Argentina - Future trends

Argentina has undergone a dramatic economic transformation since the early 1980s. Throughout most of the second half of the 1900s, Argentina suffered from high inflation and economic instability. Although the population was generally well paid and GDP per capita was among the highest in Latin America, inflation eroded the value of employees' wages. Corruption and inefficiency also plagued Argentine companies. Inflation reached a crisis level in the 1980s, and forced the nation to acquire a large foreign debt in order to maintain living standards. When Argentina fixed its currency to the U.S. dollar, it began a period of economic recovery, which continues. Government efforts to reduce expenditures and privatize many state-owned businesses also helped spur economic growth. The nation's economy is now well-placed to compete with other countries and to expand Argentina's share of international trade.

While the most significant economic reforms have already been implemented, there remains the need for a number of other structural readjustments. In overall terms, Argentine workers are not as productive as their counterparts in countries such as Brazil or Chile. The nation's workers are high-paid, however, and this means that labor costs in Argentina are high when compared to other nations in MERCOSUR. In addition, a number of state-owned companies, including the country's largest bank, still need to be privatized. Long-term economic growth is also dependent on the elimination of the government's annual deficit and reductions in the national debt .

Membership in MERCOSUR and other economic organizations will continue to expand Argentine foreign trade. International support and aid for Argentina, including loans from the World Bank and the International Monetary Fund, have alleviated some of the pressure of the large national debt, but further assistance is necessary to ensure continued economic growth. The reform and partial privatization of the nation's pension system has increased the capital available to companies to invest in new equipment and new products. In addition, the establishment of free trade zones has lured a significant amount of foreign investment and a number of foreign companies to Argentina. These factors should allow the nation to continue its economic recovery in the wake of the recession of the late 1990s.