Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. The country historically had a large middle class, compared to other Latin American countries, but this segment of the population was decimated by a succession of economic crises. Today, while a significant segment of the population is still financially well-off, they stay in sharp contrast with millions who live in poverty or on the brink of it.
Since the late 1970s the country piled up public debt and was plagued by bouts of high inflation. In 1991, the government pegged the peso to the U.S. dollar and limited the growth in the monetary base. The government then embarked on a path of trade liberalisation, deregulation, and privatisation. Inflation dropped and GDP grew, but external economic shocks and failures of the system diluted its benefits, causing it to crumble in slow motion, from 1995 and up to the collapse in 2001.
By 2002 Argentina had defaulted on its debt, its GDP had shrunk, unemployment was over 25%, the peso had devalued 75% after being floated, and inflation was hitting again. However, careful spending control and heavy taxes on now soaring exports gave the state the tools to regain resources and conduct monetary policy.
In 2003, import substitution policies and soaring exports, coupled with a lower inflation and expansive economic measures, triggered a surge in the GDP, which was repeated in 2004, creating jobs and encouraging internal consumption. Capital flight decreased, and foreign investment slowly returned. The influx of foreign currency from exports created such a huge trade surplus that the Central Bank was forced to buy dollars from the market, which it continues to do at the time, to be accumulated as reserves.
The situation in 2005 is much improved, but there are still large numbers of unemployed people that beg for some money or food, especially in the outskirts of Buenos Aires. Some of them are homeless, and there is at least one small non-profit humanitarian organization which distributes free food to some of them most days of the week. However, Argentina is still the most developed country in Latin America. It boasts the highest GDP per capita, the highest levels of education measured by university attendance, and a reasonable infrastructure that in many aspects is equal in quality to that found in fully industrialized nations. In 2002 over 57% of the population was below the poverty line, at the end of 2005 it was 33.8%. In 2002 unemployment had reached over 25%, and by December 2005 it was 10.2%. GDP per capita has surpassed the previous pre-recession peak of 1998. The economy grew 8.9% in 2003, 9.0% in 2004, and 9.2% in 2005; figures no lower than 7% and up to about 9% are predicted for 2006. The foreign debt now stands at 69% of GDP and is slowly decreasing.
This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article Argentina
