Economy:  Argentina Today

 

 

Overview

 

At the onset of the twentieth century, Argentina was among the worlds leading exporters of beef and agricultural products.  By 1980, the Argentine economy declined so significantly that it had been linked increasingly to the economies of Third World nations. Today, Argentina faces significant problems including austerity measures, a huge foreign debt, the reduction of salaries, and rising unemployment and underemployment. 

 

The Early Twentieth Century Until Today

 

Following the Great Depression, Argentina witnessed a decline in its foreign trade.  In order to reverse this situation, the Argentine government sought to protect its industries by placing high tariffs on imported goods.  To promote industrial growth, the government additionally diverted resources away from agricultural to industrial production.  Successive governments continued the policy of import substitution and by the mid 1970’s, manufacturing contributed more to Argentina’s GDP than did agriculture.

 

In 1976 in order to control inflation, there was a shift in economic policy.  The Argentine economy was liberalized and import barriers and restrictions on foreign borrowing were reduced.  These measures resulted in a decrease in manufacturing as domestic producers could not compete with inexpensive foreign imports.  Argentina’s foreign debt quintupled and hyperinflation (as high as 1000 percent) and unemployment spiraled.  Argentina’s debt ratio equaled that of Third World nations.

 

Measures in the 1990’s, enacted by President Menem and his economic minister, Domingo Cavallo, stabilized Argentina’s economy and attracted foreign capital.  Argentina witnessed a period of economic austerity, reduced tariffs, and privatization of many state-run companies, including the privatization of the national airline, Aerolineas Argentinas.  In 1991, the convertibility plan pegged the Argentinean peso, one to one, to the U.S. dollar.  .

 

In 1995, the devaluation of the Mexican peso impacted the Argentinean economy.  Many investors lost confidence in Latin America’s financial systems.  The monies from the sale of national industries, meant to service foreign debt, did not always find their way there.  Government corruption seemed to permeate all levels of government.

 

Today, the formal unemployment rate, by some estimates, is as high as twenty-two percent.  This does not account for the number of people who are underemployed.  Many of the federal social welfare programs were dismantled during the early 1990’s and have led to the nuclear family becoming the source of social welfare in Argentina.  Its increasing country risk is making it more difficult to attract foreign investment and increased competition for agricultural commodities (one of Argentina’s main industries) has resulted in lower prices worldwide.  All these factors have combined to create a real economic crisis for Argentina.  In response, the government has enacted further austerity measures in order to avoid defaulting on its loans and in hopes of attracting investors.  The newest austerity measures enacted in the summer of 2001 included the reduction of employee wages and pensions and have added more uncertainty to the daily lives of Argentineans.  The pauperization of the middle class has led many young, highly educated, Argentineans to leave in increasing numbers to find opportunity in countries such as Spain, Italy, and the United States.  The sale of many industries, particularly of Aerolineas Argentinas has prompted many protests and is viewed as a sell out of the Argentine national identity. 

 

The policies of globalization and free trade was hoped to bring modernity and security to the nation.  However, the result of these policies today seems to have done the opposite as Argentina faces an uncertain future.

 

List of those industries privatized by the government of Argentina

 

  • Oil
  • Telecom
  • Sundry electrical
  • Gas and water companies
  • Aerolineas Argentinas
  • Two television channels
  • Steel and petrochemical firms
  • Grain elevators
  • Hotels
  • Racetracks
  • 10,000 kilometers of toll roads
  • 25,000 kilometers of railways
  • State welfare system was replaced by private pension schemes
  • Provincial airports
  • Banco de la Nacion
  • Yacyreta hydro-electric dam
  • Postal service

 

Source: 

Fulbright-Hays Seminars Abroad Program  “The Many Faces of Argentina’s Political, Economic and Social Transformation at the    Turn of the 21st Century.   Buenos Aires:  Fulbright Commission, 2001.

 

 

 

 

 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Protestors in Buenos Aires demonstrating their anger over the possible bankruptcy Aerolineas Argentinas.

The sale of the Argentinean national airline to a Spanish company was seen as a sell out of the Argentine national identity