Argentina - International trade

Growth in foreign trade, especially trade with MERCOSUR partners, has been one of the main factors driving the Argentine economy. In 1990, 11 percent of the nation's GDP was tied to foreign trade; by 1999 that figure had grown to 17 percent. Exports account for 7 percent of GDP. Lower tariffs and improvements in domestic industries have helped decrease the nation's trade deficit, which fell from US$5 billion in 1998 to US$2.2 billion in 1999. In 1999 exports declined by 12 percent, while imports fell by 19 percent. Argentina has a large trade deficit with the United States. In 1999 it amounted to US$2.4 billion.

In 1999 Argentina's main export partners were Brazil with 24 percent of exports, the EU with 21 percent, and the United States with 11 percent. Its main import partners were the EU with 28 percent of imports, the United States with 22 percent, and Brazil with 21 percent. Increases in exports of beef and oil have helped drive exports. Following a brief period when beef exports were banned by several countries because of the potential for hoof-and-mouth disease, exports of beef and beef products have met or exceeded export quotas.

MERCOSUR serves as the main outlet for Argentine exports. In addition to Argentina, Brazil, Paraguay, and Uruguay, the trade organization now includes Chile and Bolivia as associate members. Brazil is the dominant economic force in MERCOSUR and accounts for 70 percent of the organization's GDP, while Argentina accounts for 27 percent. Intra-MERCOSUR trade rose from US$4 billion in 1991 to US$23 billion in 1998. Much of the increase

Trade (expressed in billions of US$): Argentina
Exports Imports
1975 2.961 3.947
1980 8.021 10.541
1985 8.396 3.814
1990 12.353 4.076
1995 20.967 20.122
1998 25.227 31.402
SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.

in trade has been the result of decreases in tariffs. Almost 90 percent of intra-MERCOSUR trade is now duty -free, but there are still substantial tariffs on goods imported from outside MERCOSUR. Approximately 85 percent of imported goods are subject to tariffs.

Argentina has initiated negotiations to enter into trade agreements with the EU, Mexico, and the Andean Pact (an economic organization of South American nations which includes Bolivia, Colombia, Ecuador, Peru, and Venezuela). It has also been supportive of the effort to develop a Free Trade Area of the Americas (FTAA) which would bring all of the nations of the Western Hemisphere together in a free trade organization. In 1994 the United States and Argentina signed a bilateral investment agreement which allows U.S. companies to invest in most sectors of the Argentine economy on the same basis as domestic companies. Argentina has trade treaties with 56 other nations.

Since Argentina fixed its currency to the U.S. dollar, it has become much more attractive for foreign investment. Spain is the largest investor in Argentina. The United States is the number two investor, and by 1999 direct U.S. investment was US$16 billion. U.S. investments are concentrated in manufacturing (at US$3.65 billion), finance, banking, and real estate (at US$3.8 billion) and petroleum (at US$1.565 billion).

Another broad effort to attract international trade has been the establishment of free trade zones . There are 3 large zones and a number of minor areas. The largest of these is the La Plata Free Trade Zone, which was established in 1997. The zone is close to Buenos Aires and has 500 meters of dock, 400,000 square meters of warehouse space, and 5,000 square meters of office space. La Plata has 1,942 different commercial users. The largest companies in the zone include Sharp, Pioneer, Daewoo, Ford, General Motors, Nike, Nissan, Mazda, and Zenith.

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