatic Pres. Levingston, in September 1970, had Ferrer, Frondizi and other moderates draft a "five-year plan" creating a national small-business lender and other new incentives for local investment in energy and industry, as well as regulations on foreign investment designed to encourage reliance on Argentine products and skill.The plan, however, also catered to Levingston's personal political ambitions and resulted in his being replaced the next March. Ferrer's proposals, even so, were left largely intact and were complemented by Social Policy Minister Francisco Manrique's public housing and public health programs — the most comprehensive Argentina had ever seen.
These accomplishments, however, suffered from a background of repression that had resulted in increasing labor and student unrest, particularly since 1969. Skillfully co-opting these movements from exile, Juan Perón pressured the military regime into calling free elections in March 1973, which, won by his Justicialist Party in a landslide, resulted in the aging leader's return from exile that June.
And aside from some sectors of the above, there are again some of the sector is also very supportive of the revival of economy of Argentina. Among other things, namely:
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. 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 export commodities with one fourth of the total; cereals added another 7%. Cattle-raising is also a major industry, though mostly for domestic consumption; beef, leather and dairy were 5% of total exports. Sheep-raising and wool are important in Patagonia, though these activities have declined by half since 1990.
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. 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.
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, 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.
Argentine fisheries bring in about a million tons of catch annually,and are centered around Argentine hake which makes up 50% of the catch, pollack, squid and centolla crab. Forestry has long history in every Argentine region, apart from the pampas, accounting for almost 14 million m³ of roundwood harvests.Eucalyptus, pine, and elm (for cellulose) are all widely harvested, mainly for domestic furniture, as well as paper products (1.5 million tons). Fisheries and logging each account for 2% of exports.
14) Natural resources
Mining is a growing industry, increasing from 2% of GDP in 1980 to nearly 4% today. The northwest and San Juan Province are the main regions of activity. Coal is mined in Santa Cruz Province. Metals mined include copper, zinc, magnesium, sulfur, tungsten, uranium silver, and particularly, gold, whose production was boosted by recent investments from Barrick Gold 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 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-Buenos Aires-Rosario industrial belt.
Manufacturing is the largest single sector in the nation's economy (19% of GDP), and is well-integrated into Argentine agriculture, with half the nation's industrial exports being agricultural in nature. Leading sectors by production value are: food processing, chemicals and pharmaceuticals, motor vehicles, farming equipment and auto parts, iron, steel and aluminum, petroleum, as well as industrial machinery 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. Beverages are another significant sector, and Argentina has long been among the top five wine producing countries in the world, though in 2000, beer overtook wine production, and today leads by nearly two billion liters a year to one.
Other manufactured goods include textiles and leather, plastics and tires, forestry products, publishing, cement, glass and tobacco products. Nearly half the industries are based in and around Buenos Aires, 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, and will supply the majority of the nation's laptop market by 2013. Construction permits nationwide covered nearly 20 million m² (215 million ft²) in 2007. The construction sector accounts for over 5% of GDP, and two-thirds of the construction was for residential buildings.
Argentine electric output totaled over 117 billion Kwh in 2010. This was generated in large part through well developed natural gas and hydroelectric resources. Nuclear energy is also of high importance, 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.
The service sector is the biggest 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 mobile telephony (more than 75% of the population having access to mobile phones), Internet (more than 16 million people online), and broadband services. Regular telephone services with 9.5 million lines and mail services are robust.
Exports and imports of services were US$12 billion each in 2009. 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 increasingly important and provided 8% of economic output (over US$25 billion) in 2008; over 80% of tourism sector activity is domestic.
Argentine banking, whose deposits exceeded US$90 billion in November 2010, developed around public sector banks, but is now dominated by the private sector. The private sector banks account for most of the 85 active institutions (4,000 branches) and holds nearly 60% of deposits and loans, and there are as many foreign-owned banks as local ones. The largest bank in Argentina by far, however, has long been the public Banco de la Nación Argentina. Not to be confused with the Central Bank, this institution now accounts for about a fourth of the total deposits and a seventh 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 to the private sector has been increasing 40% a year since 2004, and delinquencies are down to 3%. Still, credit outstanding is, in real terms, about a fifth less than in 2000, and as a percent of GDP (around 15%), 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 17% in 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$140 billion in overseas accounts and investment exceeded the domestic monetary base (M3) by nearly 50% in 2009.
The World Economic Forum estimated that, in 2008, tourism generated around US$25 billion in economic turnover, and employed 1.8 million. Tourism from abroad contributed US$ 4.3 billion, having become the third largest source of foreign exchange in 2004. Around 4.6 million foreign visitors arrived in 2007, yielding a positive balance vis-à-vis the number of Argentines traveling abroad.
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.
INDEC recorded 2.3 million foreign tourist arrivals in 2007 (a 12% increase), at the Ministro Pistarini International Airport, alone (around half the total); of these, 26 % arrived from Brazil, 25 % from Europe, 14 % from the United States and Canada, 8 % from Chile, 19 % from the rest of the Western Hemisphere and 8 % from the rest of the World.
19) Trade and investment
Argentine exports are fairly well diversified. However, although agricultural raw materials were 20% of the total exports in 2010, agricultural goods including processed foods still account for over 50% of exports. 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. The country exported 448,000 motor vehicles in 2010, mostly to Brazil. Motor vehicles and auto parts are the leading industrial export, about 10% of the industrial 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 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 1981, 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. Exports of crude petroleum and natural gas have recently been about around US$3 billion a year.
Argentine imports have historically been dominated by the need for industrial and technological supplies, machinery, and parts, which were US$38 billion in 2010 (two-thirds of total imports). Consumer goods including motor vehicles make up most of the rest.Trade in services, historically in deficit for Argentina, is currently balanced at around US$12 billion each way.
Direct investment in Argentina by the U.S. is mainly in telecommunications, energy, financial services, chemicals, food processing, and vehicle manufacturing. The U.S. direct investment in Argentina approached $16 billion at the end of 1999, according to the embassy estimates. Investments from Canada, Europe, Chile, and other countries have also been significant. In all, foreign nationals hold around US$80 billion in direct investment.
Brazil has, since 2000, also became an important investor in Argentine assets and 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.
Argentina attracted $3.4 billion in foreign direct investment (FDI) in 2006;as a percent of GDP, this FDI volume was below the Latin American average. Current Kirchner Administration policies and difficulty in enforcing contractual obligations had been blamed for this modest performance.FDI accelerated, reaching US$8 billion in 2008,while slowing to US$4 billion in 2009 and recovering to US$6.2 billion in 2010.
The electricity sector in Argentina constitutes the third largest power market in Latin America. It relies mostly on thermal generation (54% of installed capacity) and hydropower generation (41%), with new renewable energy technologies barely exploited. The country still has a large untapped hydroelectric potential. However, the prevailing natural gas-fired thermal generation is at risk due to the uncertainty about future gas supply.
Faced with rising electricity demand (over 6% 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.
Argentina's transport infrastructure is relatively advanced. 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 1,575 km (980 mi) are expressways, many of which are privatized tollways. Having doubled in length in recent years, multilane expressways now connect several major cities with more under construction. Expressways are, however, currently inadequate to deal with local traffic, as 9.5 million motor vehicles were registered nationally as of 2009 (240 per 1000 population).
The railway network has a total length of 34,059 km (21,170 mi).After decades of declining service and inadequate maintenance, most intercity passenger services shut down in 1992 when the rail company was privatized, and thousands of kilometers of track (excluding the above total) are now in disuse. Metropolitan rail services in and around Buenos Aires remained in great demand, however, owing in part to their easy access to the Buenos Aires subway, and intercity rail services are currently being reactivated along numerous lines.
Inaugurated in 1913, the Buenos Aires Metro was the first subway system built in Latin America and the Southern Hemisphere. No longer the most extensive in South America, its 52.3 km (32.5 mi) of track carry nearly 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 Río de la Plata, Paraná, Uruguay, Río Negro and Paraguay rivers.
Aerolíneas Argentinas is the country's main airline, providing both extensive domestic and international service. Austral Líneas Aéreas is Aerolíneas 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 economy recovered strongly from the 2001-02 crisis, and remained the 22nd-largest in purchasing power parity terms in 2010. Some observers have questioned whether the country should still have a place in the G20, however, considering that since the first G20 summit in 1999 it has slipped from being the world's 16th-largest economy to the 28th largest in 2010 (in nominal terms). 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.
Argentina’s economy grew by 9% in 2010, and officially, income poverty declined to around 13%; unofficially, it was estimated to top 30% of the population, the highest since poverty exceeded 50% after the 2001-2 economic crisis.Argentina's unemployment rate in the fourth quarter of 2010 was reportedly down to 7.4%, compared with 7.5% in the third quarter and 8.4% in the fourth quarter of 2009, according to INDEC data. Argentina's jobless rate has declined from 25% in 2002 largely because of both growing global demand for Argentine commodities and strong growth in domestic
23) Reliability of official statistics
The executive branch began meddling in the INDEC in 2007, and official figures now are considered to carry little credibility. They show a GDP growth of 0.8% for 2009, but private-sector economists have said the economy actually contracted by 2-2.5%. Most economists consider the government's economic data, particularly its inflation and poverty estimates, as tainted and unreliable.The manipulation of the statistics has drastically increased Argentina’s risk profile, driven away foreign investors and complicated the country’s efforts to return to the credit markets.
Official inflation data are widely regarded as unreliable, leading union leaders, even in the public sector, to disregard them when negotiating pay rises. Private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010.Inflation estimates from Argentina’s provinces are also higher than the government’s figures. The government stands by the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.
The government threatens inflation analysts with fine of up to 500,000 pesos if they don't report how they calculate their inflation estimates, which some economists consider an attempt to limit the availability of independent estimates
High inflation has been a weakness of the Argentine economy for decades. In December 2010, inflation was believed to be running at more than 25% annually, despite official statistics indicating less than half that figure, the highest level since the 2002 devaluation. Food-price increases began to outstrip wage increases in 2010, leading Argentines to buy less food. President Kirchner insists inflation is not a problem.
Consumer prices for 2011 are expected to rise by 20 to 30%, leading 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 is expected to pump at least 1 billion pesos into the economy in 2011.
25) Income inequality
Argentina, in relation to other Latin American countries, has a moderate level of income inequality. Its Gini coefficient of 48.8 is below that of Brazil (55.0), Chile (52.0), Colombia (58.5), or Mexico (51.6); but it is above that of Uruguay (47.1) or Venezuela (43.4). The social gap is worst in the suburbs of the capital, where beneficiaries of the economic rebound live in gated communities, and many of the poor (particularly illegal immigrants) live in slums called villas miserias.
In the mid-1970s, the most affluent 10% of Argentina's population had an income 12 times that of the poorest 10%. That figure had grown to 18 times by the mid-1990s, and by 2002, the peak of the crisis, the income of the richest segment of the population was 43 times that of the poorest. These heightened levels of inequality had improved to 26 times by 2006, and to 16 times at the end of 2010. Economic recovery after 2002 was thus accompanied by some improvement in income distribution: in 2002, the richest 10% absorbed 40% of all income, compared to 1.1% for the poorest 10%;by 2010, the former received 29% of income, and the latter, 1.8%.
Argentina has an inequality-adjusted human development index of 0.622, compared to 0.509 and 0.634 for neighbouring Brazil and Chile, respectively. Unofficially, three of every ten Argentines fall below the poverty line, and 7.3% subsist on less than US$2 per person per day.
3.1 Fact Finding
In the discussion of this paper, there are some interesting issues. The following example :
15) We can describe that country Argentina appear to the world economy was aided by several factors, namely:
o The development of land
o The development of the labor market
o The development of capital markets
o Appraisal and the twilight of export-led growth
o The industrial era
o Import substitution industrialization
16) Argentina has experienced rapid growth. Economic growth may be due to the sectors of Argentina has much to contribute in the advancement of the economy. These sectors are:
o Natural resources
o Trade and investment
o Reliability of official statistics
o Income inequality
From this I created peper, can give the effect of a policy, and also the strength or the advantages and disadvantages of such a policy.According to the Heritage Foundation, a Washington-based conservative think tank, the state's role in the economy has expanded since the start of the Kirchner administration, primarily through price fixing in some industries and the creation of a state-owned airline and a state-owned energy company. The Heritage Foundation assigns Argentina a score of 3.3 (mostly unfree) in economic freedom on a scale of 1 to 5 of, which places the country in the 109th position of the 157 evaluated at the Index of Economic Freedom.
Though nothing new to Argentina, inflation has also proven difficult to contain. Price stability returned quickly after the 2002 crisis and President Kirchner inherited annual inflation in the 3-4% range. The robust recovery that followed has been accompanied by growth in median incomes averaging 17% (including a 25% jump in the year to April 2008, alone); but it has also seen a 26% average expansion in the monetary base.
The Kirchner Administration began pursuing a price truce with retailers as early as 2005; but, with macroeconomic pressures at these levels, the initiative soon failed.To make matters worse, in early 2007 the administration began interfering with inflation estimates and, as of mid-2009, continues to do so (by how much, of course, remains a subject of debate; but, where the Economy Ministry has refused to acknowledge inflation greater than 10%, their own measure of implicit private consumption prices (a factor in GDP estimates) suggests inflation had reached nearly 20% by mid-2008, and remains in the order of 15%).
So basically, the policy applied in Argentina has been successful and it can be said to be demonstrated its success. our Government should be able to follow the policy line of Argenrtina. Basically, our country is almost the same with Argentina, we also share the State of the economy which is almost similar. and we also have a number of sectors which could be developed to become the financial income of our country.
We should be able to replicate the procedure applied by Argentina. in order for our financial policies with respect to road. not just a policy on the economy, but all aspects of life in our State so that our country can move forward, and the stronger the level of the economy. and the stronger influences us at international level because if our economy is rising then we can all improve our potential in a variety of other fields.