Argentina - Overview
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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.
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
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).