Transcript Argentina 2 - BYU Marriott School

Argentina
Jake Mullen
Jordan Pearce
Brad Harris
Branden Espinoza
Brad Lauritzen
Background
Information
Jake Mullen
Argentina
 Name comes from the Latin word
Argentum
 Capital: Buenos Aires
 Official Language: Spanish
 Declared independence from Spain in
1816
 23 Provinces
Population
 Estimated 39,921,833
 3rd in South America
 32 in world
 14 inhabitants per square kilometer.
 Buenos Aires 14,000 inhab/km2
 Province Santa Cruz has less than one
Demographics
 Population is of European origin
 97% of the population is European
(Highest rate in the Western
Hemisphere)
 Majority form Spain, France, & Italy
 Indigenous population .8%
Immigration
 Net positive migration rate
 Argentina believes there are over 1
million illegal immigrants
 Many are from Bolivia, Paraguay, Peru,
Ecuador, China, & West Africa
 Launched Partria Grande “Greater
Homeland”
Urbanization
 2.7 million people in Buenos Aires
 11.5 million in Greater Buenos Aires
 Most immigrants settled in cities for jobs,
education and other opportunities that
allowed them to enter the middle class
 Moved to towns along the rail system to
live in city but work in rural areas
 Have a European look, built in a
Spanish-grid style around a main square
Religion
 80% declare themselves Roman
Catholic (most are not practicing)
 Catholicism is supported by the
Constitution
 330,300 LDS members in 2005
 Has the largest Jewish pop in Latin
America at 2%
Education
 Literacy rate 97.5%
 Primary school 6-7 years
 Secondary school 3-5 years (moving
more towards 5)
 Education is free at all levels except
graduate studies
Government
 Federal Republic
 Argentine Constitution of 1853 mandates
separation of powers
 Legislature consists of Senate and
Chamber of Deputies
 Supreme Court has 9 members
appointed by president and Senate
History
 Corn-based Civilizations Developed in 1 AD
 Europeans arrived in 1502
 Spain established the colony of Buenos Aires in
1580
 British launched 2 invasions but failed
 Revolution began after Napoleon defeated King
Ferdinand VII
 Helped Chile and Peru to become free nations
History
 Enjoyed increasing prosperity through
early 1930’s
 Government went from conservative to
Radical back to Conservative
 Several Internal conflicts
 Economic situation began to deteriorate
 Government became protectionists
Current Situation
Jordan Pearce
Economy of Argentina
 Benefits from natural
resources, a highly literate
population, an exportoriented agricultural sector,
and a diversified industrial
base.
 Economic performance
historically uneven.
 Upper-middle income
country.
 Most economically
developed country in South
America (measured in GDP
per capita and HDI)
The Economic Crisis
 In January 2002, the plan
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that pegged the peso to
the dollar was
abandoned.
Peso depreciated 75%.
Poverty rate grew from
35.9% in May 2001 to
57.5% in October 2002.
In 2005, the poverty rate
returned to 33.8%.
Unemployment also rose,
but is now back to
normal.
The role of the IMF
 In 2004, President Kirchner
asked for a “structural
redesign of the International
Monetary Fund”
 President Kirchner was
warned that Argentina must
come to a debt-restructuring
agreement, increase its
primary budget surplus to
pay more debt, and impose
“structural reforms” to regain
the trust of the world
financial community
Statistics
 GDP ranking: 23rd (2005)
 Inflation: 10% (2006)
 Unemployment: 10% (Feb.
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2006)
Public debt: $124 billion
Population: 39,921,833
(June 2006).
Ranked 3rd in South America
in total population and 32nd
in the World.
Population growth rate:
0.96%
Only country with a net
positive migration rate. (0.4
migrants/1,000 population)
President Néstor Kirchner
 Heavy taxes on exports.
 Aggressively expansive
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monetary policy.
The Central Bank has
injected large amounts of
money into the economy
and bought dollars from the
free currency market in
order to accumulate
reserves.
Fiscal policy is also
expansive.
Inflation has again become
a concern.
Price-freeze agreements.
Economic expansion

A high rated dollar in
comparison to the local
currency allowed Argentina to
produce goods with competitive
prices and some industries have
begun to flourish once again.
 According to the Heritage
Foundation, the state’s role in
the economy has expanded
since the Kirchner
administration primarily through
price fixing, a state-owned
airline, and a state-owned
energy company.
 3.3 economic freedom ranking
on a scale from 1 to 5. Ranked
109 out of 157 rankings.
International Aspects
Bradley Harris
International Aspects
 How it all began…
 Argentina set the peso equal to the dollar in 1991
 Capital expenditures increased as a result of the lower
exchange rate
International Aspects
 Trade Deficit and Surplus
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Prior to the collapse of the economy
1998 Trade Deficit of 5000 million
1999 Trade Deficit of 2200 million
2000 Trade Surplus which resulted as a result of
decreased demand for imports in other countries as
a result of a recession
International Aspects
 Trade Deficit and Surplus
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After collapse of the economy in 2001
Large decrease in imports
Completely flipping their economy from a trade
deficit to a trade surplus.
Finally, in 2003, imports began to recover
International Aspects
International Aspects
 Exchange rate balanced to 3 pesos/dollar

Exports began to grow as their exports became
cheaper for other countries.
International Aspects
 Argentina as a member of Mercosur
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Mercosur formed January 1st, 1995 as a customs
union of Argentina, Brazil, Paraguay, Uruguay
Chile and Bolivia joined as associate members
Primary focus of Mercosur is trade between the
countries.
International Aspects
 Trade/Exports
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Soybean products: 22.2%
Cereals: 8.5%
Petroleum: 20%
Bovine Products (beef, leather, milk): 7%
Siderurgical: 3.4%
Industrial Manufacturers: 11%
Other: 27.9%
International Aspects
 Investments
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Prior to collapse
 United States, Canada, Europe, Chile, Brazil main
investors
• United States approached 16 billion by the end of
1999
International Aspects
 Investments

After Collapse
 2004, China announed 20 billion investment in
Argentina
 2005, Argentina attracted only 2.4 billion in
foreign investment
Special Problems
Branden Espinoza
Problem 1: Economics or
Politics
 Public Debt is 30% of
GDP
 “In particular, the federal
government and the
states have to find a way
to adjust their spending to
available tax revenues, or
do a better job in
generating revenues
while at the same time
not hurting incentives to
economic activity.”
-Carol Graham VP of Governance
Studies at the Brookings Institution’s
Center on Social and Economic Dynamics
.
Problem 2: Capital Asset
Investment
 Investment necessary for future growth.
 Investment in equipment, machinery
increased 45 percent in 2004.
 First quarter 2005, the import of capital
assets has grown over 100 percent.
Problem 3: Stem Inflation
 Trade Surplus caused influx of moneys.
 GDP has increased dramatically.
 Employment has increased.
 Foreign investment has increased.
 Option 1: Central Bank can buy Dollars.
 Option 2: Offset Surplus with Imports.
The Future
Brad Lauritzen
The Future of Argentina
How do you measure economic
freedom?
 Trade policy
 Fiscal burden of
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government,
Government intervention
in the economy,
Monetary policy,
Capital flows and foreign
investment,
Banking and finance,
Wages and prices,
Property rights,
Regulation,
Informal market activity.
Economic Freedom
“Is debt destiny for Argentina?”
The score shows hope of increasing, but will Argentina
ever be able to obtain economic freedom?
Imports, Exports and Inflation
 The amount of imports vs. the amount of exports is detrimental
to the economy.
 Argentina needs to focus on increasing the amount of imports.
 If this is not done, complete inflation is their destiny
 They will continue on the path of being economically UNFREE.
Where are they heading?
9.2%
9.2%
60%
9.1%
50%
9.1%
9.0%
40%
9.0%
30%
8.9%
8.9%
20%
8.8%
10%
8.8%
2003
2004
2005
Economy Growth
Percentage
2006
0%
2003
2004
2005
Poverty
Percentage
2006
Future Economic Growth
 China will be investing
over $20 billion in oil over
the next 20 years.
 Argentina is getting more
involved in the production
of ethanol, due to
increases in oil prices.
 Bill Gates and Google
owners are investing in
Argentina’s emerging
ethanol sector.