Economic history of Argentina

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History of Argentina
Pre-Columbian Indigenous peoples in Argentina Inca Empire
Colonial Argentina Governorate of New Andalusia (1534-1542) Governorate of the Río de la Plata (1549-1776) Royal Audiencia of Buenos Aires (1661-1671), (1759-1788) Viceroyalty of the Río de la Plata (1776–1814)
Independence May Revolution War of Independence United Provinces of the Río de la Plata Congress of Tucumán
Civil Wars Bernardino Rivadavia Confederation Juan Manuel de Rosas French blockade of the Río de la Plata Anglo-French blockade of the Río de la Plata
Rise of Argentine Republic 1853 Constitution British investment in Argentina Conquest of the Desert Generation of '80 Radical Phase (1916–30) The Infamous Decade
Peronism Juan Perón and Eva Perón General Confederation of Labour
Post-WW II (1955 to 1976) Revolución Libertadora Arturo Frondizi 1963 Argentine Navy revolt Arturo Umberto Illia Argentine Revolution Montoneros and ERP
National Reorganization Process Dirty War Falklands War (Guerra de las Malvinas)
Return to democracy Trial of the Juntas Raúl Alfonsín December 2001 riots Kirchnerism
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The economic history of Argentina is one of the most studied, owing to the "Argentine paradox". As a country, it had achieved advanced development in the early 20th century but experienced a reversal relative to other developed economies, which inspired an enormous wealth of literature and diverse analysis on the causes of this relative decline.^[1] Since independence from Spain in 1816, the country has defaulted on its debt nine times. Inflation has often risen to the double digits, even as high as 5,000%, resulting in several large currency devaluations.

Argentina possesses definite comparative advantages in agriculture because the country is endowed with a vast amount of highly fertile land.^[2] Between 1860 and 1930, exploitation of the rich land of the pampas strongly pushed economic growth.^[3] During the first three decades of the 20th century, Argentina outgrew Canada and Australia in population, total income, and per capita income.^[3] By 1913, Argentina was among the world's ten wealthiest states per capita.^[4]

Beginning in the 1930s, the Argentine economy deteriorated notably.

During the

The period between the 16th and the end of the 18th century was characterized by the existence of self-sufficient regional economies separated by considerable distances, a lack of road, maritime or river communications, and the hazards and hardship of land transport.[13] By the end of the 18th century, a significant national economy came into being as Argentina developed a market in which reciprocal flows of capital, labor, and goods could take place on a significant scale between its different regions, which it had hitherto lacked.^[13]

In the colonial period, the territories that now make up Argentina were subject, like the rest of the Spanish territories in the Americas, to legal restrictions regarding how and with whom trade could be conducted. Throughout the 17th and 18th centuries, trade directly through the port of Buenos Aires, rather than via the official system of fleets out of the port of Lima in modern Perú, was forbidden except through special permission from the Crown.^[14] In practice, however, this did not mean that the colonial economy of what is now Argentina was closed to trade.

In addition to trade with Brazil and Guinea, which was legalized in the early seventeenth century, colonial Buenos Aires also conducted trade directly with Spain and other European powers through the so-called navíos de registro— ships with royal permission to sail outside the official fleet or Spanish treasure fleet system to conduct specific services, such as transport soldiers. Dutch and Basque merchants in particular played an important role, in partnership, in managing the system of navíos de registro to conduct trans-Atlantic trade with Buenos Aires. Even more important than the navíos was a system of contraband trade into which the navíos were inserted. Thus, in the second half of the seventeenth century an estimated 200 ships entered the port of Buenos Aires without any permission at all, as opposed to 34 navíos de registro.^[15] On top of this system of largely technically illegal transatlantic trade was the situado system of funding from the royal treasury in Potosí, in Upper Peru, which supplied the military garrison in Buenos Aires. In practice, the situado funded, through a system of credit, a local economy in Buenos Aires which was itself inserted into the contraband economy.^[16]

Argentinian historian Zacarías Moutoukias argues that this system of trade, in which Buenos Aires was linked with the mining economy of the Andes through the situado and to cross-Atlantic trade through contraband and the navíos de registro, created an integrated political and commercial elite in Buenos Aires, made up of military officers, Crown officials and local merchants, and a political economy in which “corruption”— that is, the violation of royal laws regarding trade— was not an aberration but rather a defining characteristic.  For Moutoukias, “corruption” in this context was simply “the violation of a fixed set of norms that limited the integration of the crown’s representatives with the local oligarchy”— a violation that was tacitly tolerated by the Crown because it was lucrative.^[17]

Historians like Milcíades Peña consider this historical period of the Americas as pre-capitalist, as most production of the coastal cities was destined to overseas markets.^[18] Rodolfo Puiggrós consider it instead a feudalist society, based on work relations such as the encomienda or slavery.^[18] Norberto Galasso and Enrique Rivera consider that it was neither capitalist nor feudalist, but a hybrid system result of the interaction of the Spanish civilization, on the transition from feudalism to capitalism, and the natives, still living in prehistory.^[18]

The Argentine territories, held back by their

This trade was legally limited to Spain: the Spanish Crown enforced a monopsony which limited supplies and enabled Spanish merchants to mark up prices and increase profits.^[20] British and Portuguese merchants broke this monopsony by resorting to contraband trade.^[21]

Other scholars reject the label of “feudal” to describe Argentine economy and society during the colonial period. Historian Jeremy Adelman, for example, describes an agrarian economy in the Argentinian interior in which both wage labor and production for the market were quite common during the colonial period. In the seventeenth century, this included the development of textile workshops (obrajes), the raising of mules for transport and the hunting of feral cattle herds to produce meat, leather and tallow— all of these economic activities supplied the mining economy of Potosí in the Andes. In the 18th century, the depletion of feral cattle herds led to the development of settled livestock agriculture in the Argentine Littoral as well as in inland regions. The relative lack of extra-economic coercion due to ample access to land on the agrarian frontier, the prevalence of wage labor, the variety of types of land tenure (ownership, tenancy, a spectrum of usufruct rights) as well as a lack of a fixed and hegemonic landed elite all lead Adelman to reject the label of “feudalism” to describe the agrarian economy of what now makes up Argentina during the colonial period.^[22]

The British desire to trade with South America grew during the

The first Argentine historians, such as

Exports rose 4% to 5% annually from 1810 to 1850 and 7% to 8% from 1850 to 1870.[30] This growth was achieved through the extension of the frontier and greater efficiency in livestock production.^[31]

As a result of the diversification in markets and products, Argentina managed to escape the trap of a single-staple economy and sustained its economic growth over six decades.^[31] The combined effect of declining prices of textiles and rising prices of livestock products produced dramatic improvements in the terms of trade, which rose 377% between 1810 and 1825 in local prices.^[29] Several governors waged campaigns against the natives to increase the available lands, from Juan Manuel de Rosas to Julio Argentino Roca.

Most poor gauchos joined forces with the most powerful caudillos in the vicinity. As the Federalist Party, they opposed the policies implemented by Buenos Aires, and waged the Argentine Civil Wars.^[32]

1810–1829

After Argentina became independent in 1810, an era in which commerce was controlled by a small group of peninsular merchants came to an end.^[29] The Primera Junta, the first government established after the 1810 May Revolution, undertook a protectionist policy until their fall from government.

The

Between 1812 and 1816 divisions developed between a Unitarist faction centred on Buenos Aires and a Federalist faction in the provinces, which eventually led to a series of civil wars that ended with the conquest of Buenos Aires by Federalist caudillos at the Battle of Cepeda in 1820.^[35]

Each province had its own money, and the same money had a different value from one province and another, and even among cities in the same province.^[36]

The government of Martín Rodríguez (1820–1824) and his minister Bernardino Rivadavia, then Las Heras and finally Rivadavia himself as the first president of Argentina from 1826 to 1827, developed an economic plan deemed as "The happy experience". This plan increased the British influence in the national politics. It was based on five main pillars: complete free trade and no protectionist policies against British imports, finance with a central bank managed by British investors, absolute control of the port of Buenos Aires as the sole source of income from national customs, British exploitation of the national natural resources, and a Unitarist national organization centred in Buenos Aires.^[37] After Rivadavia resigned in 1827, ending the "happy experience", the federalist Manuel Dorrego assumed power as governor of Buenos Aires, but was soon executed by the unitarist Juan Lavalle during a military coup.

The exports of gold, allowed by the free trade policies, soon depleted the national reserves. This posed a great problem, as gold was the medium of exchange of the local economy. Rivadavia sought to fix it by establishing the "Discount Bank", a central bank for printing fiat money. Like a number of other central banks worldwide, this bank was not owned by the state, but by private investors, British in this case.^[38]

The report of the American John Murray Forbes to John Quincy Adams, sixth President of the United States, in 1824 mentioned that Britain had a huge influence in the economic power of the country.

He mentioned that the government in Buenos Aires was so eager to be on good terms with Britain and gain recognition of the

Juan Manuel de Rosas forced Lavalle to leave the province, and the federals ruled Buenos Aires until 1852.^[43] Rosas modified a number of policies of the Rivadavian period but maintained others: he set a customs law with protectionist policies, but kept the port under the exclusive control of Buenos Aires and refused to call a constituent assembly.^[44]

The customs law set trade barriers to products produced in the country, and imposed high import tariffs on luxury goods, together with export quotas and tariffs on gold and silver. However, the law was not completely effective because of the control of the port, which did not allow the provinces a steady financial income.^[45] The exclusive control of the port was long resisted by federals from other provinces and led to the conflict of Rosas and Justo José de Urquiza at the battle of Caseros.^[46] Despite the financial obstacles, the economy of Entre Ríos grew to a size near that of Buenos Aires, with the decline of saladeros and the growth of wool production.^[47]

In 1838 there was a new currency crisis, and the peso papel was devalued by 34%, and in 1839 when the peso papel lost 66% of its value.

In the 60 years after the founding of the farming colony at Esperanza in 1856, the base of Argentine agriculture gradually shifted from livestock to crops.^[8]

Export-led boom

Argentina, which had been insignificant during the first half of the 19th century, showed growth from the 1860s up until 1930 that was so impressive that it was expected to eventually become the United States of South America.^[55] This impressive and sustained economic performance was driven by the export of agricultural goods.^[56] A 2018 study describes Argentina as a "super-exporter" during the period 1880–1929 and credits the boom to low trade costs and trade liberalization on one hand and on the other hand to the fact that Argentina "offered a diverse basket of products to the different European and American countries that consumed them".^[57] The study concludes "that Argentina took advantage of a multilateral and open economic system."^[57]

During the second half of the 19th century, there was an intense process of colonization of the territory in the form of

In 1870, during

In 1881, a currency reform introduced a bimetallic standard, which went into effect in July 1883.^[65] Unlike many precious metal standards the system was very decentralized: no national monetary authority existed and all control over convertibility rested with the five banks of issue.^[65] The period of convertibility lasted only 17 months: from December 1884 the banks of issue refused to exchange gold at par for notes.^[65] The suspension of convertibility was soon accommodated by the government, since, having no institutional power over the monetary system, there was little they could do to prevent it.^[65]

The profitability of the agricultural sector attracted foreign capital for railways and industries.^[56] British capital investments went from just over £20 million in 1880 to £157 million in 1890.^[66] During the 1880s, investment began to show some diversification as capital began to flow from other countries such as France, Germany and Belgium, though British investment still accounted for two thirds of total foreign capital.^[66] In 1890 Argentina was the destination of choice for British investment in Latin America, a position it held until World War I.^[66] By then, Argentina had absorbed between 40% and 50% of all British investment outside the United Kingdom.^[66] Despite its dependence on the British market, Argentina managed a 6.7% annual rate of growth of exports between 1870 and 1890 as a result of successful geographic and commodity diversification.^[67]

The

The scarcity of labor and abundance of land induced a high

Celman's successor, Carlos Pellegrini, laid the foundations for a return to stability and growth after the restoration of convertibility in 1899.^[75] He also reformed the banking sector in ways that were to restore stability in the medium term.^[75] Rapid growth rates soon returned: in the period 1903–1913, GDP increased at an annual rate of 7.7%, and industry grew even faster, jumping by 9.6%.^[76] By 1906, Argentina had cleared the last remnants of the 1890 default and a year later the country re-entered the international bond markets.^[76]

All the same, between 1853 and the 1930s, fiscal instability was a transitory phenomenon.^[52] The depressions of 1873–77 and 1890–91 played a crucial role in fostering the rise of industry: timidly in the 1870s and more decisively in the 1890s, industry grew with each crisis in response to the need of a damaged economy to improve its trade balance through import-substitution.^[77] By 1914, about 15% the Argentine labor force was involved in manufacturing, compared to 20% involved in commercial activities.^[78] In 1913, the country's income per head was on a par with that of France and Germany, and far ahead of Italy's or Spain's.^[5] At the end of 1913, Argentina had a gold stock of £59 million, or 3.7% of the world's monetary gold, while representing 1.2% of the world's economic output.^[79]

Interwar period

1914–1929

Argentina, like many other countries, entered into a recession following the beginning of World War I as international flows of goods, capital and labour declined.

Exports of frozen beef, especially to Great Britain, proved highly profitable after the invention of refrigerated ships in the 1870s.[88] However Britain imposed new restrictions on meat imports in the late 1920s, which sharply reduced beef imports from Argentina. Ranchers responded by switching from livestock to crop production, but there was lasting damage to the Argentine economy.^[89]

Great Depression

The Great Depression had a comparatively mild effect on Argentina:^[90] the unemployment rate never went above 10%,^[91] and the country largely recovered by 1935.^[90] However, the Depression permanently halted its economic expansion.^[55] Actually, much like other developing countries, the economy was already in a downturn beginning in 1927, a result of declining prices.

Argentina abandoned the gold standard in December 1929, earlier than most countries.^[80] For much of the previous period, the country had operated a currency board, in which a body known as the caja de conversión was charged with maintaining the peso's value in gold.^[92] The devaluation of the peso increased the competitiveness of its exports and protected domestic production.^[56] Argentina saw the value of its exports drop from $1,537 million in 1929 to $561 million in 1932, but this was by no means the most severe downturn in the region.^[93]

In response to the Great Depression, successive governments pursued a strategy designed to transform Argentina into a country self-sufficient in industry as well as agriculture.^[8] The strategy of growth was based on import substitution in which tariffs and quotas for final goods were raised.^[56] The import-substitution process had progressively been adopted since the late 19th century, but the Great Depression intensified it.^[77] The government's encouragement of industrial growth diverted investment from agriculture, and agricultural production fell dramatically.^[8]

In 1930, the armed forces

After the

During the first Five-Year Plan, various public works and programs were executed, with the aim to modernize the country's infrastructure. For example, a total of 22 hydroelectric power plants were erected, increasing electrical output from 45,000 kVA in 1943 to 350,000 kVA in 1952. Between 1947 and 1949, a network of gas pipelines, which linked Comodoro Rivadavia with Buenos Aires, was built. The gas distribution reached 15 million m³, reducing costs by a third.^[107]

During this period Argentina's economy continued to grow, on average, but more slowly than the world as a whole or than its neighbors, Brazil and Chile.^[108] A suggested cause is that a multitude of frequently changed regulations, at times extended to ridiculous specifics (such as a 1947 decree setting prices and menus for restaurants), choked economic activity.^[108] The long-term effect was to create pervasive disregard for the law, which Argentines came to view as a hindrance to earning a living rather than an aid to enforcing legitimate property rights.^[108] The combination of industrial protectionism, redistribution of income from the agrarian to the industrial sector, and growing state intervention in the economy sparked an inflationary process.^[109] By 1950, Argentina's GDP per capita accounted fell to less than half of that of the United States.^[110]

Perón's second Five-Year Plan in 1952 favored increased agricultural output over industrialization, but industrial growth and high wages in previous years had expanded the domestic demand for agrarian goods.^[97] During the 1950s, output of beef and grain fell, and the economy suffered.^[97] The policy shift toward agricultural production created a gap in income distribution, as the majority of those who worked in agriculture labored on tiny plots, while the majority of the land was in large estates.^[100] Argentina signed trade agreements with Britain, the Soviet Union and Chile, slightly opening the market to international trade as Perón's second economic plan sought to capitalize on the country's comparative advantage in agriculture.^[104]

Post-Peron era and the 1960s

In the 1950s and part of the 1960s, the country had a slow rate of growth in line with most Latin American countries, while most of the rest of the world enjoyed a golden era.^[55] Stagnation prevailed during this period, and the economy often found itself contracting, mostly the result of union strife.^[55]

Wage growth beginning in 1950 pushed prices up.^[109] The inflation rate increased faster, and soon real wages fell.^[109] High inflation prompted a stabilization plan that included tighter monetary policy, a cut in public expenditures, and increases in taxes and utility prices.^[109] Increasing economic wariness as the 1950s progressed became one of the leading causes for Perón's downfall in the Revolución Libertadora of 1955, as the working classes saw their quality of life diminished, thus stripping Perón from a large part of his popular support.

1958 presidential election in a landslide.^[112] In the same year he announced the beginning of the "oil battle": a new attempt at import substitution which aimed to achieve self-sufficiency in oil production by signing several contract with foreign companies for the mining and exploitation of oil.^[113] In 1960, Argentina joined the Latin American Free Trade Association.^[104]

Another coup in June 1966, the so-called Argentine Revolution, brought Juan Carlos Onganía to power. Ongania appointed Adalbert Krieger Vasena to head the Economy Ministry.^[114] His strategy implied a very active role for the public sector in guiding the process of economic growth,^[114] calling for state control over the money supply, wages and prices, and bank credit to the private sector.^[115]

Krieger's tenure witnessed increased concentration and centralization of capital, coupled with privatization of many important sectors of the economy.^[114] The international financial community offered strong support for this program, and economic growth continued.^[97] GDP expanded at an average annual rate of 5.2% between 1966 and 1970, compared to 3.2% during the 1950s.^[116]

After 1966, in a radical departure from past policies, the Ministry of Economy announced a program to reduce rising inflation while promoting competition, efficiency, and foreign investment.^[97] The anti-inflation program focussed on controlling nominal wages and salaries.^[117] Inflation decreased sharply, decreasing from an annual rate of about 30% in 1965–67 to 7.6% in 1969.^[116] Unemployment remained low, but real wages fell.^[116]

A gradual reversal in trade policy culminated in the military announcing import substitution as a failed experiment, lifting protectionist barriers and opening the economy to the world market.^[104] This new policy boosted some exports, but an overvalued currency meant certain imports were so cheap that local industry declined, and many exports were priced out of the market.^[104] The Ministry of Economy put an end to the exchange rate policy of previous governments.^[109] The currency underwent a 30% devaluation.^[109] In 1970, the "peso moneda nacional" (one of the longest-lived currencies in the region) was replaced by the "peso ley" [shortened form of "peso ley 18188"] (100 to 1).

In May 1969, discontent with Krieger's economic policies led to riots in the cities of

expansive monetary policy, which resulted in an uncontrolled rise in the level of inflation.^[101]

Free-market reforms (1975–2002)

Stagnation (1975–1990)

Between 1975 and 1990, real per capita income fell by more than 20%, wiping out almost three decades of economic development.^[80] The manufacturing industry, which had experienced a period of uninterrupted growth until the mid-1970s, began a process of continuous decline.^[119] The extreme dependence on state support of the many protected industries exacerbated the sharp fall of the industrial output.^[120] The degree of industrialization at the start of the 1990s was similar to its level in the 1940s.^[119]

In the early 1970s, per capita income in Argentina was twice as high as in Mexico and more than three times as high as in Chile and Brazil. By 1990, the difference in income between Argentina and the other Latin American countries was much smaller.^[80] Starting with the Rodrigazo in 1975, inflation accelerated sharply, reaching an average of more than 300% per year from 1975 to 1991, increasing prices 20 billion times.^[80]

When the military dictatorship finance minister José Alfredo Martínez de Hoz assumed power, inflation was equivalent to an annual rate of 5000%, and output had declined sharply.^[121] In 1976, the era of import substitution was ended, and the government lowered import barriers, liberalized restrictions on foreign borrowing, and supported the peso against foreign currencies.^[8] That exposed the fact that domestic firms could not compete with foreign imports because of the overvalued currency and long-term structural problems.^[120] A financial reform was implemented that aimed both to liberalize capital markets and to link Argentina more effectively with the world capital market.^[121]

After the relatively stable years of 1976 to 1978, fiscal deficits started to climb again, and the external debt tripled in three years.

overvaluation ultimately led to capital flight and a financial collapse.^[121]

Growing government spending, large wage raises, and inefficient production created a chronic inflation that rose through the 1980s, when it briefly exceeded an annual rate of 1000%.^[8] Successive regimes tried to control inflation by wage and price controls, cuts in public spending, and restriction of the money supply.^[8] Efforts to stem the problems came to naught when in 1982 Argentina came into armed conflict with the United Kingdom over the Falkland Islands.^[122]

In August 1982, after Mexico had announced its

Argentine peso argentino was introduced in 1983, with 10,000 old pesos exchanged for each new peso.^[8]

In December 1983, Raúl Alfonsín was elected President of Argentina, bringing an end to the military dictatorship.^[122] Under Alfonsin, negotiations started on a new program with the IMF, but they led to nothing.^[122] In March 1984, Brazil, Colombia, Mexico and Venezuela lent Argentina $300 million for three months, followed by a similar amount by the United States. That provided some breathing space as it was not before late September 1984 that an agreement was reached between the IMF and Argentina.^[122]

In 1985, the

IMF program.^[122] A new IMF arrangement was reached in July 1987, only to collapse in March 1988.^[122]

The next move by the authorities was to launch the Primavera Plan in August 1988, a package of economically heterodox measures that foresaw little fiscal adjustment. The IMF refused to resume lending to Argentina.^[122] Six months after its introduction, the plan collapsed, leading to hyperinflation^[122] and riots.

Consolidation of Neoliberalism (1990–2002)

The Peronist Carlos Menem was elected president in May 1989.^[122] He immediately announced a new shock program, this time with more fiscal adjustment in view of a government deficit of 16% of GDP.^[122] In November 1989 agreement was reached on yet another standby with the IMF, but again the arrangement was ended prematurely, followed by another bout of hyper-inflation, which reached 12,000% per year.^[122]

After the collapse of public enterprises during the late 1980s, privatization became strongly popular.^[127] Menem privatized almost everything the state owned, except for a couple of banks.^[92] In terms of service there were indisputable improvements. For example, before the telephone privatization, to get a new line it was not unusual to wait more than ten years, and apartments with telephone lines carried a big premium in the market. After privatization the wait was reduced to less than a week.^[127] Productivity increased as investment modernized farms, factories and ports.^[92] However, in all cases, there were large outflows of employees.^[127] In addition, the process of privatization was suspected of corruption in many cases.^[127] Ultimately, the privatized enterprises became private (rather than public) monopolies.^[92] Their prices on long-term contracts were indexed to American inflation, even though prices in Argentina were falling.^[92]

In 1991, economy minister

a currency board, under which the peso was fixed by law at par to the dollar, and the money supply restricted to the level of hard-currency reserves. This was a risky policy which meant at a later stage Argentina could not devalue.^[92] After a lag, inflation was tamed. With risk of devaluation apparently removed, capital poured in from abroad.^[92] GDP growth increased significantly and total employment rose steadily until mid-1993.^[91] During the second half of 1994, the economy slowed down and unemployment increased from 10% to 12.2%.^[91]

Although the economy was already in a mild recession at this point, conditions worsened substantially after the

devaluation of the Mexican peso during December 1994.^[91] The economy shrank by 4%, and a dozen banks collapsed.^[92] With the labor force continuing to expand and employment falling sharply along with aggregate demand, unemployment rose by over 6% in 6 months.^[91] But the government responded effectively: it tightened bank regulation and capital requirements, and encouraged foreign banks to take over weaker local ones.^[92] The economy soon recovered and, between 1996 and 1998, both output and employment grew rapidly and unemployment declined substantially.^[91] However, at the beginning of 1999, the Brazilian currency underwent a strong depreciation. The Argentine economy contracted 4% in 1999, and unemployment increased again.^[91]

Exports grew from $12 billion in 1991 to $27 billion in 2001, but many industries could not compete abroad, especially after Brazil's devaluation.

deficits between 1992 and 1999.^[129] Unable to devalue, Argentina could only become more competitive if prices fell.^[92] Deflation came from recession, falling wages and rising unemployment.^[92] Interest rates remained high, with banks lending dollars at 25%.^[92]

The share of public spending in GDP increased from 27% in 1995 to 30% in 2000.[92] Some poorer provinces had depended on state enterprises or on inefficient industries, such as sugar, which could not compete when international trade was opened.^[92] To quell social unrest, provincial governors padded their payrolls.^[92] The government had embarked on an old-age pension reform with costs reaching 3% of GDP in 2000, as it still had to pay pensioners but no longer received contributions.^[92]

Economic crisis (1998–2002)

Main article: 1998–2002 Argentine great depression

Argentina fell into a deep recession in the second half of 1998, triggered and then compounded by a series of adverse external shocks, which included low prices for agricultural commodities,^[130] the appreciation of the US dollar, to which the peso was pegged at par,^[130] the 1998 Russian financial crisis, the LTCM crisis and the devaluation of the Brazilian real in January 1999.^[131] Argentina's sluggish GDP growth fuelled concerns about the sustainability of public debt.^[131]

In December 1999, President

spreads on Argentine bonds over U.S. Treasuries.^[131] In December, the de la Rua government announced a $40 billion multilateral assistance package organized by IMF.^[132] The uneven implementation of fiscal adjustments and reforms, a worsening global macroeconomic environment, and political instability led to the complete loss of market access and intensified capital flight by the second quarter of 2001.^[131] Argentine sovereign debt, held mostly in bonds, was massively sold short and the government found itself unable to borrow or meet debt payments.^[133]

In December 2001, a series of deposit runs began to destabilize the banking system, leading the Argentine authorities to impose a partial withdrawal freeze.^[131] With Argentina no longer in compliance with the conditions of the expanded IMF-supported program, the IMF decided to suspend disbursements.^[131] At the end of December, in a climate of severe political and social unrest, the country partially defaulted on its international obligations; in January 2002, it formally abandoned the currency convertibility regime.^[131]

The ensuing economic and political crisis was arguably the worst since the country's independence.^[80] By the end of 2002, the economy had contracted by 20% since 1998.^[131] Over the course of two years, output fell by more than 15%, the Argentine peso lost three-quarters of its value, and registered unemployment exceeded 25%.^[80] Income poverty in Argentina grew from an already high 35.4% in October 2001 to a peak of 54.3% in October 2002.^[134]

Critics of the policy of economic liberalization pursued during the Menem Presidency argued that Argentina's economic woes were caused by neoliberalism, which had been actively promoted by the U.S. government and the IMF under the Washington Consensus.^[80] Others have stressed that the main shortcoming of economic policy-making during the 1990s was that economic reform was not pursued with enough determination.^[80] A 2004 report by the IMF's Independent Evaluation Office criticized the IMF's conduct prior to Argentina's economic collapse of 2001, saying the IMF had supported the country's fixed exchange rate for too long, and was too lenient towards fiscal deficits.^[135][136]

Kirchnerism and relative growth (2003–2015)

In January 2002 Eduardo Duhalde was appointed president, the fifth in two weeks.^[138] Roberto Lavagna, who became Minister of the Economy in April 2002, was credited for the ensuing recovery, having stabilized prices and the exchange rate to head off hyperinflation.^[139] After the default in 2001, growth reached over 6% a year for seven of the eight years to 2011.^[140] This was in part due to a commodity price boom, and also because the government managed to keep the value of the currency low, boosting industrial exports.^[140]

Kirchner administration

See also: Presidency of Néstor Kirchner

soybeans, soybean oil, and meal generated more than 20% of Argentina's export revenue, triple the joint share of the traditional exports of beef and wheat.^[137] Export taxes comprised 8% to 11% of the Kirchner government's total tax receipts, around two-thirds from soy exports.^[141] Taxes on imports and exports increased government spending from 14% to 25% of GDP.^[140] However, the import and export taxes discouraged foreign investment, while high spending pushed inflation over 20%.^[140]

An attempt by the Kirchner administration to impose

Province of Buenos Aires (2006)^[143] and Aerolíneas Argentinas (2009).^[144]

In December 2005, Kirchner decided to liquidate the Argentine debt to the IMF in a single payment, without refinancing, for a total of $9.8 billion.

Moody's boosted Argentina's debt rating from B− to B.^[147]

In early 2007 the administration began interfering with inflation estimates.^[clarification needed]^[148]

Fernández administration

See also: Presidency of Cristina Fernández de Kirchner

Tierra del Fuego, drawn by tax breaks.^[149]

On December 10, 2007,

mobilized against a resolution that would have increased the tax rate on soybean exports from 35% to 44.1%. Ultimately, the new taxation regime was abandoned.^[150] Official Argentine statistics are believed to have significantly underreported inflation since 2007, and independent economists publishing their own estimates of Argentine inflation have been threatened with fines and prosecution.^[151]

In October 2008 President Fernández de Kirchner nationalized private pension funds worth almost $30 billion, ostensibly to protect the pensions against falling stock prices around the world, although critics said the government simply wanted to add the money to its budget.[152] Private pension funds, which were first licensed in 1994, suffered large losses during the 1998–2002 crisis and by 2008, the state subsidized 77% of the funds' beneficiaries.^[153]

The

late-2000s recession hit the country in 2009 with GDP growth slowing to 0.8%.^[154] High GDP growth resumed in 2010, and the economy expanded by 8.5%.^[155] In April 2010, Economy Minister Amado Boudou prepared a debt swap package for the holders of over US$18 billion in bonds who did not participate in the 2005 Argentine debt restructuring.^[156][157] In late 2010, the largest new natural gas deposits in 35 years were discovered in Neuquén Province.^[158] The unemployment rate in the third quarter of 2011 was 7.3%.^[159]

In November 2011, the government laid a plan to cut utilities subsidies to higher income households.

Repsol, had not done its duty as to provide the financial support for research and land exploitation, as well as being a bad administrator concerned only in sending profits to Spain and forsaking YPF's economic growth.^[164]

Rising inflation and

capital controls, in turn, led to the emergence of a black market for dollars, known as the "dólar blue", at higher rates than the official exchange rate.^[166]

By May 2014, private forecasts estimated annual inflation at 39.9%, one of the highest rates in the world.[167] In July 2014, a ruling from a New York court ordered the country to pay the remaining holders of the bonds defaulted in 2001, which by then were mostly American Vulture funds, before it paid any of its exchange bondholders. The Argentine government refused, causing the country to default on its debt again.^[168]

Economic problems since 2016

Presidency of Mauricio Macri

Main articles:

Argentine monetary crisis

On December 17, 2015, Macri lifted foreign exchange restrictions, leading to a 30% devaluation of the Peso, the largest since 2002.^{[169] [170][171][172]} In January 2016 it was devalued to 44 cents.^[173][174] Unemployment reached double digits as, with massive layoffs in the public and private sectors.^[175]

In April 2016, monthly inflation rose to 6.7%, the highest since 2002, according to the indicator, with annual inflation reaching 41.7%, one of the highest in the world.^[176] Another estimate said that inflation reached 37.4%, the fiscal deficit 4.8%, and predicted GDP would fall by 1.9%.^[177] In December 2015, the government announced the elimination of export restrictions for wheat, maize and meat, while reducing withholding taxes on soybeans to 30% at a fiscal cost of 23,604 million pesos.^[178] This led to large price increases in staple products including oil, which increased by 51%, flour 110%, chicken 90%, noodles 78%, and a 50% increase in the price of meat in two weeks.^[179] Because of a 150-180% increase in feed prices, many pig producers were in crisis. It is estimated that in the province of Buenos Aires alone, 40 thousand pork producers would fail.^[180]

One of Macri's promises during the 2015 campaign was the elimination of

Congress for treatment on March 1, 2016.^[182] As of December 2017^[update], Macri had not fulfilled his promise, and it was not in the government's plan to eliminate the Income tax in the future either.^[183]

An extremely high

inflation rate was strangling the urban and rural working population: decreasing from the astounding 40% of 2016, it was expected to be 17% by 2018.^[184] Other vulnerabilities include an unemployment rate close to 9% (expected to be in two digits in the next two years), as well as the sharp rise in the current-account deficit around 3% to 4% of GDP in 2017–2018 thanks to an over-valued currency.^[184] Forecasts from the IMF show GDP growth in 2018 decelerating to 2.5% from 2.75%, and clearly any halting of the cyclical upswing in the global economy would set the country back.^[184]

Presidency of Alberto Fernández

See also: Presidency of Alberto Fernández

In 2019 the inflation was considered the highest in 28 years according to the index, ascending to 53.8%. To the cause of the quarantine in 2020, in April, 143,000 SMEs will not be able to pay salaries and fixed expenses for the month, even with government assistance, so they will have to borrow or increase their capital contribution, and approximately 35,000 companies consider closing their business. even so, the president remains firm in his decision to maintain the state of total quarantine. Despite cuts in the payment chain, some project 180 total days and calculate 5% of companies that fell in May. In 2023, the rate of inflation in Argentina surpassed 100% for the first time since the early 1990s.^[185]

Presidency of Javier Milei

See also: Presidency of Javier Milei

On 10 December 2023,

right-wing libertarian, was sworn in as new president of Argentina.^[186] During the electoral campaign, inflation was at over 100 percent.^[187] At the time of Milei's inauguration in December 2023, Argentina’s economy was suffering 143 percent annual inflation, the currency had plunged and four out of 10 Argentines were in poverty.^[188]

In January 2024, Argentina’s poverty rate reached 57.4%, the highest poverty rate in the country since 2004.[189]

Argentine paradox

Geary–Khamis dollars

) as a percentage of the US's, 1900–2008

The Nobel prize-winning economist Simon Kuznets is said to have remarked that there were four types of countries: the developed, the underdeveloped, Japan, and Argentina.^[190]

According to

land distribution in Canada, which led to a rising number of small farmers, and the small number of landowners each with large areas of land in Argentina.^[191]

Duncan and Fogarty (1984) argued that the key difference lies in the contrast between the stable, flexible government of Australia and the poor governance of Argentina.

immigration policy, similar to Australia's, would have increased productivity encouraged by the relative scarcity of labor.^[191]

labor productivity.^[191]

See also

• British investment in Argentina
• History of agriculture in Argentina
• Latin American debt crisis
• Economic history of Latin America

Notes