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Argentina - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Buenos Aires
Area:: 2.780 km2
Total Population:: 41.087
Annual growth rate:: 1.00%
Density:: 15.00/km2
Urban population:: 93%
Population of Buenos Aires (12.924), Cordoba (1.528), Rosario (1.358), La Matanza (1.255), Mendoza (849), La Plata (833), Tucuman (830)
Official language: Spanish is the national language of Argentina.
Other languages spoken: It is important to note that a part of the population understands and/or speaks English and Italian. All the other Argentines only speak Spanish, except the immigrant population. There are also minority groups speaking approximately 20 native languages.
Business language: According to the type of company contacted, its geographical location and sector of activity, it may be difficult to find someone who speaks English.
Ethnic Origins:: 85% Europeans, 13% mixed ethnic origins and 2% Amerindians.
Beliefs: Catholics 89.9%; Protestants 2.1%; Jews 1.9%; Others 6.1%.
Telephone codes:
To make a call from: 0
To make a call to: +54
Internet suffix:: .com.ar
Type of State::
The official name of Argentina is the Republic of Argentina. It is a federal republic based on parliamentary democracy.
Type of economy::
Upper-middle-income economy, Emerging Financial Market
Argentina faced a long and costly reconstruction after the economic crisis of 1998-2002. The country has much natural wealth and an agriculture oriented towards export.

Economic overview

After the severe financial crisis which led to the Argentinean bankruptcy in 2001-2002, the country's economy experienced a rapid and stable growth of an average of 8%. Argentina was affected by the global financial crisis of 2009, but its economy experienced a rapid revival again in 2010. However, growth slowed down again in 2012 (2.6%) due to weak global demand, poor grain harvest, an energy deficit and the effects of import and foreign exchange limits imposed by the government. In 2013, the growth rate increased reaching 3.5% of GDP. According to the estimations, inflation was at least 10%. The economy is largely driven by the exports of soy, the growing of this crop occupies more than 60% of the cultivated land.

President Kirchner, re-elected in 2011, pursues an expansionary economic policy, which has contributed to a rapid GDP growth, but it has also led to the increase of inequities, inflationary pressures and a deterioration of public finances. The government has responded to this situation by a resurgence of protectionism (price and trade controls) and by proposing a  reduction of 45% in imports by 2020. Its purpose is to protect local industries in order to guarantee a trade surplus which is the only way for Argentina to obtain foreign exchange since the country still holds a debt with the Paris Club (USD 8 billion) and while this debt is still outstanding, the country cannot have access to international credit. The country has also nationalized the oil company YPF, ex-subsidiary of Repsol. These measures have triggered the displeasure of the management executives who demand also a devaluation of the Peso (national currency). These policies have also deteriorated Argentina's relations with the countries of Mercosur. Moreover, the financial system remains fragile and the country faces an energy crisis due to lack of investment in this sector. Other structural problems remain as well, such as corruption and poor conditions of public transportation, education and health-care services. The Argentinean protectionism has not allowed the country to revitalize its local industry; there is always a shortage of funds to develop the oil and shale gas fields. The ecologists condemn the use of transgenics in the soy agriculture and the impact on the environment created by the uncontrolled mining exploitation of the multinationals. The mid-term legislative elections created a turnover for the political party in power and marked an end to the omnipotence of president Kirchner whose popularity is at its lowest. By the end of 2013, a strike of the police service provoked a looting in many provinces creating about ten victims.

The social situation of the country is sensitive: unemployment persists (7%), malnutrition remains and 25% of the population lives under the poverty line. More than 30% of the workforce is employed in the informal economy. According to the official figures, 2 million persons are living in poverty; however, according to private institutes, the real number is five times higher.

Main industries

Even though, Argentina lost its position of a superpower which it occupied at the beginning of the 20th century, the country, nevertheless, remains an important world economy, mainly due to its agricultural production. As a fact, the agricultural sector, which is based on livestock farming, cultivation of cereals (wheat, corn, and most of all soy) and citrus fruits, represents around 10% of the country’s GDP. On a global level, Argentina is the largest exporter of soy-derived products and the third largest producer. Soy and sugar cane are grown to produce bio-fuels, a specialty of the country which is the world's largest bio-diesel exporter and the fourth largest producer.

Rich in energy resources, Argentina is the world’s fourth largest oil producer and the first natural gas producer in Latin America.

The industry sector has vastly expanded over these last few years. It contributes to more than 30% of the GDP and employs almost one-fourth of the population. Food packaging (in particular meat packing, flour grinding, and canning) and flour-milling are the country's main industries. Industry also relies on automobile subsidiaries for European brands and also on chemical, petro-chemical and metallurgical activities.

The services sector has followed the same trend as the industry sector. Currently, it contributes to almost 60% of the GDP and employs three-fourths of the active workforce. Argentina has specialized in areas of high-tech services and it is very competitive in software development, call centers, nuclear energy and tourism. The telephone and ICT sectors are also being developed.

Foreign trade overview

Argentina is very open to international exchanges, foreign trade represents around 40% of the GDP (average 2008-2010). Its main commercial partners are the Mercosur countries (Brazil, Paraguay and Uruguay), China, the European Union and the United States. Argentina exports more than what it imports, therefore its trade balance is structurally positive. In 2012, the trade balance increased by 27% in relation to 2011, the strategic policy of restricting imports made up for the reduction in exports. This surplus was maintained in 2013, despite a slight drop (about USD 9 billion in surplus), thanks to the dynamic activity of the agricultural exports (soy and corn). Brazil is Argentina's first trade partner, in imports as well as in exports.

FDI

FDI influx into Argentina was reduced by half in 2009 under the effect of the global economic recession, they started to recover again in 2010; however, in 2013 the FDI inflows were strongly reduced again. Argentina ranks 4th amongst the South American countries in terms of FDI stocks (after Brazil, Chile and Colombia) and 6th in terms of FDI influx. The three main investors in Argentina are the United States, Spain and France. Argentina has certainly strong assets: its natural resources are considerable (copper, gas and oil) and its workforce is highly-skilled and competitive. However, it suffers from a disastrous image conveyed by the country during the economic crisis of late 1990s and early 2000. Restrictions have been placed on FDI in the agricultural sector, which is strategically important for the country's food security, and the more recently implemented measures (a restrictive property law, nationalizations in the energy sector which have affected the Spanish oil giant Repsol) could discourage potential investors. According to the World Bank, between 2012 and 2013 the country's business climate was deteriorated, it went down five places in the classification Doing Business (it ranked 126 out of 189 countries in 2013).

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