Argentina: Economy

Argentina benefits from rich natural resources, a highly educated population, a globally competitive agricultural sector, and a diversified industrial base. The move after the 2001-2002 crisis to a more flexible exchange rate regime, along with sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal, and income distribution policies, and favorable international commodity prices and interest rate trends were catalytic factors in supporting 5 consecutive years of greater than 8% annual GDP growth between 2003 and 2007. That economic recovery enabled the government to accumulate substantial official reserves (over $51 billion as of late August 2010). The reserves, combined with the absence of fresh borrowing from the international capital markets, helped insulate the economy from external shocks. A higher tax burden, improved tax collection efforts, and the recovery's strong impact on tax revenues supported the government's successful efforts to maintain primary fiscal surpluses since 2003.

Global financial turmoil and rapid declines in world commodity prices and economic growth during 2008 and 2009 resulted in diminished domestic growth in 2008 and a mild recession in 2009. These factors as well as some changes in trade policy in late 2008 and in 2009 had an impact on foreign trade, with imports and exports falling 32% and 20% annually, respectively, in 2009. While the economic downturn was less severe in Argentina than elsewhere, the deterioration of both domestic and international demand complicated the fiscal situations of both the federal government and the provinces. The global economy’s current recovery is helping to ameliorate some of those pressures.

Official figures show that Argentine GDP reached U.S. $380 billion in 2010, approximately U.S. $9,400 per capita, with investment increasing an estimated 10% for the year and representing approximately 22% of GDP. Analysts estimate that 2010 GDP growth was 7.5%. Government of Argentina statistics showed unemployment was 9.7% in 2010. Poverty dropped in the aftermath of the economic crisis of 2001-2002, after it reached a record high of over 50%. In 2010, the official poverty level was 12%. Some unofficial estimates suggest that unemployment and poverty levels may be higher.

Argentina's exchange rate policy is based on a managed float, with an average exchange rate of 3.89 pesos per dollar in 2010. The rate in early June 2011 was 4.10 pesos per dollar. According to market analysts, the peso's real exchange rate has been undervalued in previous years, which, when combined with high global commodity prices, helped lift export volumes and values to record levels. Argentina had a $1.82 billion trade surplus in early 2011.

Foreign trade was approximately 31% of GDP in 2009 (up from only 10% in 1990) and played an increasingly important role in Argentina's economic development. Exports totaled approximately 18% of GDP in 2009 (up from 15% in 2002), and key export markets included Brazil (18.78%), EU (17.7%), China (9.26%), U.S. (6.38%), and Chile (7.11%). Two-way trade in goods with the U.S. in 2009 totaled about $9.4 billion according to the U.S. International Trade Commission. Total two-way trade in services in 2009 was $5.1 billion (according to the Bureau of Economic Analysis, U.S. Department of Commerce). The production of grains, cattle, and other agricultural goods continues to be the backbone of Argentina's export economy. High-technology goods and services are emerging as significant export sectors.

Continuing Argentine arrears to international creditors and a large number of arbitration claims filed by foreign companies are legacies of the 2001-2002 economic crisis that remain to be resolved. Outstanding external debts included over $6.3 billion (not including interest and penalties) owed to official creditors according to Government of Argentina statistics, including about $500 million owed to the United States. From May to June 2010, the Government of Argentina offered a debt restructuring for private holders of defaulted bonds. Two-thirds of the private bondholders participated, leaving approximately $6 billion in private default claims still outstanding.

Nearly 500 U.S. companies are currently operating in Argentina, employing over 155,000 Argentine workers. U.S. investment in Argentina is concentrated in the manufacturing, information, and financial sectors.

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