Argentina

Jake MullenJordan PearceBrad HarrisBranden EspinozaBrad Lauritzen

Background Information

Jake Mullen

Argentina

Name comes from the Latin word Argentum

Capital: Buenos Aires Official Language: Spanish Declared independence from Spain in

1816 23 Provinces

Population

Estimated 39,921,833 3rd in South America 32 in world 14 inhabitants per square kilometer. Buenos Aires 14,000 inhab/km2

Province Santa Cruz has less than one

Demographics

Population is of European origin 97% of the population is European

(Highest rate in the Western Hemisphere)

Majority form Spain, France, & Italy Indigenous population .8%

Immigration

Net positive migration rate Argentina believes there are over 1

million illegal immigrants Many are from Bolivia, Paraguay, Peru,

Ecuador, China, & West Africa Launched Partria Grande “Greater

Homeland”

Urbanization

2.7 million people in Buenos Aires 11.5 million in Greater Buenos Aires Most immigrants settled in cities for jobs,

education and other opportunities that allowed them to enter the middle class

Moved to towns along the rail system to live in city but work in rural areas

Have a European look, built in a Spanish-grid style around a main square

Religion

80% declare themselves Roman Catholic (most are not practicing)

Catholicism is supported by the Constitution

330,300 LDS members in 2005 Has the largest Jewish pop in Latin

America at 2%

Education

Literacy rate 97.5% Primary school 6-7 years Secondary school 3-5 years (moving

more towards 5) Education is free at all levels except

graduate studies

Government

Federal Republic Argentine Constitution of 1853 mandates

separation of powers Legislature consists of Senate and

Chamber of Deputies Supreme Court has 9 members

appointed by president and Senate

History

Corn-based Civilizations Developed in 1 AD Europeans arrived in 1502 Spain established the colony of Buenos Aires in

1580 British launched 2 invasions but failed Revolution began after Napoleon defeated King

Ferdinand VII Helped Chile and Peru to become free nations

History

Enjoyed increasing prosperity through early 1930’s

Government went from conservative to Radical back to Conservative

Several Internal conflicts Economic situation began to deteriorate Government became protectionists

Current Situation

Jordan Pearce

Economy of Argentina

Benefits from natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base.

Economic performance historically uneven.

Upper-middle income country.

Most economically developed country in South America (measured in GDP per capita and HDI)

The Economic Crisis

In January 2002, the plan that pegged the peso to the dollar was abandoned.

Peso depreciated 75%. Poverty rate grew from

35.9% in May 2001 to 57.5% in October 2002.

In 2005, the poverty rate returned to 33.8%.

Unemployment also rose, but is now back to normal.

The role of the IMF

In 2004, President Kirchner asked for a “structural redesign of the International Monetary Fund”

President Kirchner was warned that Argentina must come to a debt-restructuring agreement, increase its primary budget surplus to pay more debt, and impose “structural reforms” to regain the trust of the world financial community

Statistics

GDP ranking: 23rd (2005) Inflation: 10% (2006) Unemployment: 10% (Feb.

2006) Public debt: $124 billion Population: 39,921,833

(June 2006). Ranked 3rd in South America

in total population and 32nd in the World.

Population growth rate: 0.96%

Only country with a net positive migration rate. (0.4 migrants/1,000 population)

President Néstor Kirchner

Heavy taxes on exports. Aggressively expansive

monetary policy. The Central Bank has

injected large amounts of money into the economy and bought dollars from the free currency market in order to accumulate reserves.

Fiscal policy is also expansive.

Inflation has again become a concern.

Price-freeze agreements.

Economic expansion

A high rated dollar in comparison to the local currency allowed Argentina to produce goods with competitive prices and some industries have begun to flourish once again.

According to the Heritage Foundation, the state’s role in the economy has expanded since the Kirchner administration primarily through price fixing, a state-owned airline, and a state-owned energy company.

3.3 economic freedom ranking on a scale from 1 to 5. Ranked 109 out of 157 rankings.

International Aspects

Bradley Harris

International Aspects

How it all began…

Argentina set the peso equal to the dollar in 1991

Capital expenditures increased as a result of the lower exchange rate

International Aspects

Trade Deficit and Surplus Prior to the collapse of the economy 1998 Trade Deficit of 5000 million 1999 Trade Deficit of 2200 million 2000 Trade Surplus which resulted as a result of

decreased demand for imports in other countries as a result of a recession

International Aspects

Trade Deficit and Surplus After collapse of the economy in 2001 Large decrease in imports Completely flipping their economy from a trade

deficit to a trade surplus. Finally, in 2003, imports began to recover

International Aspects

International Aspects

Exchange rate balanced to 3 pesos/dollar Exports began to grow as their exports became

cheaper for other countries.

International Aspects

Argentina as a member of Mercosur Mercosur formed January 1st, 1995 as a customs

union of Argentina, Brazil, Paraguay, Uruguay Chile and Bolivia joined as associate members Primary focus of Mercosur is trade between the

countries.

International Aspects

Trade/Exports Soybean products: 22.2% Cereals: 8.5% Petroleum: 20% Bovine Products (beef, leather, milk): 7% Siderurgical: 3.4% Industrial Manufacturers: 11% Other: 27.9%

International Aspects

Investments Prior to collapse

United States, Canada, Europe, Chile, Brazil main investors

• United States approached 16 billion by the end of 1999

International Aspects

Investments After Collapse

2004, China announed 20 billion investment in Argentina

2005, Argentina attracted only 2.4 billion in foreign investment

Special Problems

Branden Espinoza

Problem 1: Economics or Politics Public Debt is 30% of

GDP “In particular, the federal

government and the states have to find a way to adjust their spending to available tax revenues, or do a better job in generating revenues while at the same time not hurting incentives to economic activity.”

-Carol Graham VP of Governance Studies at the Brookings Institution’s Center on Social and

Economic Dynamics.

Problem 2: Capital Asset Investment

Investment necessary for future growth. Investment in equipment, machinery

increased 45 percent in 2004. First quarter 2005, the import of capital

assets has grown over 100 percent.

Problem 3: Stem Inflation

Trade Surplus caused influx of moneys. GDP has increased dramatically. Employment has increased. Foreign investment has increased. Option 1: Central Bank can buy Dollars. Option 2: Offset Surplus with Imports.

The Future

Brad Lauritzen

The Future of Argentina

How do you measure economic freedom?

Trade policy Fiscal burden of

government, Government intervention

in the economy, Monetary policy, Capital flows and foreign

investment, Banking and finance, Wages and prices, Property rights, Regulation, Informal market activity.

Economic Freedom

“Is debt destiny for Argentina?”

The score shows hope of increasing, but will Argentina ever be able to obtain economic freedom?

Imports, Exports and Inflation The amount of imports vs. the amount of exports is detrimental to

the economy. Argentina needs to focus on increasing the amount of imports. If this is not done, complete inflation is their destiny They will continue on the path of being economically UN-FREE.

Where are they heading?

8.8%

8.8%

8.9%

8.9%

9.0%

9.0%

9.1%

9.1%

9.2%

9.2%

2003 2004 2005 2006

Economy GrowthPercentage

0%

10%

20%

30%

40%

50%

60%

2003 2004 2005 2006

PovertyPercentage

Future Economic Growth

China will be investing over $20 billion in oil over the next 20 years.

Argentina is getting more involved in the production of ethanol, due to increases in oil prices.

Bill Gates and Google owners are investing in Argentina’s emerging ethanol sector.