Economy of Argentina

Economy of Argentina

According to businesscarriers, Argentina is a country with a relatively high level of economic development for Latin America. GDP 391 billion, GDP per capita 10.2 thousand US dollars (2002). The industrial development of Argentina is distinguished by a number of features. First of all, these are extremely uneven and unstable growth rates: in 1995 2.9%; in 1999 3.4%; in 2001 4.4%; in 2002 11.0%. Among the Latin American countries, Argentina’s industry stands out as the most advanced and diversified industry structure. The leading role belongs to the manufacturing industry: in 2002 it accounted for 16.1% of GDP. Argentina has the main types of modern mechanical engineering, including motor transport, agricultural, aircraft and shipbuilding, the production of power, oil, electrical and radio engineering, road construction and hoisting and tractor equipment, rolling stock, etc. In the 1970s. The automotive industry took the first place among the manufacturing industries in terms of production volume, displacing the food industry. In 2002, car production amounted to 159.4 thousand. Argentina is one of the few countries in Latin America that has its own shipbuilding (the main centers are Tigre and Ensenada) and aircraft manufacturing (the largest aircraft plant in the region in Cordoba). Oil refining is one of the most developed industries in Argentina. The plants are located both in the oil production areas (Campo Duran in the north, Comodoro Rivadavia and Rio Grande in Patagonia, Luján de Cuyo in Mendoza, Plaza Wincul in the province of Neuquen), and in places of its consumption. – in Buenos Aires, La Plata, Bahia Blanca, Campana. The total capacity of refineries in Argentina in 2000 was 661.8 thousand barrels. The electric power industry is one of the rapidly developing industries, its basis is thermal power plants (50% of electricity production). The huge hydropower potential available in Argentina (50 thousand MW) contributes to the construction of powerful hydroelectric power plants in the country: Chocón Cerros Colorados, Salto Grande (1.9 million kW), Yasireta Apipe (1.3 million kW) and others. HPPs in total electricity generation 39%. Argentina became the first country in Latin America to produce nuclear energy. Two more nuclear power plants have been built in the country: Rio Tercero (640 thousand kW) and Atucha-2 (600 thousand kW). Electricity generation at nuclear power plants – 11% of the total output. The total electricity production is 82,802 million kWh (2000), the installed capacity of power plants is 23,032 thousand kW (1998).

Argentina has a comparatively developed metallurgical industry and, above all, ferrous metallurgy. In 2002, the production of pig iron amounted to 1475 thousand tons, steel 4355 thousand tons. Non-ferrous metallurgy, despite the sufficient raw material base, is poorly developed. The demand for copper, tin, and aluminum is covered mainly by imports, and only the production of lead and zinc largely satisfies domestic demand. The chemical industry, the leading branch of which is the industry of organic synthesis, has received significant development in Argentina. Petrochemical enterprises form a single complex with oil refineries. The largest of them are Petrokimika General Mosconi, Petrokimika Bahia Blanca, Petrokimika Rio Tercero. The plant in Campana is also the largest in the country for the production of mineral fertilizers. A characteristic feature of the food industry is its great export value. Vegetable oils account for approx. 50% of the country’s agricultural exports. In the field of flour production, Argentina is a recognized world leader. A special place in Argentina is occupied by the meat-packing industry, which is also one of the leading sectors of export value. Basically, such industries as winemaking, sugar, fruit and vegetables work for the domestic market. The timber industry is represented by sawmilling, woodworking and pulp and paper production. In 2001 Argentina produced 1228 thousand tons of paper. The light industry in Argentina is the oldest and most well developed: textile, leather and footwear, tobacco, etc. The extractive industry in Argentina accounts for 2.1% of GDP (2002). Fuel is approx. 80% of the total cost of extractive industry products. The industry’s products fully meet the country’s domestic consumption of oil and gas, which are produced in the provinces of Mendoza, Chubut (como-doro-Rivadavia basin), Neuquen, Salta, Santa Cruz, and Tierra del Fuego. Oil production 44 billion m3, natural gas production 44.8 billion m3 (2002). Small deposits of brown coal in the Rio Turbio basin (Patagonia). Iron ore is mined in the provinces of Jujuy, Rio Negro, lead and zinc – in the provinces of San Juan and Jujuy, tungsten – in the province of San Luis, uranium – in the province of Mendoza, copper – in the provinces of Salta, Mendoza and Catamarca, manganese ore – in the province of Mendoza, borates – in the province of Salta, tin – in the province of Jujuy.

Argentina is one of the world’s largest producers and exporters of agricultural products. Despite the downward trend in the share of agriculture in GDP (6.5% in 2002), it remains one of the main factors determining the economic situation in the country. The area of ​​agricultural land is 162 million hectares (2002), of which 9.9% is cultivated land, 51.8% is pasture, 18.6% is forest and 19.5% is other land. In crop production, the grain direction prevails. The main grain crop is wheat, which is cultivated mainly in the Pampas. The areas under fodder are sown with alfalfa, the rest – with sorghum, clover, etc. Industrial crops occupy the 2nd place in terms of the cost of crop production. Argentina is one of the region’s largest producers of Paraguayan mate tea (provinces of Misiones and Corrientes). Vegetable growing is concentrated near large cities, as well as in specialized areas in areas of irrigated agriculture. Viticulture and horticulture are of great importance in crop production in Argentina.

The main livestock sector in Argentina is cattle breeding (2293 million heads, 2002). The main area is Pampa. Sheep breeding, the second major livestock industry, has been developed in Patagonia. In terms of wool shearing and the number of sheep, Argentina occupies one of the first places in the world. One of the important industries is poultry farming (mainly chicken breeding).

The total area under forests is 50.9 million hectares. Main logging areas: Mesopotamia (araucaria) and

Gran Chaco (quebracho). Quebracho extract Argentina supplies to the world market.

Fishing is developed in the Parana and Uruguay rivers, as well as in the coastal waters of the Atlantic Ocean. Fish catch 1339 thousand tons (1997).

In terms of the length of railways, Argentina ranks first in Latin America (35,753 km, 2002). True, this network is distinguished by a low level of technical equipment and electrification, as well as a different track. The volume of traffic in 2000 was 9120 million tkm, passengers 9102 million pas.-km. The main part of cargo transportation is carried out by road transport. Road length 215,434 km (1997). Oil pipelines stretched from the fields to the main centers of oil refining and consumption of oil products. Almost all foreign trade transportation is carried out by sea: the cargo turnover is 158 thousand tons (2000). Main seaports: Buenos Aires, La Plata, Rosario, Bahia Blanca, San Nicolás. Cargo turnover of air transport 241 million tkm (1999). In 1999 Argentine airlines carried 9 million passengers on domestic and international routes.

Communications is one of the most promising industries. The leading positions in the telecommunications market are occupied by the Spanish company “Telefonika” and the French “Telecom”. In 2001, there were 416.4 mobile phones and 91.4 personal computers per 1,000 inhabitants in Argentina. Internet users 3.3 million

Trade and services are the sectors of the main employment of the population: 68.5% of GDP (2001). In 2002, due to the political and economic crisis in the country, the wholesale price index increased (compared to 2001) from 103.8 to 183.9 (1993 = 100), in retail (Buenos Aires) – from 98.8 to 124, 3.

The tourism industry has made impressive strides in recent years. Tourism revenues increased from $1,976 million in 1990 to $5,069 million in 1997. In 2002, 2,949,000 tourists visited Argentina: from Chile (19%), Paraguay (16%), Uruguay (16%), Brazil (15% ), USA (9%), Bolivia (3%); Europe (12%). Tourist spending amounted to $2,874 million. The number of hotels is 7190 (5 stars – 32).

As a result of the implementation of the neoliberal economic program (1991), all restrictions on current and capital operations were removed in the country, the public sector was reduced through the privatization of large enterprises, a policy of reducing the state budget deficit was carried out, subsidies and benefits were limited, and a new monetary system was created according to the currency board scheme. Among the positive aspects of this economic policy are the stabilization of the peso exchange rate, the openness of the national market, and an increase in the inflow of foreign investment. Economic policy orientation in the 1990s on the “opening” of the credit sector for foreign capital led to a significant presence of foreign banks in the national economy.

In 1994, after the speech of the opposition forces, a sharp economic recession began in the country: an outflow of capital abroad, the collapse of the banking system, a decrease in production, a jump in inflation and a decrease in the level of foreign exchange reserves. In December 2001, the economic situation deteriorated sharply, the peso began to rapidly depreciate. The Argentine government has asked for financial support from the IMF to stabilize the peso and maintain the solvency of the banking system. The fund demanded from the government to carry out reforms in the country in the first place. The May 2003 presidential elections and the arrival of a new government may put an end to shock economic and social reforms.

Argentina has one of the most developed credit systems in the region. It is based on banks; the share of non-bank credit and financial institutions (consumer credit institutions, credit offices, financial companies “financieras”, etc.) in the total resources of the loan market is small.

The banking sector has undergone a significant transformation initiated by the neo-liberal economic program “Convertibility”. The main directions of structural reforms in this area were: liberalization of state regulation; modification of the status of the central bank; privatization of a part of state banks; modernization of the regulatory framework; openness to foreign capital. As a result of the reform, the modern banking system of Argentina has the following structure (2001): of the total number of institutions (90), 74 are private banks, 16 are state-owned banks.

The private sector is formed by Argentinean (56) and foreign banking institutions (18). The Argentinean group includes banks with a different share of foreign capital; the overwhelming majority of institutions in this group are universal banks, i.e., commercial banks of a diversified type with a wide range of credit and financial services and established as joint-stock companies. The largest of them is Banco de Galicia y Buenos Aires, which is one of the ten largest banks in Latin America in terms of assets (14.8 billion dollars) (2002). 4 institutes are established in the form of cooperative banks; the largest of them is Banco Credicoop Cooperativo Limitado (assets – 2.4 billion US dollars).

The public sector in the banking system is represented by 16 institutions: the central bank; 2 national banks, including the largest commercial bank in the country, Banco de la Nacion Argentina (assets – $17.9 billion); 13 banks of municipalities and provinces.

The Central Bank of the Argentine Republic (CBAR) was established in 1935 as an issuing institution of the state, its main functions are: the issuance of banknotes and coins of Argentina (monopoly right); regulation of money circulation; implementation of monetary policy; service of internal and external debt; granting loans to the government (for a period not exceeding 1 year); regulation of financial institutions, including the practice of “lender of last resort” and activities to reorganize banks experiencing liquidity problems; storage of official gold and foreign exchange reserves; performing the functions of a financial agent of the state, as well as a representative of the country in relations with international financial organizations, etc. The official gold and foreign exchange reserves of Argentina during the crisis period decreased significantly: from 25.1 billion in 2000 to 10.3 billion dollars in February 2003.

The specificity of the monetary circulation of Argentina was the currency board system that was in force until recently – a strict restriction of the money supply by the value of the state’s gold and foreign exchange reserves: each money issue must be fully secured by a corresponding increase in reserves, which was a guarantee and basis for the convertibility of the national currency – the austral. In 1992, the austral was denominated and replaced by the peso; introduced a fixed exchange rate at the parity of 1 peso: 1 US dollar. In January 2002, in accordance with the newly adopted laws, the currency board system was abolished; the peso was devalued; the transition to a “floating” exchange rate system was carried out.

A characteristic feature of the economic development of Argentina in the 1990s. — a chronic budget deficit due to the unceasing growth of government spending, a constantly negative trade balance and continuously increasing payments to service external debt. Government spending (despite the sale of the public sector and the disposal of most unprofitable enterprises) increased from $40 billion in 1991 to $75.1 billion in 2002. The budget deficit increased sharply from $820 million in 1994 to $9.8 billion in 2002 Covering the budget deficit through borrowing abroad has led to an increase in external debt, which in the middle. 2001 was approx. $130 billion. Debt servicing costs increased: from $2.6 billion in 1993 to $8.2 billion in 1999; over the years, Argentina has paid $34.7 billion in interest alone. In con. 2001 The IMF froze the payment of loans included in the program to support the economy of Argentina. The World Bank (WB) also refused to provide loans to Argentina. On December 26, Argentina defaulted, and on January 6, 2002, with frozen foreign exchange trading, there was an official abandonment of the currency board. Argentina received the only loan from the Inter-American Development Bank (IADB) in the amount of $700 million in May 2002. Until August 2002, Argentina was able to pay $550 million to the IDB and $680 million to the WB. The foreign exchange reserves of the Central Bank of the country were used to pay off the debts. Argentina’s budget revenues fluctuate significantly, due to the volatility of indirect tax revenues, as well as the depreciation of money. In 1991, the revenue side of the budget was $30.9 billion, in 2002 it was $65.9 billion. Main sources of income: income from taxes; income from public property, as well as from the provision of funds, licenses and services to the private sector.

One of the consequences of the crisis of the socio-economic structure of Argentina is the growth of high prices and the sharp impoverishment of the population. The collapse of the economy has led to the fact that 59% of Argentines are officially considered poor. The incomes of this category of the population do not cover the needs for food and payment of utility bills, as well as the costs of education and health care. In 2002, the prices of basic foodstuffs doubled, while wages and benefits remained the same; purchasing power as a result of the devaluation of the peso and inflation has decreased by an average of 25%. In January 2002, the government began to return frozen dollar deposits. In September, a decision was made to remove the restrictions on term accounts, the amounts of which do not exceed 7,000 pesos.

In recent years, the position of Argentina in the world market has been rather difficult. The fall in prices on world commodity markets (Argentina is one of the largest exporters of copper, tungsten ores, meat, grain), the massive devaluation of the national currencies of countries producing competing products – all this reduced the competitiveness of Argentinean goods. The trade balance deficit in 1998 amounted to 4.9 billion, in 1999 – 2.1 billion US dollars. A record positive trade balance was noted in 2002 in the amount of $16.4 billion, which was achieved not due to a sharp increase in exports of national goods, but due to a massive reduction in imports (from $20.3 billion in 2001 to $8.9 billion). in 2002). Such a sharp decline in imports was due to the depreciation of the Argentine peso. In 2002, exports amounted to $25.4 billion, 32 5% of exports are processed agricultural products; 20.9% – for food and raw materials; 29.6% – for industrial products; 17.0% – for fuel. Imports are dominated by raw materials and semi-finished products – 48.6%; equipment – 14.6%; spare parts – 16.7%; consumer goods – 14.8%; fuel – 4.1%. Main trading partners (%): in export – Brazil (26.8); EU (17.5); US (11.8); Chile (10.1); China (3.3); in imports – Brazil (25.6); EU (22.9); USA (18.9); China (4.8); Japan (3.9). The scale of cooperation with the Russian Federation is noticeably inferior to previous indicators. Trade turnover in 1997 was 350 million, in 2002 it fell to 218 million dollars.

Economy of Argentina