Argentina Economy - Analysis Project Research Paper

Argentina Economy - Analysis Project - Research Paper Example Argentina economy is the third biggest economy in Latin America, with high standards of living and per capita income. Argentina is an upper middle-income economy and exhibits the characteristics of a strong foundation for future market size expansion, and increments in foreign direct investment. It also exhibits an augment in the percentage of high technology exports as a share of the entire manufactured products. Argentina gains from rich natural resources, high literacy rates of its population, an agricultural sector which is export oriented, and a diversified industrial base. Traditionally, Argentine economy had been agriculture based, but in the recent years, service and industrial sectors have grown in importance (Paolera & Taylor 88). Prior to the 1880s, the country relied on the salted meat, leather, hide, and wool industries for the larger component of its foreign trade and the generation of local income and earnings. Over the years, the country has experienced economic expansion in the various sectors. Argentina is among the international principal producers of agricultural commodities. The country is amongst the top producers and exporters of fruits and vegetables, maize, soybeans, honey, wheat and sorghum among others. In 2010, the agriculture sector accounted for 9 percent of the Gross Domestic Product (Paolera & Taylor 90). The manufacturing sector of the economy accounts for 19 percent of the country’s economy. The manufacturing and agriculture sectors of the economy are well integrated; more than half of the country’s industrial exports are agricultural in nature. ... 0, the country experienced persistent economic crises, relentless current account and fiscal deficits, high inflation rates, escalating external debt, and capital outflows. A severe economic depression, escalating external and public indebtedness, and bank run culminated in 2001 were the most serious social, political and economic crisis in the Argentina turbulent history. In December 2001, interim President Adolfo Rodriguez SAA declared a default on the government’s external debt, which was the biggest in history. President Rodriguez resigned a few days after taking office (Baer & Fleisher 8).3 In early 2002, Rodriguez’s successor, Eduardo Duhalde, declared an end to the peso’s 10 years long 1-to-1 peg to the U.S. dollar. During this year, there was deterioration of the economy with real GDP being 18 percent lower compared to that of 1998 and almost 60 percent of the Argentines were living under the poverty line. After six years, the economy started to grow with an average real GDP annual growth rate of 8.5 percent. The economy took advantage of previously inactive labor and industrial capacity, a bold debt restructuring and diminished debt burden, excellent global financial conditions, and expansionary fiscal and monetary policies. Also, the economy experienced high rates of inflation (Baer & Fleisher 10).3 However, in early 2007, President Nestor Kirchner’s administration responded to the inflation through price restraints on businesses and export taxes and controls. In late 2007, Cristina Kirchner succeeded her husband as President, and the rapid growth of the economy of previous years started to slow down sharply in 2008. This was as a result of government policies, which reduced exports and the global economy fell into recession. The economy has recovered