Abhinav VK – 12P121 Karan Jaidka – 12P141

Mayur Srivastav– 12P151 Ravi Goel– 12P161

Soumyajit Sengupta– 12P171 Amrita Sandhu – 12FPM74

Group 2 – Section C

The Argentinian Economy

The economy of Argentina is an upper middle-income economy, and Latin America's third-largest. The nation has a high quality of life and GDP per capita, which is since 2011 the highest in Latin America.

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.

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.

Argentina is considered an emerging market by the FTSE Global Equity Index, and is one of the G-20 major economies.

GDP and its Growth Rates

The Argentinian GDP Story! In 1989, according to the convertibility plan the peso was pegged to the

U.S. dollar at a rate of 1:1

The economy was liberalized by privatization of over 200 state owned companies

 Due to cheap imports, many businesses closed down because they could not compete with low costs of foreign products

With the selling-off of state-run industries to the private market, thousands of Argentines were left without work

 Simultaneously, the government went on a spending spree financed by debt

By 1999, GDP had fallen 4% for the year

The Argentinian GDP Story! (Contd.)

The tipping point came in November 2001, when there was an all out run on the banks

Finance Minister Cavallo ordered a limit on bank withdrawals to 250 – 300 pesos per week and these measures backfired horrendously on the government.

In January 2002, the government decided to abandon the law of convertibility and set the official exchange rate at 1 to 1.4.

Devaluation made Argentina exports much more competitive and imports uncompetitive. This led to a big increase in export demand 

The devaluation forced people to buy less imports and more domestically produced goods which was good for Argentinian industry.

Since the devaluation and debt default, Argentina has posted impressive rates of economic growth. 

Annual % change in real GDP in 2000 was -0.8 which went up to 8.4 in 2007

Components of GDP (Expenditure in billion USD)

Components of GDP(Annual Growth Rate)

Sectoral Contribution to GDP

Sectoral Contribution to GDP(Annual Growth %)

Sectoral Contribution Analysis 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

Fruits and vegetables made up 4% of exports Mining is a growing industry, increasing from 2% of GDP in 1980

to nearly 4% today Around 35 million m³ each of petroleum and petroleum fuels are

produced 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

Sectoral Contribution Analysis (Contd.)

Leading sectors by production value are: Food processing and beverages; motor vehicles and auto parts; refinery products, and biodiesel; chemicals and pharmaceuticals; steel and aluminum

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

Business Process Outsourcing became the leading Argentine service export, and reached US$3 billion

The World Economic Forum estimated that, in 2008, tourism generated around US$25 billion in economic turnover, and employed 1.8 million

Balance on Goods and Services

Government Consumption Expenditure

Break-Up of Public Finances

Household Consumption Expenditure

The Consumption Pattern

Consumption had decreased in 2002 but the trend was reversed in 2003 partly in response to the rising inflation

Salaries began to rise and by 2005 their consumption pattern returned to pre recession period.

The middle class returned to buying luxury products on account of higher salaries 

The trend has carried on ever since and has proved good for the economy

Gross Capital Formation (Investment)

Trade Balance Graph (Goel to add)

Break-Up of Exports and Imports

Trade Balance Analysis Argentina’s trade surplus, as of May 2009, rose 139% from the 2008 levels to $2.48 billion

due to a sharp drop in imports, in the wake of the economic meltdown

The overall exports dropped by 18% in May 2009 to $5.14 billion, while imports fell by 49% to $2.66 billion.

The export slump was attributed to lower prices of grains and oilseeds. While the volume increased 6%, export prices fell by 13%

The imports plunged 39% in volume and 16% of value.

Purchases of foreign made and capital goods shrank in May 2009

The trade surplus in the first five months of 2009 was $8.33 billion, up by 63% from $5.12 billion in the first five months of 2008.

In January 2010, Argentina’s trade surplus reached $1.22 billion. While exports rose 19% to $4.42 billion in the month due to rising industrial manufacturing sales, imports rose by 16% at $3.21 billion.

¡gracias