Economy

Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. The country historically had a large middle class, compared to other Latin American countries, but this segment of the population was decimated by a succession of economic crises.

Since the late 1970s the country piled up public debt and was plagued by bouts of high inflation. In 1991, the government pegged the peso to the U. S. dollar and limited the growth in the monetary base. The government then embarked on a path of trade liberalisation, deregulation, and privatisation. Inflation dropped and GDP grew, but external economic shocks and failures of the system diluted its benefits, causing it to crumble in slow motion, from 1995 and up to the collapse in 2001.

By 2002 Argentina had defaulted on its debt, its GDP had shrunk, unemployment was over 18%, the peso had devalued 75% after being floated, and inflation was hitting again. However, careful spending control and heavy taxes on now soaring exports gave the state the tools to regain resources and conduct monetary policy.

In 2003, import substitution policies and soaring exports, coupled with a lower inflation and expansive economic measures, triggered a surge in the GDP, which was repeated in 2004, creating jobs and encouraging internal consumption. Capital flight decreased, and foreign investment slowly returned. The influx of foreign currency from exports created such a huge trade surplus that the Central Bank was forced to buy dollars from the market, which it continues to do at the time, to be accumulated as reserves.

Since the crisis, Argentina has grown 27% (8,8% in 2003, 9% in 2004 and 9,1% in 2005) and it seems it will continue like this as investment is in a good percent of the GDP, inflation is under control, people are consumpting, credit is coming back, unemployment has fallen below 10% in just 3 years, exports get records numbers each year and the government is starting to re-pay the defaulted debt.