Two features of Argentina’s history jump out at any observer, first I notice it was a wealthy agricultural territory in the 19th century with an abundant pampas of rich soil. Second, from 1850 to 1955 it experienced the second largest European immigration in the world, second only to the U.S. The twentieth century was hard on Argentina’s economy and its people. The country is still relatively wealthy, but it hasn’t progressed as far along as it should have. Repressive politics played a negative role on economic development.
A Global Exporter
Today Argentina has an export surplus that is still substantially based on agriculture. The top five export products are: soybeans and soy bean derivatives, petroleum and gas, vehicles, corn, wheat. There is automobile manufacturing and oil refining but farming still plays a big role. Exports represent about eleven percent of GDP and with such a large percentage of the economy tied to exports, the international economy is very important. When the world economy slows down, exporting usually slows down too.
As an upper middle income economy, Argentina has a high per capita GDP of almost $19,000 per year. The country has partially developed an industrial economy that exports over 20 percent of its goods to Brazil and imports from Brazil, the United States and China. Argentina imports machinery to use for manufacturing. It doesn’t have its own independent machine tooling industry that is capable of producing heavy manufacturing machinery. But every part of the economy that is tied to imports and exports is also tied to the vagaries of international economic downturns.
Argentina’s territory is global in the sense that its economic policies have to accommodate whatever gyrations occur internationally. In 1992 Argentina pegged its peso to the U.S. dollar at a 1-to-1 rate. At first the peg worked well to expand the economy and by 1998 GDP reached a new high. In early 2002 the financial system collapsed as a result of a run on banks, resulting in the end of the peso’s peg to the U.S. dollar. During the ten year-long peg, deposits at banks increased from $15 billion to over $80 billion. When the value of the peso fell people took their money out of the banks and the government had to default on it’s international loans. It was the first time a country had defaulted in the international system since WWII. It all happened so fast that there wasn’t a way to work it out.
Inflation and unemployment continue to plague Argentina’s society and that is difficult to manage because the government is tied to the international economy and needs to resurrect Argentina’s financial profile in order to sustain exports. Argentina’s territory now involves international markets. To handle these markets Argentina, like most countries, is a member of free trade associations. In South America the largest free trade association is Mercosur. More than 90 percent of the trade within Mercosur is duty-free, which means that most of the trade between Argentina and Brazil is duty-free. Since about 28 percent of Argentina’s exports are to Brazil this trade agreement is extremely important and assuages the barbs of old animosities between the two countries.
China is Argentina’s second largest trading partner, but also one of its newest trading partners. Before the 1990s there was almost no trade between the two countries. The bulk of the trade consists of petroleum and agricultural products, especially soy oil. To smooth out dumping conflicts and potential misunderstandings the two countries signed a series of bilateral trade agreements in 2012. This relationship is testament to the global nature of Argentina’s territorial interactions as they are transacted through trade.
Argentina’s third largest trade partner is the United States and there is a long history of bilateral commercial relations in both trade and investment between the two countries. Argentina’s stormy political history during much of the twentieth century meant a love – hate relationship developed which is now being replaced by a more stable relationship in Argentina’s post-default economy. Over 500 U.S. based companies now operate in Argentina, so trade also deeply involves the knowledge transfers that occur when companies set up shop in a foreign country. To protect the companies and encourage them Argentina adheres to most treaties and international agreements on intellectual property. It is a member of the World Intellectual Property Organization.
There are over fifteen trade partners that transact notable volumes with Argentina. There are also several long running territorial disputes over small territories or islands, such as the Falkland Islands. For the most part these disputes are left to simmer in the background due to more pressing domestic issues and the ongoing need to adapt Argentina’s policies to global trade in order to sustain exporting. In the longer-term Argentina is attempting to move away from agricultural exports and towards financial and manufacturing exports, but being the eighth largest country in the world and only having a population of 43 million people means land is readily available. Lots of that land is highly productive soil, which makes Argentina an agricultural territory.