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Argentina Economy Presentation
Transcript of Argentina Economy Presentation
Welcome to Argentina!
A Video Analysis of the Argentine Economy
By: Alyna Merali, Matt Stockamp, Jack Bayless, and Valmik Desai
Destruction by Inflation
How Has this Inflation Hurt the Economy?
A brief history of inflation in the Argentine economy
Implications of pegging the peso to the US dollar
Current exchange rate policies
Inflation amidst Argentina's protectionist policies has led to capital flight as profits are extremely difficult to create and hold
All in all, the consumer gets hurt!
1909: Per Capita income was almost five times greater than Brazil
1914: GDP had grown at an annual rate 0f 6%
Income per head was 92% of the average of the 16 richest economies in the world
Rich in commodities but not in industrial sector
Lack of Human Capital
More than 75% were illiterate
Lack of Capital
Consumed technology but did not invest in innovation within the country
Predisposing Factors that led to Economic Decline
Juan Domingo Peron
Argentina = Autarky
Protectionism for infant industries
Decline in trade as % of GDP
Raised import tariffs from 16.7% to 28.7% in 3 years
Inadequate representation of the working class
Property rights were insecure
Population of 41 million
$18,112 per capita
$743.1 billion GDP.
One year growth 1.9%
5 year compounded annually growth 5.4%
The Shrinking Peso
Source: Wharton: University of Pennsylvania
Coups and the Economy
Wall Street Journal Article: "Mi Amor, I Shrunk the Peso"
Peronist era after depression in the 1930s
Characterized by state-led industrialization and protectionism
1955 overthrow of Peron, followed by weak civilian governments, illegitimate military regimes, and economic recession
1976 overthrow: turn to neoliberal globalizationn
1983 elections: leader with Peronist views
Foreign Exchange reserves dropped $1.25 billion
Current Reserves: $28.3 Billion
January 2011: $52.6 billion
Poor Economic Policies
Crisis of 2001
Our Outlook: Cautiously Optimistic
Raise the full-year forecast from 3.2% to 4.3%.
Moderate growth is expected in the short term
Government intervention keeps the peso on a managed devaluation trend
Public-sector deficits will persist .
Analysis from Global Insight's Country Intelligence Report
Argentina recession in 1998
GDP = 298.9
Global recession by 2001
ARG GDP = 266.7
Foreign investors were withdrawing about $1 billion per day by December 2001
People tried to withdraw money from banks, state had frozen all accounts
Protests led by working class, unemployed
Effects of 2001 Crisis
Over half the population (about 18 million) fell below the poverty line
Barter economy and "asemblas"
Auto and textile industries collapsed
Political factions struggling
IMF accused of having no idea what to do with Argentina
December 17, 2001, social explosion
What needs to happen:
GDP must rise
Consumers need to continue spending
Government needs to reduce spending increases to allow for repayment of debt
Economic Policy Reform is necessary to ensure full recovery