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Argentina Economy Report

Argentina is precisely an emerging country, and it is classified among the middle-income countries. The country has a human development index is 0.811 against the 0.900 which is considered the minimum for the developed countries. This has been as a result of high living standards of its citizens due to high employment levels.

Lately, Argentina has exhibited high poverty levels with the population below the poverty line being 8.35% as of 2011 (McCloskey 71). However, it has the least income disparities in Latin America. The country has advanced its manufacturing sector, and it’s the largest contributor to the gross domestic product.

Moreover, the country has established its agriculture and tourism sector which contribute highly to its economy. Nevertheless, the government is highly indebted and recently billionaire Paul Singer decided to take ARA Libertad as collateral for the debts owed to him by the government.

Argentina is highly endowed with natural resources which contribute significantly to its economic development. The country has a lot of minerals including coal, copper zinc, silver, and Gold. These minerals have helped in the advancement of the economy. On the same note, Argentina has a highly skilled population which can contribute positively to the economy (Gomez 115).

These factors have been very crucial in propelling the country to a middle-income economy and also among the G-20 countries. It is important to note that the government is very supportive of the private sector. The good relationship has led to increased economic growth.

The low-income inequalities have been responsible for not only increased living standards but also high rates of economic development. Moreover, the economy is highly diversified which makes the country rather protected from changing economic conditions.

Effects of environmental externalities are not that very adverse in the Argentina economy. The position of Argentina is strategic, and the country can trade with very many countries both in Europe and North America. However, external economic conditions have had negative effects on Argentina’s economy.

Argentina had a very bad tax system which had many loopholes that enabled many people to evade paying their taxes. Consequently, the government lost a lot of money leading to low savings and investments (Paolera and Alan 197). It is important to note that the government of Argentina has huge foreign as well as local debts.

Servicing these loans has been very difficult for the government. Not only has it led to higher percentages of the GDP going to loans and the interests, but has also driven the country to economic crises.

Furthermore, the economic conditions of Argentina have not been good especially after the crisis of 2001. As a result, many people both locals and foreigners have decided to invest in other countries. Also, the Argentine economy pays lower wages than the western countries. This has led to very high rates of capital flight from the country.

However, Argentina has a relatively developed infrastructure which has very positive contributions to the development of the country. Approximately, a very important part of the country has been connected with good roads as well as railway systems.

There are also waterways that make navigation quite easy (Restakis 191). Moreover, political instability has also been a great block of economic development. It should be noted that political stability is essential for both domestic and foreign investors.

Argentina pursues export-led policies given that a lot of efforts are directed towards the manufacturing sector. The government has invested in the industrial sector in a bid to add value to its raw products before exporting them. On the same note, the exploitation of natural resources for export is given priority. The level of foreign direct investment in Argentina stood at $92.81 billion as at December 2011 (Baer and David 227).

This high level has been associated with a good business environment that has been maintained in Argentina. Most of the foreign direct investment is in the oil and gas industry probably because of the good returns in the industry. However, mining and telecommunications also receive a substantial amount of foreign direct investment.

The level of foreign assistance in Argentina was approximated to be $121.12 million in 2010 though statistics show that the rate has been dropping since 2008 (McCloskey 72). Small entrepreneurs are assisted by micro-credit organizations to boost their businesses.

However, these organizations are not effective because they have only managed to reach very few people though there are very many people who need financial services. Their efficiency is also hindered by several factors including lack of funding.

The government of Argentina needs to reduce its debt both public and foreign as much as possible. Unless this is done, it will be difficult to record meaningful development. It is important to note that increased debts increases the rate of money outflow and thus reduces the amount of money available for investment. There is also a need to reduce the government expenditure which is likely to increase inflation rates and throw the economy out of balance.

Works Cited

Baer, Werner, and David V. Fleischer. The Economies of Argentina and Brazil: A Comparative Perspective. Northampton: Edward Elgar Publishing, 2011. Print.

Gomez, Georgina. Argentina’s Parallel Currency: the Economy of the Poor. London: Pickering & Chatto, 2009. Print.

McCloskey, Erin. Argentina. Chalfont: Bradt Travel Guides, 2011. Print.

Paolera, Gerardo D. and Alan M. Taylor. A New Economic History of Argentina. Cambridge: Cambridge University College, 2003. Print.

Restakis, John. Humanizing the Economy: Co-operative in the Age of Capital. Gabriola: New Society Publishers, 2010. Print.

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