Argentina Economy

Economy

Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Over the past decade, however, the country has suffered problems of inflation, external debt, capital flight, and budget deficits. Growth in 2000 was a negative 0.8%, as both domestic and foreign investors remained skeptical of the government's ability to pay debts and maintain the peso's fixed exchange rate with the US dollar. The economic situation worsened in 2001 with the widening of spreads on Argentine bonds, massive withdrawals from the banks, and a further decline in consumer and investor confidence. Government efforts to achieve a "zero deficit," to stabilize the banking system, and to restore economic growth proved inadequate in the face of the mounting economic problems. The peso's peg to the dollar was abandoned in January 2002, and the peso was floated in February; the exchange rate plunged and real GDP fell by 10.9% in 2002, but by mid-year the economy had stabilized, albeit at a lower level. GDP expanded by more than 8% in 2003 and again in 2004, with unemployment falling and inflation remaining in single digits.