Economic Affairs

Argentina: Economic Affairs

In 2008, according to estimates by the World Bank, Argentina’s gross national income (GNI), measured at average 2006–08 prices, was US $287,160m., equivalent to $7,200 per head (or $14,020 on an international purchasing-power parity basis). During 2000–08, it was estimated, Argentina’s population increased at an average rate of 1.0% per year, while gross domestic product (GDP) per head increased, in real terms, by an average of 3.2% per year. According to official estimates, overall GDP increased, in real terms, at an average annual rate of 4.2% in 2000–08; real GDP increased by 6.8% in 2008.

Agriculture (including forestry and fishing) contributed an estimated 9.8% of GDP in 2008. The sector engaged 7.7% of the employed labour force in 2008, according to FAO estimates. The principal cash crops are wheat, maize, sugar cane and soybeans. Beef production is also important. During 2000–08, according to official estimates, agricultural GDP increased at an average annual rate of 3.0%; the GDP of the sector increased by 9.8% in 2007, but declined by 2.5% in 2008 owing to a severe drought, considered the worst in 100 years.

Industry (including mining, manufacturing, construction and power) engaged 23.7% of the employed labour force in 2006 and contributed an estimated 32.3% of GDP in 2008. During 2000–08, according to official estimates, industrial GDP increased, in real terms, at an average annual rate of 4.6%; sectoral GDP increased by 4.0% in 2008.

Mining contributed an estimated 3.8% of GDP in 2008, and engaged 0.4% of the employed labour force in 2006. Although Argentina used to possess substantial deposits of petroleum and natural gas, as well as steam coal and lignite, few hydrocarbon deposits have been discovered since the mid-1990s. According to official estimates, the GDP of the mining sector increased, in real terms, at an average rate of 0.9% per year during 2000–08; the sector’s GDP decreased by 0.5% in 2007, but increased by 1.1% in 2008.

Manufacturing contributed an estimated 21.2% of GDP in 2008, and employed 14.0% of the working population in 2006. During 2000–08, according to official estimates, manufacturing GDP increased, in real terms, at an average annual rate of 4.4%; manufacturing GDP increased by 4.5% in 2008.

The construction sector contributed 6.0% of GDP in 2008, and engaged 8.8% of the employed labour force in 2006. During 2000–08, according to official estimates, the GDP of the sector increased at an average annual rate of 6.5%; construction GDP increased by 3.7% in 2008.

Energy is derived principally from natural gas, responsible for the production of 50.2% of total primary energy consumption in 2006. In early 2004 a critical shortage in the gas supply prompted the Government of President Néstor Carlos Kirchner to reduce the voltage in the national grid, ration gas supplies to various corporations and reduce exports of gas. Hydroelectricity produced 33.0% of Argentina’s total energy requirements in 2006, while the country’s two nuclear power stations produced 6.7%. In 2008 imports of mineral fuels comprised an estimated 7.2% of the country’s total imports.

Services engaged 75.2% of the employed labour force in 2006 and accounted for an estimated 57.9% of GDP in 2008. According to official estimates, the combined GDP of the service sectors increased, in real terms, at an average rate of 3.7% per year during 2000–08; sectoral GDP increased by 8.2% in 2008.

In 2008 Argentina recorded a visible trade surplus of US $15,464m., and there was a surplus of $7,078m. on the current account of the balance of payments. In 2008, according to provisional figures, the principal source of imports was Brazil (30.8%), followed by the People’s Republic of China (12.4%). Brazil was also the principal recipient of exports, accounting for 18.9% of total exports in that year, again followed by China (9.4%). Other major trading partners in 2008 were the USA, Chile, the Netherlands, Spain and Germany. In late 2004 Argentina and China signed a joint statement of intent to increase bilateral economic co-operation. In November 2005 Kirchner and Venezuelan President, Lt-Col (retd) Hugo Chávez Frías, signed several agreements to promote economic co-operation, including plans for a gas pipeline between the two countries, and for Venezuela to buy more Argentine debt bonds and to supply discounted petroleum to Argentina. The principal exports in 2008 were, according to provisional figures, fats and oils, cereals, and mineral fuels and lubricants and vehicles. The principal imports were, according to provisional figures, vehicles, nuclear reactors, boilers, machines and mechanical appliances, and electrical machinery.

In 2009, according to provisional figures, a consolidated central government budgetary surplus of 9,109m. new pesos was recorded. Argentina’s total external debt was US $127,758m. at the end of 2007, of which $66,110m. was long-term public debt. In that year the total cost of debt-servicing was equivalent to 13.0% of revenue from exports of goods and services. The annual rate of inflation averaged 9.8% in 2000–08; consumer prices increased by 8.6% in 2008. According to preliminary figures, the national unemployment rate was 9.1% in 2009.

The country recovered well from its major default on sovereign debt to the IMF (estimated at US $155,000m.) in January 2002. In spite of what was effectively the largest default in the Fund’s history, the IMF extended a new, three-year deal to the Argentine Government, and in March 2004 the IMF agreed to release a further $3,100m. in loans, after the Government agreed to continue negotiations with private sector creditors. By early 2005 some 76.6% of Argentina’s privately held debt (estimated at some $82,000m.) had been converted into several new types of bond. This plan was central to the Kirchner Government’s economic policy and its success facilitated Argentina’s readmission to international financial markets. In 2002–06 the economy grew by an annual average of 8.9%. In an effort to liberate economic policy from IMF regulation, the Government repaid outstanding loans of some $9,500m. to the Fund in 2007. None the less, Argentina was observed to be at risk of a second default on its sovereign debt in late 2008 and the country suffered significant outflows of domestically and internationally held capital, while the exchange rate declined sharply as investors converted their peso holdings into dollars. The Government of Cristina Fernández de Kirchner, which continued the economic policies of its predecessor, announced two crisis packages intended to alleviate the impact of economic downturn. The first plan aimed to create around 400,000 jobs in the construction industry by means of a major programme of public works (estimated to cost some $32,000m.). In addition, a series of tax incentives for small- and medium-sized enterprises was announced, together with the extension of full employment status to workers in the informal sector. The second plan was devised to improve access to credit and thereby strengthen consumption and investment (both of which had declined sharply in response to the ‘credit crunch’ and associated global financial crisis). The risk of default receded in 2009 following the rise in price of soybean, one of Argentina's principal commodities. In the second half of the year the Fernández Government attempted to accelerate its broadly interventionist economic programme ahead of the new Congreso, in which it no longer held a majority, taking office; the approval of a law restricting foreign ownership of media companies was a potential deterrent to investment, while the launch of a US $1,500m. public investment plan jeopardized government fiscal discipline. Social spending was expected to increase further in advance of elections in 2011. Real GDP was projected by the IMF to decrease by 2.5% in 2009, before expanding by just 1.5% in 2010.

Citation: Economic Affairs (Argentina), in Europa World online. London, Routledge. Retrieved 06 September 2010 from http://www.europaworldonline.com/pub/entry/ar.is.57