Economy of Argentina
|Economy of Argentina|
|Currency||Argentine peso (ARS)|
|WTO, Mercosur, Unasur|
|GDP||$540.2 billion (nominal) (24th, 2014)
$947.6 billion (PPP) (24th, 2014)
GDP per capita
|$12,873 (nominal) (56th, 2014)
$22,582 (PPP) (54th, 2014)
GDP by sector
|Agriculture, forestry and fishing, 8.2%; mining, 4.5%; manufacturing, 14.6%; construction, 6.0%; commerce and tourism, 13.1%; transport, communications and utilities, 10.2%; government, 8.3%; business, social and other services, 35.1%. (2014)|
|20.9% (3/2015)[N 1]|
Population below poverty line
|4.7% (2013, Indec)[N 2]|
|17.9 million (2012) categories: private-sector employees, 49%; employers and the self-employed, 27%; public-sector employees, 21%; unpaid family workers, 3% (2001).|
Labour force by occupation
|Agricultural, 7.3%; manufacturing, 13.1%; construction, 7.6%; commerce and tourism, 21.4%; transport, communications and utilities, 7.8%; financial, real estate and business services, 9.4%; public administration and defense, 6.3%; social services and other, 27.1%. (2006)|
Average gross salary
|US$1,340 monthly (9/2014)|
|Food processing and beverages; motor vehicles and auto parts; appliances and electronics; chemicals, petrochemicals, and biodiesel; pharmaceuticals; steel and aluminum; machinery; glass and cement; textiles; tobacco products; publishing; furniture; leather.|
|Exports||US$71.9 billion (2014)|
|Soy and soy products, 27.7%; motor vehicles and parts, 12.4%; cereals (mainly maize and wheat), 7.8%; chemicals, 7.4%; fossil fuels, 6.5%; fruit and vegetable products, 3.8%; aluminum and steel, 3.3%; electric machinery, 2.8%; gold, 2.7%; all other (mainly agroindustry), 25.6%. (2014)|
Main export partners
| Brazil 20.8%
European Union 14.2%
United States 5.6%
Chile 4.2% (2014)
|Imports||US$65.2 billion (2014)|
|Intermediate goods, 28.7%; capital goods and parts, 22.8%; automobiles and parts, 16.8%; fuel and lubricants, 16.7%; freight and farm vehicles, 4.8%; consumer durables (except auto), 3.7%; all other (mostly consumer non-durables), 6.5%. (2014)|
Main import partners
| Brazil 22.0%
European Union 17.6%
United States 13.7%
Bolivia 3.3% (2014)
|US$116.7 billion (12/2014)|
Gross external debt
|US$145 billion; of which private, US$70 billion (9/2014)|
|37% of GDP, US$199 billion (bonds, 66%; direct loans, 19%); of which external, US$75 billion (6/2014)|
|Revenues||US$166.7 billion (2014) (social security, 25.4%; income and capital gains, 21.7%; value-added sales tax, 19.3%; trade and duties, 19.1%; financial tax, 6.6%; excise and other, 7.9%)|
|Expenses||US$180.2 billion (2014) (social security, 38.8%; subsidies and infrastructure, 22.5%; debt service, 9.2%; education, culture and research, 8.8%; social assistance, 5.4%; health, 3.4%; security, 3.1%; defense, 2.1%; other, 6.7%)|
SD (T&C Assessment)
(Standard & Poor's)
|$31.5 billion (3/2015)|
The country benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector and a diversified industrial base. An upper-middle income economy, Argentina maintains a relatively high quality of life and GDP per capita. Argentina is considered an emerging market by the FTSE Global Equity Index, and is one of the G-20 major economies.
Argentina's economic performance has historically been very uneven, in which high economic growth alternated with severe recessions, particularly during the late twentieth century, and income maldistribution and poverty increased. Early in the twentieth century it was one of the richest countries in the world and the third largest in the Southern hemisphere.
- 1 History
- 2 Sectors
- 3 Infrastructure
- 4 Foreign trade
- 5 Foreign investment
- 6 Issues
- 7 References
- 8 Further reading
- 9 External links
Prior to the 1880s, Argentina was a relatively isolated backwater, dependent on the salted meat, wool, leather, and hide industries for both the greater part of its foreign exchange and the generation of domestic income and profits. The Argentine economy began to experience swift growth after 1880 through the export of livestock and grain commodities, as well as through British and French investment, marking the beginning of a significant era of economic expansion.
During its most vigorous period, from 1880 to 1905, this expansion resulted in a 7.5-fold growth in GDP, averaging about 8% annually. One important measure of development, GDP per capita, rose from 35% of the United States average to about 80% during that period. Growth then slowed considerably, such that by 1941 Argentina's real per capita GDP was roughly half that of the U.S. Throughout the period from 1890 to 1950, however, the country's per capita income was similar to that of Western Europe (although income in Argentina remained considerably less evenly distributed).
The Great Depression caused Argentine GDP to fall by a fourth between 1929 and 1932. Having recovered its lost ground by the late 1930s partly through import substitution, the economy continued to grow modestly during World War II (in contrast to the recession caused by the previous world war). The war led to a reduced availability of imports and higher prices for Argentine exports that combined to create a US$1.7 billion cumulative surplus, a third of which was blocked as inconvertible deposits in the Bank of England by the Roca–Runciman Treaty however. Benefiting from innovative self-financing and government loans alike, value added in manufacturing nevertheless surpassed that of agriculture for the first time in 1943 and employed over 1 million by 1947.
The populist administration of Juan Perón nationalized the railroads and other strategic industries and services from 1945 to 1955, and the partial enactment of developmentalism after 1958 was followed by a promising fifteen years. Inflation first became a chronic problem during this period (it averaged 26% annually from 1944 to 1974); but while it did not become fully "developed," from 1932 to 1974 Argentina's economy grew almost fivefold (or 3.8% in annual terms). While unremarkable, this expansion was well-distributed and so resulted in several noteworthy changes in Argentine society, most notably the development of the largest proportional middle class (40% of the population by the 1960s) in Latin America as well as the region's highest-paid, most unionized working class.
The economy declined during the military dictatorship from 1976 to 1983, and for some time afterwards. The dictatorship's chief economist, José Alfredo Martínez de Hoz, advanced a corrupt, anti-labor, monetarist policy of financial liberalization that increased the debt burden and interrupted industrial development and upward social mobility. Over 400,000 companies of all sizes went bankrupt by 1982, and neoliberal economic policies prevailing from 1983 through 2001 failed to reverse the situation.
Record foreign debt interest payments, tax evasion and capital flight resulted in a balance of payments crisis that plagued Argentina with severe stagflation from 1975 to 1990. Attempting to remedy this, economist Domingo Cavallo pegged the peso to the U.S. dollar in 1991 and limited the growth in the money supply. His team then embarked on a path of trade liberalization, deregulation, and privatization. Inflation dropped to single digits and GDP grew by one third in four years.
External economic shocks, as well as a dependency on volatile short-term capital and debt to maintain the overvalued fixed exchange rate, diluted benefits, causing the economy to crumble slowly from 1995 until the collapse in 2001. That year and the next, the economy suffered its sharpest decline since 1930; by 2002, Argentina had defaulted on its debt, its GDP had declined by nearly 20% in four years, unemployment reached 25%, and the peso had depreciated 70% after being devalued and floated.
Expansionary policies and commodity exports triggered a rebound in GDP from 2003 onwards. This trend has been largely maintained, creating over five million jobs and encouraging domestic consumption and fixed investment. Social programs were strengthened, and a number of important firms privatized during the 1990s were renationalized beginning in 2003. These include the Postal service, AySA (the water utility serving Buenos Aires), Pension funds (transferred to ANSES), Aerolíneas Argentinas, and the energy firm YPF.
The socio-economic situation has been steadily improving and the economy grew around 9% annually for five consecutive years between 2003 and 2007, and 7% in 2008. The global recession affected the economy in 2009, with growth slowing to 0.8%. High economic growth then resumed, and GDP expanded by around 9% in both 2010 and 2011. Foreign exchange controls, austerity measures, persistent inflation, and downturns in Brazil, Europe, and other important trade partners, contributed to slower growth beginning in 2012; growth averaged just 1.3% from 2012 to 2014.
The Argentine government bond market is based on GDP-linked bonds, and investors, both foreign and domestic, netted record yields amid renewed growth. Argentine debt restructuring offers in 2005 and 2010 resumed payments on the majority of its almost $100 billion in defaulted bonds and other debt from 2001.
Holdouts controlling 7% of the bonds, including some small investors, hedge funds, and vulture funds such as Paul Singer's Cayman Islands-based NML Capital Limited, rejected the 2005 and 2010 offers to exchange their defaulted bonds, resorting instead to attempts to seize Argentine government assets abroad and lawsuits to stop payments from Argentina to the 93% who had accepted the earlier swaps despite the steep discount. Bondholders who instead accepted the 2005 offer of 30 cents on the dollar, had by 2012 received returns of about 90 percent according to estimates by Morgan Stanley.
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 (not including processed food and feed, which are another third). Commercial harvests reached 103 million tons in 2010, of which over 54 million were oilseeds (mainly soy and sunflower), and over 46 million were cereals (mainly maize, wheat, and sorghum).
Soy and its byproducts, mainly animal feed and vegetable oils, are major export commodities with one fourth of the total; cereals added another 10%. Cattle-raising is also a major industry, though mostly for domestic consumption; beef, leather and dairy were 5% of total exports. Sheep-raising and wool are important in Patagonia, though these activities have declined by half since 1990. Biodiesel, however, has become one of the fastest growing agro-industrial activities, with over US$2 billion in exports in 2011.
Fruits and vegetables made up 4% of exports: apples and pears in the Río Negro valley; rice, oranges and other citrus in the northwest and Mesopotamia; grapes and strawberries in Cuyo (the west), and berries in the far south. Cotton and tobacco are major crops in the Gran Chaco, sugarcane and chile peppers in the northwest, and olives and garlic in the west. Yerba mate tea (Misiones), tomatoes (Salta) and peaches (Mendoza) are grown for domestic consumption. Organic farming is growing in Argentina, and the nearly 3 million hectares (7.5 million acres) of organic cultivation is second only to Australia. Argentina is the world's fifth-largest wine producer, and fine wine production has taken major leaps in quality. A growing export, total viticulture potential is far from having been met. Mendoza is the largest wine region, followed by San Juan.
Government policy towards the lucrative agrarian sector is a subject of, at times, contentious debate in Argentina. A grain embargo by farmers protesting an increase in export taxes for their products began in March 2008, and, following a series of failed negotiations, strikes and lockouts largely subsided only with the 16 July, defeat of the export tax-hike in the Senate.
Argentine fisheries bring in about a million tons of catch annually, and are centered around Argentine hake, which makes up 50% of the catch; pollock, squid, and centolla crab are also widely harvested. Forestry has long history in every Argentine region, apart from the pampas, accounting for almost 14 million m³ of roundwood harvests. Eucalyptus, pine, and elm (for cellulose) are also grown, mainly for domestic furniture, as well as paper products (1.5 million tons). Fisheries and logging each account for 2% of exports.
Mining and other extractive activities, such as gas and petroleum, are growing industries, increasing from 2% of GDP in 1980 to nearly 4% today. The northwest and San Juan Province are the main regions of activity. Coal is mined in Santa Cruz Province. Metals and minerals mined include borate, copper, lead, magnesium, sulfur, tungsten, uranium, zinc, silver, and gold, whose production was boosted after 1997 by the Bajo de Alumbrera mine in Catamarca Province and Barrick Gold investments a decade later in San Juan. Metal ore exports soared from US$200 million in 1996 to US$1.2 billion in 2004, and to over US$3 billion in 2010.
Around 35 million m³ each of petroleum and petroleum fuels are produced, as well as 50 billion m³ of natural gas, making the nation self-sufficient in these staples, and generating around 10% of exports. The most important oil fields lie in Patagonia and Cuyo. A network of pipelines (next to Mexico's, the second-longest in Latin America) send raw product to Bahía Blanca, center of the petrochemical industry, and to the La Plata-Greater Buenos Aires-Rosario industrial belt.
Manufacturing is the largest single sector in the nation's economy (15% of GDP), and is well-integrated into Argentine agriculture, with half the nation's industrial exports being agricultural in nature. Based on food processing and textiles during its early development in the first half of the 20th century, industrial production has become highly diversified in Argentina. Leading sectors by production value are: Food processing and beverages; motor vehicles and auto parts; refinery products, and biodiesel; chemicals and pharmaceuticals; steel and aluminium; and industrial and farm machinery; electronics and home appliances. These latter include over three million big ticket items, as well as an array of electronics, kitchen appliances and cellular phones, among others.
Argentina's auto industry produced 791,000 motor vehicles in 2013, and exported 433,000 (mainly to Brazil, which in turn exported a somewhat larger number to Argentina); Argentina's domestic new auto market reached a record 964,000 in 2013. Beverages are another significant sector, and Argentina has long been among the top five wine producing countries in the world; beer overtook wine production in 2000, and today leads by nearly two billion liters a year to one. Other manufactured goods include: glass and cement; plastics and tires; lumber products; textiles; tobacco products; recording and print media; furniture; apparel and leather.
Most manufacturing is organized in the 314 industrial parks operating nationwide as of 2012, a fourfold increase over the past decade. Nearly half the industries are based in the Greater Buenos Aires area, although Córdoba, Rosario, and Ushuaia are also significant industrial centers; the latter city became the nation's leading center of electronics production during the 1980s. The production of computers, laptops, and servers grew by 160% in 2011, to nearly 3.4 million units, and covered two-thirds of local demand. Another important rubric historically dominated by imports - farm machinery - was similarly replaced by domestic production, which covered 60% of demand by 2013.
Construction permits nationwide covered nearly 17 million m² (180 million ft²) in 2012. The construction sector accounts for over 5% of GDP, and two-thirds of construction is for residential buildings.
Argentine electric output totaled over 133 billion Kwh in 2013. This was generated in large part through well developed natural gas and hydroelectric resources. Nuclear energy is also of high importance, and the country is one of the largest producers and exporters, alongside Canada and Russia of cobalt-60, a radioactive isotope widely used in cancer therapy.
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, and the economy benefits from widespread access to communications services. These include: mobile telephony, with 77% of the population having access to mobile phones; Internet (over 32 million users, or 75% of the population); and broadband services (accounting for nearly all the 10 million accounts). Regular telephone services, with 9.5 million lines, and mail services are robust. While only one in three retail stores in Argentina accepted online purchases in 2013, E-commerce reached US$4.5 billion in sales.
Trade in services remained in deficit, however, with US$15 billion in service exports in 2013 and US$19 billion in imports. Business Process Outsourcing became the leading Argentine service export, and reached US$3 billion. Advertising revenues from contracts abroad were estimated at over US$1.2 billion.
Argentine banking, whose deposits exceeded US$120 billion in December 2012, developed around public sector banks, but is now dominated by the private sector. The private sector banks account for most of the 80 active institutions (over 4,000 branches) and holds nearly 60% of deposits and loans, and as many foreign-owned banks as local ones operate in the country. The largest bank in Argentina by far, however, has long been the public Banco de la Nación Argentina. Not to be confused with the Central Bank, this institution now accounts for 30% of total deposits and a fifth of its loan portfolio.
During the 1990s, Argentina's financial system was consolidated and strengthened. Deposits grew from less than US$15 billion in 1991 to over US$80 billion in 2000, while outstanding credit (70% of it to the private sector) tripled to nearly US$100 billion.
The banks largely lent US dollars and took deposits in Argentine pesos, and when the peso lost most of its value in early 2002, many borrowers again found themselves hard pressed to keep up. Delinquencies tripled to about 37%. Over a fifth of deposits had been withdrawn by December 2001, when Economy Minister Domingo Cavallo imposed a near freeze on cash withdrawals. The lifting of the restriction a year later was bittersweet, being greeted calmly, if with some umbrage, at not having these funds freed at their full U.S. dollar value. Some fared worse, as owners of the now-defunct Velox Bank defrauded their clients of up to US$800 million.
Credit in Argentina is still relatively tight. Lending has been increasing 40% a year since 2004, and delinquencies are down to less than 2%. Still, credit outstanding to the private sector is, in real terms, slightly below its 1998 peak, and as a percent of GDP (around 18%) quite low by international standards. The prime rate, which had hovered around 10% in the 1990s, hit 67% in 2002. Although it returned to normal levels quickly, inflation, and more recently, global instability, have been affecting it again. The prime rate was over 20% for much of 2009, and around 17% since the first half of 2010.
Partly a function of this and past instability, Argentines have historically held more deposits overseas than domestically. The estimated US$173 billion in overseas accounts and investment exceeded the domestic monetary base (M3) by nearly US$10 billion in 2012.
The World Economic Forum estimated that, in 2012, tourism generated around US$17 billion in direct economic turnover, another US$30 billion in indirect turnover; the industry employed 650,000 directly and 1.1 million more indirectly. Tourism from abroad contributed US$5.3 billion, having become the third largest source of foreign exchange in 2004. Around 5.7 million foreign visitors arrived in 2012, reflecting a doubling in visitors since 2002 despite a relative appreciation of the peso.
Argentines, who have long been active travelers within their own country, accounted for over 80%, and international tourism has also seen healthy growth (nearly doubling since 2001). Stagnant for over two decades, domestic travel increased strongly in the last few years, and visitors are flocking to a country seen as affordable, exceptionally diverse, and safe.
Foreign tourism, both to and from Argentina, is increasing as well. INDEC recorded 5.2 million foreign tourist arrivals and 6.7 million departures in 2013; of these, 32% arrived from Brazil, 19% from Europe, 10% from the United States and Canada, 10% from Chile, 24% from the rest of the Western Hemisphere, and 5% from the rest of the world. Around 48% of visitors arrived by commercial flight, 40% by motor travel (mainly from neighboring Brazil), and 12% by sea. Cruise liner arrivals are the fastest growing type of foreign tourism to Argentina; a total of 160 liners carrying 510,000 passengers arrived at the Port of Buenos Aires in 2013, an eightfold increase in a just a decade.
GDP by value added
|Supply sector (% of GDP in current prices)||1993-2001||2002-2005||2006-2009[N 3]||2010-2013|
|Agriculture, forestry, and fishing||5.4||10.3||7.3||7.3|
|Commerce and tourism||17.3||14.0||15.6||14.4|
|Transport and communications||8.3||8.7||7.3||6.7|
|Real estate and business services||16.5||11.7||13.7||12.9|
|Public administration and defense||6.3||5.4||5.6||7.4|
|Health and education||8.4||6.9||8.9||11.9|
|Personal and other services||5.4||3.9||5.3||6.3|
Electricity generation in Argentina totaled 133.3 billion Kwh in 2013. The electricity sector in Argentina constitutes the third largest power market in Latin America. It relies mostly on natural gas power generation (51%), hydroelectricity (28%), and oil-fired generation (12%). Reserves of shale gas and oil in the Vaca Muerta oil field and elsewhere are estimated to be the world's third-largest.
The first of the country's three nuclear reactors was inaugurated in 1974, and nuclear power generated 7% of the total in 2009. New renewable energy technologies are barely exploited, however, and the country still has a large untapped hydroelectric potential. Wind energy is the fastest growing among new renewable sources. Fifteen wind farms have been developed since 1994 in Argentina, the only country in the region to produce wind turbines. The 55 MW of installed capacity in these in 2010 will increase by 895 MW upon the completion of new wind farms begun that year. Solar power is also being promoted with the goal of expanding installed solar capacity from 6 MW to 300, and total renewable energy capacity from 625 MW to 3,000 MW.
Faced with rising electricity demand (over 5% annually) and declining reserve margins, the government of Argentina is in the process of commissioning large projects, both in the generation and transmission sectors. To keep up with rising demand, it is estimated that about 1,000 MW of new generation capacity are needed each year. An important number of these projects are being financed by the government through trust funds, while independent private initiative is still limited as it has not fully recovered yet from the effects of the Argentine economic crisis.
The electricity sector was unbundled in generation, transmission and distribution by the reforms carried out in the early 1990s. Generation occurs in a competitive and mostly liberalized market in which 75% of the generation capacity is owned by private utilities. In contrast, the transmission and distribution sectors are highly regulated and much less competitive than generation.
Argentina's transport infrastructure is relatively advanced. There are over 230,000 km (144,000 mi) of roads (not including private rural roads) of which 72,000 km (45,000 mi) are paved, and 2,800 kilometres (1,700 mi) are expressways, many of which are privatized tollways. Having tripled in length in the last decade, multilane expressways now connect several major cities with more under construction. Expressways are, however, currently inadequate to deal with local traffic, as over 12 million motor vehicles were registered nationally as of 2012 (the highest, proportionately, in the region).
The railway network has a total length of 37,856 kilometres (23,523 mi). After decades of declining service and inadequate maintenance, most intercity passenger services shut down in 1992 when the state rail company was privatized, and thousands of kilometers of track are now in disuse; outside Greater Buenos Aires most rail lines still in operation are freight related, carrying around 23 million tons a year. The metropolitan rail lines in and around Buenos Aires remained in great demand owing in part to their easy access to the Buenos Aires subway, however; the metro rail network of 833 kilometres (518 mi) carries around 400 million passengers yearly. A similar number of automobiles commute from Greater Buenos Aires to the city proper, and four times that number commute by city bus.
Inaugurated in 1913, the Buenos Aires Metro was the first subway system built in Latin America and the Southern Hemisphere. No longer the most extensive in South America, its 60 kilometres (37 mi) of track carry nearly a million passengers daily.
Argentina has around 11,000 km (6,835 mi) of navigable waterways, and these carry more cargo than do the country's freight railways. This includes an extensive network of canals, though Argentina is blessed with ample natural waterways as well, the most significant among these being the Río de la Plata, Paraná, Uruguay, Río Negro, and Paraguay rivers. The Port of Buenos Aires, inaugurated in 1925, is the nation's largest; it handled 11 million tons of freight and transported 1.8 million passengers in 2013.
Aerolíneas Argentinas is the country's main airline, providing both extensive domestic and international service. Austral Líneas Aéreas is Aerolíneas Argentinas' subsidiary, with a route system that covers almost all of the country. LADE is a military-run commercial airline that flies extensive domestic services. The nation's 33 airports handled air travel totaling 25.8 million passengers in 2013, of which domestic flights carried over 14.5 million; the nation's two busiest airports, Jorge Newbery and Ministro Pistarini International Airports, boarded around 9 million flights each.
Argentine exports are fairly well diversified. However, although agricultural raw materials are over 20% of the total exports, agricultural goods still account for over 50% of exports when processed foods are included. Soy products alone (soybeans, vegetable oil) account for almost one fourth of the total. Cereals, mostly maize and wheat, which were Argentina's leading export during much of the twentieth century, make up less than one tenth now.
Industrial goods today account for over a third of Argentine exports. Motor vehicles and auto parts are the leading industrial export, and over 12% of the total merchandise exports. Chemicals, steel, aluminum, machinery, and plastics account for most of the remaining industrial exports. Trade in manufactures has historically been in deficit for Argentina, however, and despite the nation's overall trade surplus, its manufacturing trade deficit exceeded US$30 billion in 2011. Accordingly, the system of non-automatic import licensing was extended in 2011, and regulations were enacted for the auto sector establishing a model by which a company's future imports would be determined by their exports (though not necessarily in the same rubric).
A net energy importer until 1987, Argentina's fuel exports began increasing rapidly in the early 1990s and today account for about an eighth of the total; refined fuels make up about half of that. Exports of crude petroleum and natural gas have recently been around US$3 billion a year. Rapidly growing domestic energy demand and a gradual decline in oil production, resulted in a US$3 billion energy trade deficit in 2011 (the first in 17 years) and a US$6 billion energy deficit in 2013.
Argentine imports have historically been dominated by the need for industrial and technological supplies, machinery, and parts, which have averaged US$50 billion since 2011 (two-thirds of total imports). Consumer goods including motor vehicles make up most of the rest. Trade in services has historically in deficit for Argentina, and in 2013 this deficit widened to over US$4 billion with a record US$19 billion in service imports. The nation's chronic current account deficit was reversed during the 2002 crisis, and an average current account surplus of US$7 billion was logged between 2002 and 2009; this surplus later narrowed considerably, and has been slightly negative since 2011.
Foreign direct investment in Argentina is divided nearly evenly between manufacturing (36%), natural resources (34%), and services (30%). The chemical and plastics sector (10%) and the automotive sector (6%) lead foreign investment in local manufacturing; oil and gas (22%) and mining (5%), in natural resources; telecommunications (6%), finance (5%), and retail trade (4%), in services. Spain was the leading source of foreign direct investment in Argentina, accounting for US$22 billion (28%) in 2009; the U.S. was the second leading source, with $13 billion (17%); and China grew to become the third-largest source of FDI by 2011. Investments from the Netherlands, Brazil, Chile, and Canada have also been significant; in 2012, foreign nationals held a total of around US$112 billion in direct investment.
Several bilateral agreements play an important role in promoting U.S. private investment. Argentina has an Overseas Private Investment Corporation (OPIC) agreement and an active program with the U.S. Export-Import Bank. Under the 1994 U.S.–Argentina Bilateral Investment Treaty, U.S. investors enjoy national treatment in all sectors except shipbuilding, fishing, nuclear-power generation, and uranium production. The treaty allows for international arbitration of investment disputes.
Foreign direct investment (FDI) in Argentina, which averaged US$5.7 billion from 1992 to 1998 and reached in US$24 billion in 1999 (reflecting the purchase of 98% of YPF stock by Repsol), fell during the crisis to US$1.6 billion in 2003. FDI then accelerated, reaching US$8 billion in 2008. The global crisis cut this figure to US$4 billion in 2009; but inflows recovered to US$6.2 billion in 2010 and US$8.7 billion in 2011, with FDI in the first half of 2012 up by a further 42%.
FDI volume remained below the regional average as a percent of GDP even as it recovered, however; Kirchner Administration policies and difficulty in enforcing contractual obligations had been blamed for this modest performance. The nature of foreign investment in Argentina nevertheless shifted significantly after 2000, and whereas over half of FDI during the 1990s consisted in privatizations and mergers and acquisitions, foreign investment in Argentina became the most technologically oriented in the region – with 51% of FDI in the form of medium and high-tech investment (compared to 36% in Brazil and 3% in Chile).
The economy recovered strongly from the 2001–02 crisis, and was the 21st largest in purchasing power parity terms in 2011; its per capita income on a purchasing power basis was the highest in Latin America. A lobby representing US creditors who refused to accept Argentina's debt-swap programmes has campaigned to have the country expelled from the G20. These holdouts include numerous vulture funds which had rejected the 2005 offer, and had instead resorted to the courts in a bid for higher returns on their defaulted bonds. These disputes had led to a number of liens against central bank accounts in New York and, indirectly, to reduced Argentine access to international credit markets.
Following 25 years of boom and bust stagnation, Argentina's economy doubled in size from 2002 to 2013, and officially, income poverty declined to from 54% in 2002 to 5% by 2013; an alternative measurement conducted by CONICET found that income poverty declined instead to 15.4%. Poverty measured by living conditions improved more slowly, however, decreasing from 17.7% in the 2001 Census to 12.5% in the 2010 Census. Argentina's unemployment rate similarly declined from 25% in 2002 to an average of around 7% since 2011 largely because of both growing global demand for Argentine commodities and strong growth in domestic activity.
Given its ongoing dispute with holdout bondholders, the government has become wary of sending assets to foreign countries (such as the presidential plane, or artworks sent to foreign exhibitions) in case they might be impounded by courts at the behest of holdouts.
Reliability of official CPI estimates
Official CPI inflation figures released monthly by INDEC have been a subject of political controversy since 2007. Official inflation data are disregarded by leading union leaders, even in the public sector, when negotiating pay rises. Some private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010. Inflation estimates from Argentina's provinces are also higher than the government's figures. The government stands by the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.
The government threatens inflation analysts with fine of up to 500,000 pesos if they don't report how they calculate their inflation estimates, which these economists consider as an attempt to limit the availability of independent estimates.
High inflation has been a weakness of the Argentine economy for decades. Inflation has been unofficially estimated to be running at around 25% annually since 2008, despite official statistics indicating less than half that figure; these would be the highest levels since the 2002 devaluation. A committee was established in 2010 in the Argentine Chamber of Deputies by opposition Deputies Patricia Bullrich, Ricardo Gil Lavedra, and others to publish an alternative index based on private estimates. Food price increases, particularly that of beef, began to outstrip wage increases in 2010, leading Argentines to decrease beef consumption per capita from 69 kg (152 lb) to 57 kg (125 lb) annually and to increase consumption of other meats.
Consumer inflation expectations of 28 to 30% led the national mint to buy banknotes of its highest denomination (100 pesos) from Brazil at the end of 2010 to keep up with demand. The central bank pumped at least 1 billion pesos into the economy in this way during 2011.
Argentina, in relation to other Latin American countries, has a moderate to low level of income inequality. Its Gini coefficient of about 0.436 (2011) is reported to be the lowest among Latin American countries. The social gap is worst in the suburbs of the capital, where beneficiaries of the economic rebound live in gated communities, and many of the poor (particularly undocumented immigrants) live in slums known as villas miserias.
In the mid-1970s, the most affluent 10% of Argentina's population had an income 12 times that of the poorest 10%. That figure had grown to 18 times by the mid-1990s, and by 2002, the peak of the crisis, the income of the richest segment of the population was 43 times that of the poorest. These heightened levels of inequality had improved to 26 times by 2006, and to 16 times at the end of 2010. Economic recovery after 2002 was thus accompanied by significant improvement in income distribution: in 2002, the richest 10% absorbed 40% of all income, compared to 1.1% for the poorest 10%; by 2010, the former received 29% of income, and the latter, 1.8%.
Argentina has an inequality-adjusted human development index of 0.680, compared to 0.542 and 0.661 for neighboring Brazil and Chile, respectively. The 2010 Census found that poverty by living conditions still affect 1 in 8 inhabitants, however; and while the official, household survey income poverty rate (based on U$S 100 per person per month, net) was 4.7% in 2013, the National Research Council estimated income poverty in 2010 at 22.6%, with private consulting firms estimating that in 2011 around 21% fell below the income poverty line. The World Bank estimated that, in 2010, 1.9% subsisted on less than US$2 per person per day.
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