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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 stand 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 liberalization, deregulation, and privatization. Inflation dropped and the gross domestic product 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 more than 25 percent, and the peso had depreciated 75 percent after being devalued and floated. 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 large numbers of unemployed people still beg for money or food, particularly in the outskirts of Buenos Aires. Some of them are homeless, and at least one small nonprofit humanitarian organization 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. Telecommunications are particularly strong, with an important penetration of mobile telephony, Internet and wide band services. In 2002, more than 57 percent of the population was below the poverty line, but at the end of 2005, the amount was 33.8 percent. In 2002, unemployment was more than 25 percent, but by December 2005 it was 10.2 percent. GDP per capita has surpassed the previous pre recession peak of 1998. The economy grew 8.9 percent in 2003, 9.0 percent in 2004, and 9.2 percent in 2005; the floor was set at 7 percent for 2006. As of 2006 foreign debt stands at 68 percent of GDP and is slowly decreasing. |
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