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World > South America > Argentina > Economy (Notes)

Argentina - Economy (Notes)


ECONOMY
Argentina's economy has sustained a robust recovery following the severe 2001/2002 economic crisis, with 4 consecutive years of over 8% growth in real gross domestic product (GDP). Argentine GDP reached U.S. $213 billion in 2006, approximately U.S. $5,460 per capita, with real investment up 18.7%. Economic expansion is creating jobs, with unemployment down from 20.4% in the first quarter of 2003 to 9.8% in the first quarter of 2007. Poverty levels have also dropped dramatically; 26.9% of the population in the 28 largest urban areas remained below the poverty line in the last half of 2006, down from over 50% in the immediate aftermath of the economic crisis.

Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Its post-crisis move to a flexible exchange rate regime and favorable international commodity and interest rate trends were catalytic factors in supporting renewed growth, allowing the government to accumulate a reserve cushion (over $40 billion as of June 2007) to help insulate the economy from external shocks. A higher tax burden and the recovery's strong impact on revenues allowed the government to record a primary fiscal surplus in 2006 equivalent to 3.5% of GDP. Argentina should continue to perform well in 2007 with GDP growth projected in the 7.5%-8% range. A range of economic experts have identified challenges to sustaining high levels of economic growth in the future, including capacity constraints; the need for substantial new investment in primary infrastructure; potential energy shortages in the face of high growth and energy prices below international market levels; and inflation (9.8% in 2006) and the government's heterodox policies to contain it, including pressure on the private sector to limit price increases.

Argentina's exchange rate policy is based on a managed float that appears to be targeting a nominal exchange rate in the 3 Argentine pesos (ARP) per U.S. dollar range. Market analysts consider the peso's real exchange rate broadly undervalued. This, along with historically high global commodity prices, has helped lift export volumes and value to record levels, resulting in a $12 billion trade surplus in 2006. Foreign trade equaled approximately 38% of GDP in 2006 (up from only 11% in 1990) and plays an increasingly important role in Argentina's economic development. Exports totaled approximately 22% of GDP in 2006 (up from 14% in 2002), and key export markets included MERCOSUR (21% of exports), the EU (18%), and NAFTA countries (13%). Total two-way trade with the U.S. in 2006 totaled almost $9 billion. The production of grains, cattle, and other agricultural goods continues to be the backbone of Argentina's export economy. Energy products, high technology goods, and services are emerging as significant export sectors.

Over 450 U.S. companies are currently operating in Argentina and employ over 150,000 Argentine workers. U.S. investment in Argentina is concentrated in the manufacturing, information, and financial sectors. Other major sources of investment include Spain, Chile, Italy, France, Canada, and Japan. Continuing Argentine arrears to international creditors (including over $20 billion in default claims by international bondholders and over $6 billion owed to official creditors, including the U.S. Government) and a large number of arbitration claims filed by foreign companies are legacies of the 2001/2002 economic crisis that remain to be resolved and adversely impact Argentina's investment climate.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Argentine Peso Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Argentine Peso Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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