Argentina

Executive summary
Historical data of the countrys:
Argentinas economy benefits from the rich natural resources in their land, as well
as the highly literate population, their focus in export-oriented agricultural sector
and the rich and diversified industries. Argentina was one considered to be one of
the worlds wealthiest countries 100 years ago; Argentina has struggled in the past
with the economic problems such as inflation, capital flight, external debt, and
budget deficits. (country watch) The economic started to worsen in 2001 when
there were massive withdrawals from the banks, the widening of spreads on
Argentine bonds, and the decline of confidence of consumers and investors.
Inflation increased through the years and many political figures including President
Kirchner opted to retrain prices on business and export taxes after understanding
the inflation data. There has been many attempts and effort from the Argentinian
government to decrease their deficit and stabilize the banking system. After the
worldwide recession in 2009 the government got control of the internal economy
and starting building up to reduce inflation through political, fiscal and monetary
policies. The gross domestic product (GDP) of Argentina in 2011 was worth 445.99
billion US dollars. The GDP value of Argentina represents a 0.72% of the world
economy. The GPD is divided in three main sectors; agriculture represents 10.7%,
industry 31.1%, and services 58.2%. (CIA)

The medium-term growth outlook remains weak, with the high rates of GDP growth that Argentina has recorded in
the past two years on the back of expansionary macroeconomic policies expected to give way to an annual average
growth rate of just 3.4% in 2012-16, as economic distortions deter investment .The short-term growth outlook is
even worse, reflecting the impact of increasingly heterodox and interventionist economic policies, including

nationalization and foreign exchange controls, on consumer and business sentiment. Most available indicators (for
construction, industrial production, and consumer and business confidence) suggest that the economy contracted in
the second quarter of2012 on a sequential basis, as continued tightening of controls and persistent speculation over
peso devaluation
produced confidence shocks. Our previous expectation, moreover, of a fairly strong pick-up in growth in the second
half of 2012 now appears optimistic, as although the outlook for Brazil (a key trade partner) should improve on the
back of sustained stimulus measures there, domestic investment seems likely to remain subdued by uncertainty over
prices; utility tariffs; import, foreign exchange and capital controls; and the legal and regulatory environment
(for thefull year, we now expect a contraction in fixed investment of 5.7%).(Country Report, Argentina)

Historically, from 1993 until 2012, Argentina GDP Growth Rate

averaged 0.93 Percent reaching an all time high of 3.70
Percent in March of 2003 and a record low of -5.70 Percent in
December of 2001. Argentina is the third largest national
economy in Latin America. Argentina has abundant natural
resources, a well-educated population, an export-oriented
agricultural sector and a relatively diversified industrial base.
Domestic instability and global trends, however, contributed to
Argentina's decline from its noteworthy position as the world's
10th wealthiest nation per capita in 1913 to the world's 47th
wealthiest in 2008. (indicators, Argentina)
At the same time, private consumption growth is likely to be hit by falling real wage growth (although it will remain
positive), cuts in subsidies, and higher interest rates. Although remaining subsidies and transfers will provide
something of a floor, we nonetheless expect private consumption growth to slow sharply this year, to 4.8% (from
10.7% last year). As a result, we have revised down our 2012 growth forecast substantially, from 3.4% to 2.1%. We
have doubts that even this figure will be a full reflection of the extent of the downturn this year: the official national
accounts data are increasingly thought to overstate the level of activity, increasing our concerns about the accuracy
of the official data on which our forecasts are based. On balance, we believe real growth rates will be substantially
lower than the official data suggest. In the first quarter of 2012, for example, the official GDP growth figure of 0.9%
quarter on quarter was above both the monthly economic activity index (0.2%) and private estimates (which
suggested either flat growth or a modest contraction).
On the supply side, agriculture and manufacturing will continue to be key contributors to growth. The incentives
from still-high international prices should help to offset the unfavorable domestic environment for investment in
agriculture, and we expect continued solid growth in the medium term, after a drought-affected 2012. However,
given the persistent risk of intervention, agricultural production will remain below Argentina's vast potential. After a
weak 2012, there should be some pick-up in manufacturing in the medium term, reflecting still-solid longer-term
growth prospects in key export markets such as Brazil. However, manufacturing is highly sensitive to trends in the
real exchange rate, and with substantial real peso appreciation expected to continue, manufacturing output growth
will be much weaker in the forecast period than in the past five years.
Given an uncertain policy environment, high inflation and a weak external sector, depreciation pressure will persist,
and the black-market premium will remain high. After the nationalization of YPF and amid ever-tighter foreign
exchange controls, the black-market rate fell to Ps6:US$1 in June, a premium of nearly 30%. With the authorities
intervening to prevent substantial peso adjustment, we continue to forecast a nominal depreciation of the peso
against the US dollar in 2012 of around 10%. However, in a high-inflation environment, real peso appreciation will
continue, heightening the risk of a sudden, sharp adjustment at some point in the forecast period.

The government will remain reluctant to take the difficult steps needed to tackle the inflation problem. Even
according to official data, consumer price inflation remains among the highest in emerging markets, at 9.9%
in May. However, with the government mostly relying on ad hoc agreements at the firm level to try to control
prices, fiscal policy remaining expansionary, nominal peso depreciation set to accelerate, and newly imposed
import controls hindering access to cheap consumer goods, inflationary pressures will remain high.
Meanwhile, the difficulty of gauging the real rate of inflation is likely to remain a major source of concern

Historically, from 1944 until 2012,

Argentina Inflation Rate averaged 208.51 Percent reaching an
all time high of 20262.80 Percent in March of 1990 and a
record low of -7 Percent in February of 1954. In Argentina, the
inflation rate measures a broad rise or fall in prices that
consumers pay for a standard basket of goods.(Indicators,
Argentina)
among investors.(Country Report, Argentina)

Analysis of the countrys

(1) institutions
Argentina government
(2) key political figures
(3) the stability of the government and prospects of the government and
oppositions

(4) risks posed by external relations,

The potential for diplomatic and trade disputes will remain high in the forecast period. The government has
repeatedly shown itself willing to provoke disputes with key trade and investment partners in pursuit of its own
policy goals, and we do not expect this to change. Most recently, relations with Spain and the EU have been badly
damaged by the nationalization of YPF (until then majority owned by Spains Repsol). Spain is
now likely to block any Argentinian efforts to agree a debt workout with Paris Club creditors, which would
have opened the door to increased investment by allowing for credit insurance, loan guarantees, and financing from
export credit agencies in the 19 Paris Club creditor countries. This follows closely on the heels of comprehensive
import controls imposed earlier this year, which have damaged Argentina's relations with its partners
in the Mercado Comn del Sur (Mercosur) and prompted 14 members of the World Trade Organization
(WTO), including the US and EU, to make an official complaint against Argentina. There are, moreover, continuing
tensions with multilaterals and with the US government over Argentina's lack of compliance with the World Bank's
International Centre for the Settlement of Investment Disputes (ICSID) and with the IMF's articles of agreement,
which prompted the US to suspend duty-free tariff access for a number of Argentinian exports this year. Under these
circumstances, Argentina will, at best, remain marginalized within the G20, and the possibility that the country will
be forced to leave the grouping at some point cannot be discounted.

(5) economic strategy, and (main trade/trading partners)

Argentinas political form of state is a federal republic. The executive branch is
headed by the president which is the commander in chief of the armed forces and
elected for a four year term.

An assessment of the countrys business environment

relative to the practical issues of labor, labor relations, corruption, infrastructure,
ethnic conflict and cross-border warfare.

Analyze current developments and link to economic consequences

Historical Analysis of Foreign Currency Exchange Rates
This section contains an analysis of the history of the exchange rates of the
currencies for the past 24 months (first/end of month only). Students will present a
summary chart of the history as an appendix. Additionally students will write an
analysis/explanation of significant currency fluctuations/ trends during the last 24month period. Analysis must be support with economic, political or other data