Argentina - International University of Japan · Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK ISSN 0269-4468. September

COUNTRY PROFILE

ArgentinaOur quarterly Country Report on Argentina analyses currenttrends. This annual Country Profile provides backgroundpolitical and economic information.

1996-97The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

ISSN 0269-4468

September 30, 1996 Contents

2 Basic data

3 Political background3 Historical background7 Constitution and institutions8 Political forces

10 International relations and defence

12 The economy12 Economic structure13 Economic policy16 Economic performance18 Regional trends

19 Resources19 Population20 Education22 Health24 Natural resources and the environment

25 Economic infrastructure25 Transport and communications28 Energy provision31 Financial services34 Other services

34 Production34 Manufacturing41 Mining and semi-processing42 Agriculture, forestry and fishing 44 Construction

45 The external sector45 Merchandise trade47 Invisibles and the current account48 Capital flows and foreign debt50 Foreign reserves and the exchange rate

52 Appendices52 Sources of information54 Reference tables

1

EIU Country Profile 1996-97 © The Economist Intelligence Unit Limited 1996

Argentina

Basic data

Land area 2,737,000 sq km

Population 32.61 million (1991 census)

Main towns Population in ’000, 1991

Buenos Aires, federal capital 2,961(Greater Buenos Aires area) 10,911Córdoba 1,179Rosario 1,078Mendoza 122(Greater Mendoza area) 721La Plata 543Mar del Plata 534Tucumán 473Santa Fe 442Salta 374

Climate Varies from subtropical in the north to subarctic in the south

Weather in Buenos Aires(altitude 27 metres)

Hottest month, January, 17-29°C (average daily minimum and maximum);coldest month, June, 5-14°C; driest month, July, 56 mm average rainfall;wettest month, March, 109 mm average rainfall

Language Spanish

Measures Metric system. Among other measures in use are: fanega=3.77 bushels quintal=100 kg

Currency The peso has been fixed at the rate Ps1:$1 since April 1991

Time 3 hours behind GMT

Public holidays January 1; Good Friday; May 1 and 25; June 10 and 20; July 9 (Independence Day); August 17; October 12; December 8 and 25

2 Argentina: Basic data


Political background

Historical background

A poor Spanish colony— Argentina was one of the poorest and most sparsely populated Spanish coloniesin America. Having neither gold nor silver, nor a climate suitable for raisingtropical crops, the role of the Argentinian economy was to provide inputs to thePotosí silver mines in Upper Peru (now Bolivia). For most of the 18th centurythe port of Buenos Aires also engaged heavily in smuggling. In 1777 the Spanishcrown created the Río de la Plata viceroyalty to stop the westward expansion ofthe Portuguese rather than to establish a new economic centre.

Independence from Spain in 1816 was followed by decades of instability andcivil strife. The conflict between federalists and unitarians (who favoured cen-tralised government) dominated politics until the 1850s. The 1853 constitution,based on the US model, created modern Argentina. But there were ten moreyears of civil war before the rich province of Buenos Aires (which controlled theport) joined the union.

—became one of therichest countries in the

world

In the late 19th century innovations in transport and the conservation of foodsmade possible the exploitation of the fertile pampas, turning the country intoa supplier of grains and meat to Europe (particularly the UK). Liberal-mindedgovernments encouraged foreign investment and immigration. By the turn ofthe century Argentina was the tenth largest trading country in the world andthe sixth in terms of income per head. Almost 40% of its 6 million inhabitantswere foreigners. UK investments were larger in Argentina than in Australia,Canada or the USA.

Throughout this time of growth the economy and society diversified. Followinga period of conservative rule, the establishment of secret and mandatory votingin 1912 paved the way for the victory of the Unión Cívica Radical (UCR) in the1916 elections. The UCR, founded in 1890 to advance the interests of the rapidlygrowing middle classes, did not change the economic profile of the country insubstance; foreign trade remained the engine of growth and the UK the closestpartner.

The Great Depression The rapid economic growth and political pluralism was brought to an end bythe Great Depression of the 1930s. Falling agricultural prices and exportvolumes depressed the Argentinian economy. In 1930 the alleged ineffective-ness of the Radical government was the excuse for the first of what would turnout to be a long list of military interventions. By means of fraudulent electoralpractices, Conservatives returned to office in 1932 and stayed in power formore than a decade. Conservative governments attempted to overcome theeconomic crisis by means of a combination of preferential arrangements withthe UK, foreign exchange controls and protection of domestic markets.

The emergence ofPeronism

The Second World War reawakened demand for Argentinian exports. At thesame time, the influence in the army of a group of nationalist officers, amongthem Colonel Juan Domingo Perón, began to grow. In 1943 another military

Argentina: Historical background 3


coup brought to power a government which was sympathetic to the Axispowers, but maintained neutrality until the end of the war. Having been theminister for labour in the military government, Juan Perón won the 1946presidential elections as a Labour Party candidate. The constitution wasreformed in 1949 to allow his re-election as president for an additional six-yearterm in 1952. During his years in office Colonel Perón nationalised mostforeign-owned public services, such as the railways, and presided over a periodof active government involvement in the economy. He had the support of thetrade unions, which he had strengthened when he was minister for labour inthe mid-1940s, and the business sectors which produced for the domesticmarket, as well as part of the army.

Military intervention inthe 1950s and 1960s

Colonel Perón remained in power until 1955, when he was ousted by a newmilitary coup. The next three decades saw recurrent military intervention. (Thearmed forces displaced elected governments in 1962, 1966 and 1976.) In the1950s and 1960s Mr Perón was barred from taking part in elections, whichweakened the legitimacy of civilian governments. Amid such political instabil-ity, the economy proved unable to recover its pre-1929 dynamism. Yet withhindsight the 1960s appear a period of strong, relatively smooth growth, led byindustry.

Eva Perón and the finalmilitary government

In 1973 Colonel Perón was finally allowed to stand for election, winning thepresidency for the third time. But by now he was old and in poor health. Hedied less than a year after taking office, and was succeeded by his wife, MaríaEstela Martínez de Perón.

The new Peronist government retained populist economic policies and devel-oped an industrial base behind high import tariffs. Yet Mrs Perón’s adminis-tration was quickly discredited, not least because of rising inflation as unionbosses pressed successfully for higher wages. Violent confrontation betweenguerrillas, right-wing paramilitary groups tolerated by the government, andthe military made matters worse. In 1976 the armed forces took power againto implement a programme of economic liberalisation and a ruthless anti-terrorist policy. In this “dirty war” the death toll was estimated at more than7,000 desaparecidos (disappeared people), who had been abducted and killed,their bodies buried in secret graves or disposed of at sea.

By the late 1970s the economy was showing acute signs of strain. A financialcrisis started to emerge in March 1980 and several local banks went bankrupt.There was a series of large devaluations and inflation accelerated rapidly. Thesize of the foreign debt became a matter of growing concern.

The return to democracy On April 2, 1982, the armed forces invaded the Falkland Islands (Islas Malvinas),which had been occupied by the British since the 1830s, in an attempt torecapture public support. General Leopoldo Galtieri, the leader of the junta, andthe Argentinian military command assumed that the British would not go towar to defend the islands. The assumption was wrong and defeat rapidlyfollowed. The regime became isolated, both domestically and internationally.General Reynaldo Bignone took over from General Galtieri and the military

4 Argentina: Historical background


called general elections for October 1983. Unexpectedly, the winner was theUnión Cívica Radical (UCR) candidate, Raúl Alfonsín.

Mr Alfonsín’s administration was successful in consolidating political demo-cracy, and facing up to the human rights abuses committed under the militaryregime. Mr Alfonsín had to deal with military uprisings led by junior officers,known as carapintadas, dissatisfied with the army’s treatment in the investi-gations. He also succeeded in bringing into public debate previously intractableissues such as trade liberalisation, market deregulation and privatisation. But hiseconomic policies proved ineffectual. The Plan Austral to stabilise the economy,launched in mid-1985 with the support of the IMF, was initially successful andinflation was contained. But fiscal equilibrium was never achieved. The govern-ment failed to enforce the strong measures necessary to bring about a change inthe country’s macroeconomic environment and economic structure. By 1987,when Argentina reached an understanding with its creditor banks on a debt-restructuring plan, inflation was rising again. In the September 1987 parlia-mentary elections, Mr Alfonsín’s Radicals were badly beaten by a rejuvenatedPartido Justicialista (PJ, Peronist Party). The economy went from bad to worse,and in April 1988 interest payments to creditor banks were suspended. InFebruary of the following year capital flight forced the Banco Central de laRepública Argentina (the Central Bank) to devalue and Argentina sank intohyperinflation.

Mr Menem launchesstructural reform—

For the May 1989 presidential elections the leader of the PJ, Carlos Menem,campaigned on the promise of higher wages and a “productive revolution”,whereby closed factories would be reopened. This traditional Peronist platform,together with his ability to communicate and widespread dissatisfaction withthe previous government’s record, led to a sweeping victory. Mr Alfonsínhanded over power five months early, in July 1989, as hyperinflation ravagedthe economy. But in a dramatic U-turn Mr Menem did not implement thepolicies promised in the campaign, opting instead for austerity and a majorstructural reform programme involving privatisation, trade liberalisation andmarket deregulation. This constituted a dismantling of many of the legacies ofPeronism.

The first 18 months in office were not easy, with a second burst of hyper-inflation in 1990 and a series of corruption scandals. But the governmentstuck to its economic reform programme, partly enforced by special decrees.Mr Menem divided the labour movement and forged an alliance with businessand the traditionally anti-Peronist establishment. The Convertibility Planlaunched in April 1991 brought inflation under control and initiated anunprecedented period of price stability and economic growth. Aided by afavourable external financial environment, the 1991-94 economic expansionturned into the main political asset of the government. Mr Menem was ableto push successfully for a constitutional reform to allow him to stand forre-election. A constitutional assembly was convened in May 1994 and a newconstitution was adopted three months later.

—and is re-elected for asecond term

The initial fears that Mr Menem’s re-election hopes would be blighted bythe fall-out from the Mexican foreign exchange crisis were calmed by the

Argentina: Historical background 5


electorate’s fear of a return to a chaotic past, the government’s resolve to stickto the Convertibility Plan and the external support package which it was ableto put together. As a result, on May 14, 1995, in the third consecutive electionsince democracy was restored in 1983, Mr Menem was re-elected in the firstround with 49.9% of the vote. His sweeping electoral victory also provided himwith a majority in both houses of Congress. He won in all districts (except thecapital city) and was supported by a larger proportion of voters than in 1989.The 1995 elections also signalled the demise of the UCR, whose candidateobtained a meagre 17% of the vote, far behind the 30% of the centre-leftcoalition, the Frente del País Solidario (Frepaso).

Despite Mr Menem’s strong mandate in the national ballots his government’ssecond term has been plagued by problems. Public support for the governmentfell and conflicts within the cabinet mounted as the economy entered into aprotracted recession. Official candidates lost in several local elections afterMay 1995, including the first-ever ballots to elect a mayor for the federal dis-trict. The government’s internal clashes also brought to an end Mr Menem’s“marriage of convenience” with the architect of the Convertibility Plan,Domingo Cavallo.

Mr Menem has also been facing intense manoeuvring within the Peronistparty for the presidential succession in 1999. The powerful governor of theprovince of Buenos Aires, Eduardo Duhalde, who is the front-runner, is worriedabout the damage which the lacklustre economic performance could do to hiselectoral prospects. Fearful of becoming a lame duck with three years in officestill ahead, Mr Menem is fostering alternative candidates to play off againstMr Duhalde.

Important recent events

January 1991: Domingo Cavallo is named economy minister. Mr Cavallo, a former

foreign affairs minister, launches the Convertibility Plan in April and becomes the most

important member of the cabinet.

November 1993: Mr Menem and Mr Alfonsín announce an agreement to reform the

1853-60 constitution (the so-called Pacto de Olivos).

July 1994: A new constitution is adopted, enabling Mr Menem to run for re-election

in 1995.

May 1995: Mr Menem is re-elected for a second term with the support of 50% of the

vote. He also obtains majority in both houses of Congress. His second term is inaugu-

rated in July 1995.

July 1996: Mr Menem fires the economy minister. Mr Cavallo is succeeded by Roque

Fernández, an orthodox economist who, as president of the Banco Central de la

República Argentina (the Central Bank), helped to steer Argentina through the

“Tequila crisis” the financial crisis induced by the devaluation of the Mexican peso.

Mr Rodríguez is unlikely to wield as much power as his predecessor.

6 Argentina: Historical background


Constitution and institutions

A strong presidentialtradition

Argentina is a federal republic with a strong presidential tradition. The presidentappoints an eight-member cabinet, a secretary-general of the presidency and acabinet chief. On the basis of the 1994 constitutional reform the governmentannounced in 1996 the upgrading of four secretaries to ministerial level (culture;social development; sports and tourism; and natural resources and the environ-ment). The cabinet chief, a post created with the intention of moderating pres-idential power, is in charge of the general administration of the country and canbe removed by a majority vote of both houses of Congress. The new constitutionalso established a four-year presidential term with a single re-election; two-round direct elections for president (no second round is needed if the winnerreceives more than 45% of the vote, or at least 40% with a 10-percentage-pointlead over the second-placed candidate); and prohibited presidential emergencydecrees on tax, criminal law or electoral issues. In 1996 the federal district wasmade autonomous and its mayor directly electable by the city’s residents.

Traditionally, the Ministry of the Economy has wielded vast powers within thecabinet. This is unlikely to change with the post of cabinet chief, but much willdepend on personalities. In order to moderate the ministry’s influence somefavour splitting it into two but this is still undecided. To what extent the postof cabinet chief will change the balance of power between the executive andCongress also remains to be seen.

The head of the National Audit Bureau is designated by the opposition andreports to Congress.

Congress Congress is bicameral, with a 257-member Chamber of Deputies and a72-member Senate. Deputies are directly elected for four-year periods and halfof them stand for re-election every two years. Senators, who represent the23 provincial states and the autonomous federal district, are elected for six-yearterms.

In the lower house the Peronists have a majority. They hold 132 seats while theUCR holds 68, Frepaso 26 and other minority groups (mainly provincial parties)31. In the Senate, the Peronists hold 38 seats, the Radicals 21 and other minorityparties 13. The current Congress is the first since democracy was restored inwhich one party holds a majority in both houses. But congressional supportfor the government is not guaranteed. The Menem administration has haddifficulty in pushing many of its initiatives through Congress and some havebeen rejected.

A weak judiciary After the trial and condemnation of the military juntas, the judiciary’s prestigereached a peak. But in recent years its image has deteriorated. There are long-standing infrastructural and organisational problems but, more importantly,the government has intervened too often in judicial issues. In 1989 Mr Menemraised the number of Supreme Court members to alter the court’s politicalbalance. Congress has appointed judges with dubious experience or compe-tence. Although there is a judicial reform under way (including the use of oralproceedings to speed up trials), progress has been slow.

Argentina: Constitution and institutions 7


The new constitution established the appointment of judges by a council ofjurists and created a judges’ jury which is responsible for removing judges. Sofar the government and Congress have failed to agree on enabling legislationfor these changes, which require a special majority. One source of differencehas been the composition of the council of jurists.

The need for an effective and independent judiciary has been highlighted byseveral highly publicised corruption scandals involving government officialsand foreign and domestic corporations.

Political forces

A two-party politicalsystem

Traditionally, the Argentinian political system has been bipartisan, the twomain political organisations being the Partido Justicialista (PJ, Peronist Party)and the Uníon Cívica Radical (UCR). The stronghold of the Peronists hasbeen the low- and middle- income sectors. Linked to the formerly powerfultrade unions, the Peronists were regarded as unbeatable in free elections. ButMr Menem transformed the PJ into a party of privatisation, trade liberalis-ation and deregulation, the opposite of the policies espoused by Juan Perón.Mr Menem justified this on the grounds that times had changed and that thedoctrine of the party should be updated. But his U-turn, warmly supported bybusiness and financial elites, has not been accepted happily by either the partyor the trade unions.

The protracted recession which followed the Mexican crisis and the competitionfor the Peronist nomination for the 1999 presidential elections are fuelling thisdebate. Some Peronist leaders (including Mr Duhalde), while sharing a con-viction that a return to the past is out of the question, would like to see officialpolicies more in tune with the traditional party stance. They fear that highunemployment and attacks on unions’ privileges may hinder the party’schances in the 1997 mid-term elections and in the presidential contest two yearslater. Peronism seems at a crossroads and the choice of Mr Menem’s successorwill be indicative of its future course.

Election results(% share of total votes)

1987a 1989b 1991a 1993a 1994c 1995b

Partido Justicialista & allies 42.9 46.6 40.4 43.1 38.8 49.9

Unión Cívica Radical & allies 37.3 33.1 29.1 30.2 20.5 17.0

Centrist & provincial parties 13.0 12.0 16.2 18.0 11.7 0.5

Left & centre-left parties 6.9 6.8 10.5 3.1 16.7 30.7

Movimento por la Dignidad y la Independencia (MODIN) 0.0 0.0 3.5 5.7 9.2 1.8

Others 0.0 1.8 0.3 0.0 3.0 0.0

a Congressional elections. b Presidential and congressional elections. c Election of representatives tothe constituent assembly.

Source: Dirección Nacional Electoral.

8 Argentina: Political forces


The UCR is the oldest political party. For most of the post-war period its rolewas that of an opposition party, a tradition unexpectedly broken by the 1983elections. The UCR is a centre party which appeals to middle-class voters. Thetraumatic experience of the last two years of the Alfonsín administration andthe so-called Pacto de Olivos of November 1993, in which Mr Alfonsín agreednot to block Mr Menem’s effort to change the constitution and run for re-election, provoked internal disagreements and division.

The UCR performed poorly in the 1995 elections, but recovered following theelection of a new party leadership in November 1995, winning a comfortablevictory in the elections for mayor of the federal district. The new Radicalleadership has shifted away from the pactista stance supported by Mr Alfonsín,who is held responsible for the UCR’s electoral demise. Victory in the capitalcity, a highly visible district, was the first major breakthrough in four years.

A new development on the political scene has been the emergence of thecentre-left Frente del País Solidario (Frepaso) as a major electoral force. Partly asa result of voters’ dissatisfaction with the UCR, this coalition of disenchanted

Main political figures

Carlos Saúl Menem: The president of Argentina and head ofthe Peronist party. Re-elected for an additional four-yearperiod in 1995. His second term has been marred by theeconomic downturn and high unemployment. Mr Menemmay lose authority to party leaders vying for the 1999 Peronistpresidential nomination.

Eduardo Duhalde: Governor of Buenos Aires province, thelargest electoral district and a Peronist stronghold. He has vastelectoral support in his district and is the likeliest Peronistcandidate for the 1999 elections. Influential with the partystructures, he has strong links with traditional Peronist interestgroups.

Ramón Ortega: A former governor of Tucumán with pres-idential ambitions. Mr Menem has encouraged his candidacyas a counterweight to Mr Duhalde. He may be supported bythe former economy minister, Domingo Cavallo, and the dis-enchanted Peronist, Gustavo Béliz.

Domingo Cavallo: Former economy minister and architectof the Convertibility Plan. Despite a poor public image, he islikely to remain an influential figure and is thought to havepolitical ambitions.

Raúl Alfonsín: Former president and leader of a UCR faction.Although he has lost control of the party apparatus and hisappeal to voters has declined, he remains engaged in politicsand is thought to have political ambitions.

Fernando de la Rúa: Mayor (chief of government) of the cityof Buenos Aires, former senator and longstanding member ofthe UCR. He was opposed to the Pacto de Olivos, the agree-ment in which the UCR supported the constitutional amend-ment allowing Mr Menem to stand for re-election in 1995. Ifhe runs the federal district successfully he may be a candidatefor the 1999 Radical presidential ticket.

Carlos Alvarez: A deputy, he is one of the leaders of thecentre-left coalition, Frepaso. Formerly a Peronist, he is likely toremain one of the most visible opposition leaders.

Graciela Fernández Meijide: Frepaso senator for BuenosAires and president of the federal district’s constituentassembly. She attracted much support in the last two localelections. Active in the human rights movement and with anaura of integrity.

Rodolfo Terragno: A deputy, who was appointed presidentof the party in late 1995, he belongs to a new generation ofleaders hoping to restore the party’s fortunes following theloss of credibility caused by the Pacto de Olivos. Hispresidential ambitions for 1999 may bring him into conflictwith Mr de la Rúa.

Eduardo Bauzá: Former secretary-general of the presidencyand cabinet chief. Poor health led him to leave his cabinet postin early 1996 to join the Senate. He remains an influentialfigure and is active in negotiations “behind the scenes”.

Argentina: Political forces 9


Peronists, Socialists, Christian Democrats and independents attracted thesecond highest number of votes in the 1995 presidential elections. Yet internalstrife followed electoral success: one year later Frepaso failed to win the federaldistrict mayoral elections, a result which would have given it great visibility. Onbalance, Frepaso has still to demonstrate that it is able to act as a coherentpolitical organisation and reach a national audience. An electoral alliancebetween the UCR and Frepaso is a possibility in the 1999 presidential election.

The smaller parties The rest of the political spectrum has traditionally been of little significancenationally. There are powerful provincial parties in certain districts (such asCorrientes, Neuquén, Salta and San Juan), but they lack a national theme.Many of their leaders now support the government.

The political scene may be altered if disenchanted Peronists succeed in organis-ing a new party around figures such as the former interior minister, GustavoBéliz, or the former senator, José Bordón. This nascent force could grow if thePeronist party suffers further defections because of dissatisfaction with thegovernment’s conduct or the way in which the 1999 succession is handled.

International relations and defence

The South Atlantic war:mending the damage done

The Alfonsín and Menem governments had a hard job trying to mend thedamage done to Argentina’s international reputation by the invasion of theFalkland Islands (Islas Malvinas). Although relations with industrial countriesimproved markedly during the Alfonsín government, a number of difficultissues were unresolved. The UCR government was strongly critical of US policiesin Central America and maintained the traditional Argentinian stance of notratifying the Tlatelolco Treaty which bars nuclear weapons from Latin Americaand the Caribbean. Diplomatic relations were not re-established with the UK.

To reinforce his economic reform programme, Mr Menem decided to settle allpolitical disputes with industrial countries, particularly the USA and the UK. Thenew government abandoned the Non-Aligned Movement and moved closer tothe USA. Mr Menem supported UN interventions in Iraq, Bosnia and Haiti, evensending troops to participate in the operations. The government also disman-tled the Cóndor missile programme which had been heavily criticised by the USadministration, and ratified the Tlatelolco document. Mr Menem became one ofthe most vociferous critics of the Cuban president, Fidel Castro. Relations withthe UK were normalised, and the Falklands sovereignty issue set aside. Thegovernment has not renounced Argentinian claims to the islands, but hasrenounced the use of force to retrieve them. Following a policy of “charmdiplomacy”, it has considered giving financial compensation to the islanders tosettle the issue. In 1995, after months of negotiations, the Argentinian and UKgovernments signed an agreement to share the potential economic benefitsfrom oil exploration in a specially designated area in the South Atlantic.

Improving relations withneighbouring countries

One area in which the Alfonsín and Menem administrations have been consis-tent is their approach to neighbouring countries. Relations with Brazil and

10 Argentina: International relations and defence


Chile had traditionally been poor. Brazil was generally regarded as a threat toArgentinian supremacy in the region, while longstanding border disputes withChile frequently inflamed Argentinian nationalism. Mr Alfonsín radicallychanged the approach. In 1985 he and the then Brazilian president, JoséSarney, launched a bilateral economic cooperation programme, to be followedin 1991 by the Tratado de Asunción launching the Mercado Común del Sur(Mercosur), the common market of the south. After a four-year transitionperiod to complete the free-trade area, in January 1995 the member countries,comprising Argentina, Brazil, Paraguay and Uruguay, adopted a common exter-nal tariff. Yet cooperation with Brazil went far beyond economic issues. TheArgentinian and Brazilian governments have developed a foreign policyconsultation mechanism, have agreed on the mutual inspection of nuclearfacilities and have launched a military cooperation programme.

Argentina and Chile almost went to war in 1978 over three islands in the BeagleChannel. In 1984 the UCR government put a solution reached by arbitration(which did not favour Argentinian claims) to a plebiscite. Likewise, Mr Menemclosed all pending territorial disputes with Chile when he signed a Tratado dePaz y Amistad (Treaty of Peace and Friendship). The Laguna del Desierto borderdispute was resolved by arbitration and the two governments reached an agree-ment over the division of the continental glaciers area, subject to legislativeapproval. Under Argentinian leadership, in June 1996 Mercosur and Chilesigned a free-trade agreement which is expected to strengthen interdependencein the region.

Professionalisation of thearmed forces

Improved relations with Brazil and Chile have had a major impact upon the roleof Argentinian armed forces, since two traditional perceived threats to nationalsecurity have disappeared. This added to the military’s identity crisis, originallybrought about by the Falklands fiasco and the “dirty war” revelations. Once oneof the largest and proudest armed forces in Latin America, the Argentinianmilitary lost both influence and prestige in the 1980s. More recently, militaryspending has been trimmed because of fiscal constraints. As the carapintadajunior officers’ uprisings were brought to an end in 1990 and the armed forcespurged of anti-democratic elements, the challenge was to find a new role forthe military. Participation in UN peacekeeping operations was instrumental inreincorporating a heavily criticised and demoralised military into social life. Yetprofessionalisation has advanced slowly, the last step being the substitution ofthe military draft with voluntary service.

The government and Congress are working on new legislation to restructurethe national defence system. The aim is to downsize the military and upgradeits abilities. In the process it may lose some of its traditional privileges, such asspecial social security and retirement regimes. Following scandals provoked byillegal arms sales to Ecuador and Bosnia the privatisation of remaining armsindustries is being expedited.

In mid-1995 the armed forces numbered 67,300, of whom 40,400 were in thearmy, 18,000 in the navy and 8,900 in the air force. Conscription ended inApril 1995, but at mid-year there were still 18,100 conscripts in service.

Argentina: International relations and defence 11


The economy

Economic structure

Main economic indicators, 1995

GDP ($ bn) 281.0

GDP per head ($) 8,148

Consumer price inflation (%; year-end) 1.6

Current-account balance ($ m) –2,399

Exports of goods fob ($ m) 20,963

Imports of goods fob ($ m) 18,728

Foreign trade coefficienta (% of GDP) 8.5

Total gross external debt ($ bn) 89.7

a (Exports + imports of goods and real services)/2.

Source: Ministerio de Economía.

Argentina is well-endowed with natural resources and enjoys comparativeadvantages in energy, agriculture and food processing. Oil and gas extractionhas grown in importance after the sector was privatised and deregulated in1990. Mining output makes a negligible contribution to GDP but its share is setto increase in the remainder of the decade as investment projects mature.Following a period of deindustrialisation in the late 1970s and stagnation inthe 1980s, manufacturing output expanded again in the early 1990s. In 1995the share of manufacturing output in GDP was 25.3%. Argentina’s industrialbase is dominated by large domestic conglomerates and multinationals. In theearly 1990s the latter returned to the country encouraged by economic reform,including privatisation, rapid growth of domestic demand until 1994 andattractive domestic targets for takeover. Foreign investors have been most ac-tive in services and in the food and automobile sectors. Services account for alarge share of GDP, but many of the subsectors suffer from low productivity.

Low savings andinvestment rates

In the last decade investment and savings rates have been low. Savings fellabruptly in the early 1980s after the foreign debt crisis. Investment rates reachedtheir lowest levels in 1990, at 14.2% of GDP, after peaking at over 26% in 1980.Aided by a favourable external environment, investment rates increased in theearly 1990s, to reach 23.4% of GDP in 1994. Argentina’s dependence on foreigncapital inflows was made evident by the Mexican crisis of December 1994,which reduced external savings and cut the investment rate by only 20.6% in1995. The economy is relatively closed, with total foreign trade in goods and realservices contributing only 17% of GDP in 1995.

Economic activity is unevenly distributed. Less than one-fifth of the continentalarea—the federal district and Buenos Aires, Córdoba and Santa Fe provinces—holds 64% of the population and contributes 80% of industrial production and92% of total agricultural output. The north-western and north-eastern provincesare heavily dependent on agriculture and public-sector employment. In thesouth, sparsely populated Patagonia is the source of a large share of Argentina’soil and natural gas production.

12 Argentina: Economic structure


Comparative economic indicators, 1995

Argentina Brazil Mexico Colombia USA

GDP ($ bn) 281 701 244 78.6 7,246

GDP per head ($) 8,253 4,341 2,606 2,121 27,509

Consumer price inflation (average; %) 3.4 66.0 35.0 20.9 2.8

Current-account balance ($ bn) –2,4 –18.0 –0.7 –3.8 –152.9

Merchandise exports fob ($ bn) 20.9 46.5 79.5 10.7 576.8

Merchandise imports fob ($ bn) 18.7 49.7 72.5 12.9 749.8

Total merchandise foreign trade (% of GDP) 14.1 13.7 63.3 30.0 18.3Sources: IMF, International Financial Statistics; EIU.

Economic policy

The lost decade— For most of the 1980s economic policy was geared to cope with the conse-quences of the foreign debt crisis and high inflation. The 1982 foreign debtcrisis was not only a foreign exchange crisis but also a fiscal one. Since themajority of external liabilities were public or were eventually transferred to thepublic sector, the debt crisis had a far-reaching fiscal effect, which was ampli-fied by large devaluations. Domestic financial markets, severely disrupted bythe financial crisis of the early 1980s and by high inflation, were reluctant toaccept public debt except at high and increasing real interest rates. This viciouscircle eventually ended in hyperinflation in 1989-90.

Important recent economic policy events

1991: The Convertibility Law fixes the Ps:$ exchange rate and declares full convert-

ibility of the domestic currency. The monetary base is to be fully backed by inter-

national reserves.

1992: Congress approves a new Central Bank charter establishing the independence

of monetary authorities.

1993: The government agrees a debt-reduction package with commercial banks.

Liabilities with commercial banks are exchanged for collateralised bonds.

1994: The pension system is reformed to allow for the participation of private pension

funds.

1995: The Central Bank charter is reformed to allow more flexibility in managing the

liquidity crisis. Reserve requirements are replaced by liquidity requirements which can

be kept with either the Central Bank or designated foreign financial institutions.

1996: The government launches a “second reform of the state” which aims to reduce

public-sector expenditure and enhance efficiency, but implementation is half-hearted.

—ends in hyperinflation The first serious stabilisation attempt was the Plan Austral in 1985. After initialsuccess, the plan lost effectiveness owing to adverse terms of trade, lack ofexternal finance and timid fiscal adjustment. After the first burst of hyper-inflation in 1989, the newly elected government implemented an aggressivestructural reform programme. Privatisation and deregulation, as well as tradeand financial liberalisation, proceeded rapidly. But the Peronist government had

Argentina: Economic policy 13


to face a second hyperinflationary outburst in 1990, before launching theConvertibility Plan in April 1991. During the previous year the combination ofa freely floating exchange rate policy and stringent monetary policy led to asubstantial overvaluation of the domestic currency.

The 1990s: stabilisationand structural reform

The main feature of the Convertibility Plan was to make the peso fully convert-ible with the dollar at a fixed nominal exchange rate, with the domestic mone-tary base fully backed by the foreign exchange reserves of the Banco Central dela República Argentina (the Central Bank). This stopped the Central Bank fromfinancing budget deficits by printing money and the public sector was thusforced to bring its deficit into line with available finance. In 1995 foreigncurrency-denominated Argentinian public debt instruments in the hands of theCentral Bank were raised to a maximum of 20% of international reserves.

The aggressive privatisation programme launched in the early 1990s served twopurposes; to raise efficiency in the medium term and to provide the public sectorwith fresh cash or debt reduction in the short term. Although the first privatis-ations were poorly managed, the record improved in 1992 and 1993. By 1996the government had privatised most public utilities—telecommunications, air-lines, power generation and distribution, gas transportation and distribution,water and sewage systems, and passenger and cargo railways—and sold the vastmajority of productive facilities (including oil and gas extraction, coal mining,petrochemicals plants and steel mills). Divestiture operations earned the publicsector a total of $17.5bn ($11.2bn in cash and $6.3bn in debt reduction atmarket prices).

Privatisations in the pipeline include three hydroelectric power stations(Yacyretá, Salto Grande and Pichi Picún Leufú), three nuclear power-generatingstations (Atucha I, II, under construction, and Embalse), the airports, the postoffice and arms industries. The privatisation of public banks, electricity gener-ation and distribution, and water and sewage systems by provincial govern-ments has speeded up since 1995 but progress has been uneven.

Structural reform also eliminated price and interest rate controls, further liberal-ised the foreign investment regime and removed export taxes and quantitativerestrictions on imports. Import levies were cut and the tax system simplifiedaround value-added tax (VAT), which is easy to collect and in 1995 contributed48% of total tax revenue. Although enforcement of tax legislation improvedand tax evasion fell in the years to 1994, the main factor behind higher taxcollection was rapid economic growth.

Real peso appreciationand the fiscal

“devaluation”

Under the Convertibility Plan, the fixed nominal exchange rate has been theanchor of the stabilisation programme and of domestic and external credibility.The real appreciation of the peso was partly compensated by measures designedto reduce domestic costs (the so-called costo Argentino). Between 1992 and 1994the government deregulated markets, removed distortive taxes at federal andlocal levels and reduced employers’ social security contributions. These initia-tives brought down producer costs, but some had negative fiscal implications.Since exports and investment enjoyed fiscal incentives (VAT and other indirecttax reimbursements), the trade-off was accentuated as growth became moredependent on exports and investment after 1993. The introduction of a private

14 Argentina: Economic policy


retirement system in 1994 also had a significant fiscal cost as part of the labourforce began to save in private pension funds, while the public system had to bearthe financial burden of the current stock and part of the future flow of retiredpeople.

The Mexican crisis In 1995 economic policy was geared towards coping with the negative effects ofthe Mexican currency crisis. The priority was to stop the run on bank deposits,which was eventually contained through a strengthening of the banking systemand a reduction of exchange rate uncertainty after Mr Menem was re-elected inMay 1995. In addition, the government arranged an external support packagewith the participation of the IMF, which reactivated the Extended Fund Facility(EFF) agreement suspended in 1994. The government also announced a tighten-ing of fiscal policy, but measures implemented were not enough to retain thefiscal accounts in the black. In 1995 and 1996 the drop in domestic demand(particularly consumption spending) reduced tax revenue compounding thenegative fiscal effects of structural reforms.

The government succeeded in preventing a major financial crisis but not inkeeping the economy growing. Banking deposits recovered rapidly aftermid-1995 and interest rates fell sharply. But easier credit conditions did notpull the economy out of recession: financial institutions have been reluctant tolend and households and firms unwilling to borrow. Furthermore, the policyconstraints imposed by the Convertibility Plan and the strict targets agreedwith the IMF (a new stand-by agreement was signed in early 1996) preventedthe government from stimulating demand through counter-cyclical fiscal poli-cies. In the middle of a deep economic recession, fiscal consolidation becamethe primary target.

Economic policy thus seems trapped in a dilemma. Fiscal consolidation is un-likely to proceed smoothly in an environment context of recession or sloweconomic growth. Yet bringing the public-sector deficit under control is a pre-requisite to improve expectations and economic performance. Since Argentinalacks a well-developed social security net and one is unlikely to be implementedin the short run, slow growth and high unemployment are likely to lead tomounting political pressures. However, Argentina’s fiscal quandaries are notunmanageable: a consistent medium-term programme may work, provided theexternal financial environment does not deteriorate markedly.

Public-sector accounts

1995 1996a

Current revenue 49.0 22.6

Current expenditure 48.4 23.3

Primary surplus (excl privatisations) 1.5 –0.2

Privatisation receipts & others 1.2 0.3

Primary surplus 2.8 0.1

Interest payments 4.1 2.1

Fiscal result –1.3 –2.0

a Estimates.

Sources: Secretaría de Hacienda; Carta Económica.

Argentina: Economic policy 15


(Historical data on public finances are given in Reference table 1; data onmonetary indicators are in Reference table 2; data on interest rates are inReference table 3.)

Economic performance

For many decades Argentinians have had to tolerate high inflation. But theproblem became much worse as a result of the 1982 debt crisis, which provokedmajor devaluations and a severe contraction of the peso-denominated financialsystem. Economic growth suffered as financial intermediation declined andsavings were channelled towards foreign assets. Productive investment wasdiscouraged and resource allocation became inefficient as a result of high andvolatile inflation rates. Economic stabilisation thus became a prerequisite ofimproved economic performance. In this respect, the post-1990 economic stabi-lisation record has been good. Inflation fell rapidly. There was an initial shift inrelative prices in favour of non-tradeable goods, but this is beginning to bereversed.

Rapid growth in 1990-94comes to a halt in 1995

In the 1980s performance was disappointing; in the 1990s real output was atthe 1982 level although the economy recovered rapidly because of price stabi-lisation and a favourable external environment. In the 1990-94 period realGDP expanded by more than 34%, with domestic demand driving growth.Gross fixed investment was the most dynamic sector, rising by more than120% and taking the investment rate to 23.4% of GDP in 1994, the highestsince the 1982 debt crisis (see Reference table 7). Consumption expenditurealso expanded rapidly (by 40% in 1990-94). Until 1994 net external demandmade a negative contribution to GDP growth as slow export expansioncombined with rapidly growing imports. Domestic demand was fuelled byabundant inflows of foreign capital, partly reflected in a rapid accumulation offoreign reserves and an increase in the monetary base.

Growth in gross domestic product(%)

Average1995 1990-94

GDP growth –4.4 7.7

Goods-producing sectors –4.8 6.9 Agriculture, forestry & fishing 1.7 1.1 Mining & quarrying 4.3 4.8 Manufacturing –6.5 6.9 Construction –11.0 16.9

Services-producing sectors –3.4 7.5 Finance, insurance & real estate n/a 11.5 Electricity, gas & water 2.6 6.1 Commerce –8.4 9.2 Transport & communications n/a 7.4 Community, social & personal services n/a 2.8Sources: Secretaría de Programación Económica; Banco Central de la República Argentina.

16 Argentina: Economic performance


The external shock of the Mexican crisis reversed foreign capital flows, causinga deep contraction of domestic demand. Production declined and the economywent into recession. Fixed investment contracted by 16%. The reason theeconomic downturn was not deeper was the marked increase in net exports.

During the expansionary phase of the early 1990s manufacturing growth laggedbehind total GDP growth. A large share of manufacturing output growth wasaccounted for by a fourfold increase in automobile production. Constructionand some service activities (eg financial services) expanded rapidly. Most sectorssuffered during the 1995 recession but construction, trade and manufacturingwere particularly badly hit. (Historical data on GDP are given in Referencetables 4-6.)

Inflation falls sharply— The 1990-94 expansion was accompanied by rapidly falling inflation rates. Theconsumer price index (CPI) rose by just 3.4% in 1995, compared with a recordof 4,900% in 1989. Further, since mid-1995 the economy has recorded slightconsumer price deflation under the influence of a sharp recession and structuralreforms. Falling consumer prices and rising wholesale prices (particularly ofagricultural and industrial commodities) have improved the relative price oftradeable goods and hence the real exchange rate. The wholesale/consumerprice index ratio (a proxy for the real exchange rate), which fell by 31% in theMarch 1991-March 1994 period, rose by 9.2% between March 1994 andApril 1996. (Data on various prices measures are given in Reference table 9.)

Inflation(annual average; %)

1990-94 1994 1995

Consumer prices 505.1 4.2 3.4

Wholesale prices 347.1 0.7 8.0Source: IMF, International Financial Statistics.

—but unemploymentpeaks

The percentage of families living below the poverty line fell from 38% in 1989(in the middle of hyperinflation) to 13% in 1994, but rose again to 17.2% as aresult of the 1995 economic slowdown. Real wages have fallen in every yearexcept 1994 (when they rose by a modest 0.7%) and remain well below theaverage for the 1980s. The 1995 recession aggravated the position of workers asfirms were forced to cut nominal wages and overtime and to suspend thelabour force temporarily.

The most disappointing development has been the steady rise in the unemploy-ment rate, which rose from 6.9% in May 1991 to 17.1% in May 1996, with ratesof over 20% prevailing in certain urban areas. If the 12.6% underemploymentrate is taken into account, almost 30% of the active population (about 4 millionpeople) currently face employment problems. Since the beginning of theConvertibility Plan in 1991 a net total of 55,000 jobs have been destroyed.

The government has responded with a battery of measures aimed at reducinglabour costs (cutting employers’ social security contributions) and further liber-alising the labour market (creating a flexible employment regime for small andmedium-sized firms, authorising more flexible labour contracts and implement-ing a new works accident legislation). But the impact has been negligible, prob-ably owing to the sharp 1995 recession and widespread restructuring in the

Argentina: Economic performance 17


public and private sectors. A more profound reform of labour regulations isunder way. The reach of the social safety net is extremely narrow: only 7% of thejobless receive unemployment compensation, compared with 42% in Spain and34% in the USA. (Historical data are given in Reference table 8.)

Regional trends

Many provinces sufferfrom reform—

Most of Argentina’s 23 provinces did not benefit from rapid economic growthin the 1990-94 period and were severely hit by the 1995 recession. The north-western and north-eastern provinces have been hit by the crisis affecting tradi-tional agricultural crops such as sugar cane and tobacco. The southernprovinces suffered as the privatised and deregulated oil industry shed jobs andindustrial promotion schemes were terminated. Old industrial centres, such asRosario in Santa Fe province, have also experienced a severe decline.

—and their financialposition is difficult

The crisis aggravated the financial predicament of provincial governments,which for many years had sought to alleviate unemployment and buy politicalallegiance by providing jobs in the public sector. Thus in 1995 almost 60% ofthe provinces’ current spending was devoted to wages, resulting in an aggregatedeficit of Ps2.6bn ($2.6bn).

During 1990-94 provincial governments were able to increase local publicspending under the stimulus of high tax collection. But in 1995 the recessionreduced local and federal tax revenues and financial turmoil made credit toprovincial governments difficult to obtain. The result was a delay in paymentsto workers and suppliers, wage and salary cuts and the compulsory settlementof liabilities with locally issued bonds. The high level of indebtedness (mostlyshort-run and estimated at $12.5bn by end-1995) further strained provincialfinances.

Provincial public sector, 1995(Ps bn)

Total expenditure 28.9 Current expenditure 25.4 of which: personnel 15.1 Capital expenditure 3.5

Total revenue 26.4 Current revenue 24.9 Provincial origin 11.1 Federal origin 13.8 Capital revenue 0.4 Contributions 1.1

Global result –2.6Source: Ministerio del Interior.

For a number of years the federal government has placed pressure on provincialgovernments to restructure. The pacto fiscal (a transitory arrangement until anew tax revenue-sharing scheme is negotiated) guaranteed minimum levels oftax revenue-sharing for provincial governments and cuts in federal taxes inexchange for structural reforms, such as the removal of local distorting taxes; theprivatisation of local banks, water and sewage and electricity firms; and the

18 Argentina: Regional trends


transfer of bankrupt public-sector retirement schemes to federal authorities. Theprocess has advanced unevenly. The 1995 recession and the fiscal stringencywhich ensued are likely to force many provincial governments to accelerate (orstart) the agreed reforms.

Resources

Population

According to official projections made on the basis of the 1991 census, in 1995Argentina’s population was 34.6 million, the fourth largest in Latin Americabehind Brazil, Mexico and Colombia. The 1.2% average annual rate of popul-ation growth in 1990-95 was low compared with the Latin American average of1.8%. Slow population growth is explained by low fertility rates, Argentina’sbeing among the five lowest in Latin America. Projections for the remainder ofthe decade show a slowdown in population growth to 1% per year, taking thetotal population to an estimated 36 million by the year 2000 and 43 millionby 2025.

Low fertility rates and higher life expectancy place Argentina among the threeLatin American countries with the lowest share of population below 15 yearsand the highest share of population over 65 years. Infant mortality rates in1993 were 24 per 1,000 live births, approximately half the Latin Americanaverage, and life expectancy was 69 and 76 for men and women respectively,four and three years higher than the Latin American average. (Population totalsare given in Reference table 10; labour force totals in Reference table 11.)

Comparative population indicators(%)

Argentina Brazil Chile Latin America

Annual average growth rate (1990/95) 1.2 1.7 1.6 1.8

Fertility rate (children per woman, 1990/95) 2.8 2.9 2.5 3.1

Population below 15 years of age (1995) 28.7 32.3 29.5 33.8

Population over 65 years of age (1995) 9.5 5.2 6.6 5.2

Urban population (1992) 87 77 85 73Source: Instituto Nacional de Estadística y Censos (INDEC).

Regional distribution Population density is low at 12.6 inhabitants per sq km in 1995 and 87% of thetotal is concentrated in urban centres. The Buenos Aires metropolitan area has apopulation of approximately 10 million, about one-third of the country’s totalpopulation. Córdoba and Rosario are the second and third largest urban centres,with over 1 million inhabitants each. The Buenos Aires metropolitan area andits hinterland (the pampas) are home to two-thirds of the population. Thisreflects the large numbers of European immigrants in the early 20th century andrapid industrialisation in the post-war period, which provoked redistribution ofpopulation.

85% of the population isof European descent

An estimated 85% of the Argentinian population is of European descent,mostly Italian and Spanish. There have also been sizeable inflows from central

Argentina: Population 19


and eastern Europe. The remainder consists of a small number of indigenouspeople, a larger number of mestizos (of mixed Indian and white ancestry) andthe descendants of immigrants from the Middle East, mainly Syrians andLebanese. In the last two decades there has been a small inflow of Asians,mainly Koreans and Chinese. There has been a constant flow of immigrationfrom neighbouring countries since the 1950s (mainly Bolivia, Chile, Paraguayand Uruguay and, more recently, Brazil and Peru).

Housing The standard of housing varies across regions, but overall is better than in mostdeveloping countries. According to 1991 data, 93% of total dwellings hadelectricity services and 92% were either connected to the natural gas networkor used bottled gas; 73% of the population had safe drinking water within theirown dwellings and 69% had sanitary services (only 34% had sewerage services).But overcrowding has worsened since the early 1980s: one-quarter of totaldwellings were overcrowded in 1991 compared with 18.5% in 1980. Theregional distribution of these figures is uneven. While almost 100% of thepopulation of the federal district have sewerage systems, the share is only 31%for those living in Buenos Aires province and shrinks to 13% in provinces suchas Santiago del Estero or Chaco, and 7% in Misiones.

Poverty indicators Poverty estimates for the Buenos Aires metropolitan area (which makes upone-third of the population) show an improvement in structural indicators,such as the share of households with unsatisfied basic needs, which fell from16.5% in 1989 to 11.8% in 1995. A major explanatory factor may be theimprovement in sanitary conditions. However, 71% of households with unsat-isfied basic needs still fail to comply with one of the requirements (generallysanitation). The number of households below the poverty line also fell in theearly 1990s, but the trend reversed in 1995 under the impact of the recession.

Poverty in the Buenos Aires metropolitan area(%)

Households below Households withthe poverty line unsatisfied basic needs

1989 29.0 16.5

1990 29.5 16.0

1991 19.0 15.1

1992 14.4 14.2

1993 13.3 13.4

1994 13.0 14.7

1995 17.2 11.8Source: INDEC.

Education

The early development of a system of state schools has encouraged high literacyrates (95% in 1990) and high enrolment in primary and secondary education. Inthe early 1990s about 86% of children of school age were enrolled in the lastyear of primary school, while almost two-thirds of children in the 13-17 agegroup were enrolled in secondary school. The system of higher education is alsobroadly based, with a total of 82 universities, 36 of which are public although

20 Argentina: Education


the public education system has deteriorated in the last two decades owing tothe fiscal crisis of the federal and provincial governments. The private educationsystem has been growing rapidly, but quality is extremely uneven and coverageselective.

Primary and secondaryeducation has been

decentralised

In the late 1970s primary education became less homogeneous as it was decen-tralised from the federal to the local level. The process was repeated in the early1990s with the decentralisation of secondary education. Reasons for shortfallsin local educational services include administrative and technical deficiencies,and the fact that in many districts the educational system became a source ofpolitically motivated public employment. A far-reaching reform process isunder way to improve educational services in both the public and privatesectors.

Recent reforms The educational system is being reformed on the basis of the 1993 FederalEducation Law. Until 1995 the structure of the education system consisted ofone initial non-mandatory pre-school year, seven mandatory years of primaryeducation, and five non-mandatory years of secondary education and highereducation; the new structure includes one initial mandatory pre-school year,nine years of mandatory basic education, a non-mandatory three-year modularcycle and higher education. These reforms are being implemented throughspecific agreements between the federal and provincial governments. Thegovernment expects the new structure to be fully operational by 2001, but thisis unlikely.

Although implementation of the ten-year mandatory cycle started in 1996 in12 districts, the mandatory pre-school year was postponed by a year owing tolack of infrastructure. The non-mandatory three-year modular cycle is scheduledto be implemented from 1998 but, as in other areas, this date is likely to bepushed back as a result of financial constraints and lack of adequately trainedpersonnel.

The Federal Education Agreement, which was signed in September 1994 byfederal and most provincial governments, established that federal and provin-cial educational budgets be increased by 20% per year in 1995-99, and commit-ted the federal government to investing a total of Ps3bn ($3bn) to improvebuildings, provide new equipment and train teachers. Resources will be distrib-uted directly to schools. This target has not been met because of budgetary con-straints. In 1995 total government spending in education reached 3.65% of GDP.

Higher education The Higher Education Law passed in 1995 enabled public universities to estab-lish their own admission and financial regime. Traditionally, higher educationhas been free and there has been unrestricted admission to most nationaluniversities. Enforcement of the new legislation has faced stiff opposition incertain universities, particularly the largest institution, the University of BuenosAires. The apparent inadequacy of the public higher education system hasstimulated the proliferation of private institutions. Yet, many of these lackthe human capital and physical infrastructure required to provide adequateeducational services. Graduate studies have increased because of the deteriorat-ing quality of undergraduate training.

Argentina: Education 21


Research and development Research and development (R&D) is carried out mainly at universities and pub-lic research institutions, except for a small number of large companies whichhave their own technology departments. The training of scientists and engi-neers is concentrated in a handful of public universities, which also conduct thelargest share of university research. The chief non-university public researchentities are the National Scientific and Technical Research Council (CONICET),the National Institute of Agricultural Technology (INTA), the National Instituteof Industrial Technology (INTI), the National Atomic Energy Commission(CNEA) and the National Institute of Water Science and Engineering (INCYTH).Argentina’s science and technology system comprises 19,000 full-timeresearchers, the largest number in the region relative to population. Neverthe-less, conditions for R&D have deteriorated markedly in the last two decades.

Comparative education levels(% of age group enrolled in education)

Argentina Brazil Chile USA

Literacy rate (% of total population, 1992) 96.0 82.1 93.8 99.0

Primary schooling gross rate (1993) 107.0 111.0a 98.0 107.0

Secondary schooling gross rate (1993) 72.0b 43.0a 67.0 97.0

Tertiary education gross rate (1993) 40.5 11.5a 26.7 80.6

a 1992. b 1991.

Source: World Bank, World Development Report.

Health

Public healthcare serviceshave deteriorated

Responsibility for healthcare is shared between the public and private sectorsand health trust funds (obras sociales). All three have undergone a profoundtransformation in recent years, partly as a result of the public sector’s financialcrisis. While the private sector has increased its share in the provision ofhealthcare, the contribution of the public sector and the health trust funds hasfallen owing to fiscal stringency, falling wage levels (which are the basis ofworkers’ contributions to health trust funds) and poor management.

Comparative health indicators

Argentina Brazil Chile USA

Life expectancy (years, 1990-95) 72.1 66.3 73.9 75.9

Infant mortality rate (per 1,000, 1990-95) 29.0 57.0 17.0 8.0

Doctors per 1,000 inhabitants (1993) 2.68a 1.36a 1.10 2.45

Hospital beds per 1,000 inhabitants (1991) 4.4 3.5 3.2 5.3b

Expenditure on healthcare services (% of GDP, 1990) 4.2 4.2 4.7 12.7 Private 1.7 1.4 1.4 7.0 Public 2.5 2.8 3.4 5.6

a 1992. b 1985-90.

Sources: WHO, World Health Statistics Annual 1994; OMS, Las condiciones de salud en las Américas 1994.

The share of total healthcare spending in the federal budget was 2.5% in 1995.The public sector provides healthcare through the public hospital network toan estimated 32% of the population. The public hospital network has been

22 Argentina: Health


decentralised and responsibilities transferred to provincial and local govern-ments. Local authorities have privatised peripheral activities and self-administration has enabled public hospitals to charge for services provided tohealth trust funds’ affiliates and individuals able to pay. Many hospitals remainin poor condition with obsolete equipment, inadequate infrastructure and lowpay, although the quality of service varies significantly from district to district.The health secretariat in charge of overseeing national health policies lacks acoherent programme. The public sector remains the sole provider of emer-gency, chronic and psychiatric healthcare services.

Healthcare market, 1995

Population covered (%) $ bn

Health trust funds 62.0 6.95 Administered by the trade unions 48.0 3.15 For managers & executives 3.0 0.8 Programea de Asistencia Médica Integral (PAMI) 11.0 3.0

Pre-paid healthcare companies 6.0 2.1

Public hospitals 32.0 2.4

Total 100.0 11.45Sources: Towers Perín; Marc y Asociados.

Health trust funds Health trust funds (obras sociales) provide healthcare services to 62% of thepopulation. The obras sociales are pay-as-you-go systems based on compulsorypayroll contributions. Most health trust funds do not provide services directly,but subcontract to the private sector. There are about 350 private- and public-sector health trust funds coordinated by the Administración Nacional del Segurode Salud (ANSSAL), which collects payroll contributions and redistributes themproportionally to affiliates. A special compensatory fund financed by 10% oftotal revenue redistributes resources from rich to poor health trust funds. In1995 trade unions’ health trust funds managed funds worth $3.1bn.

Government attempts at deregulation in order to reduce the number of healthtrust funds, bring down costs and increase efficiency have met with stiff oppo-sition from trade unions. The government has signed an agreement with theWorld Bank to modernise the healthcare system through the reconversion ofhealth trust funds, which is part of a larger $800m project. The resources willbe used to reduce health trust funds’ liabilities, cut personnel and enhanceefficiency.

Private-sector healthcare The crisis of public healthcare and health trust funds has stimulated growth ofprivately owned hospitals, diagnostic centres and pre-paid healthcare systems.These are disproportionately concentrated in large urban centres. Pre-paidhealthcare insurance takes care of only 3% of the population, often subcon-tracting the provision of services. Older pre-paid healthcare systems are facingdifficulties associated with an ageing membership. To cope with this problem,the sector may have to transform itself into a real insurance system, with publicregulation of technical requirements, minimum capital, and reserve andsolvency indicators.

Argentina: Health 23


Natural resources and the environment

Argentina is located in the southern extreme of the American continent. Its totalsurface area is 2.7m sq km, including 964,000 sq km of continental Antarcticterritory and southern Atlantic islands (the ownership of some of which isdisputed with the UK). The South American continental portion is 3,700 kmlong, and the climate varies from subtropical to cold. Most of the country is inthe temperate climate region. One-third is in humid zones, comprising thepampas (600,000 sq km) and the subtropical forest of the north-east. The rest ofthe country is arid and semi-arid.

Land-use patterns The territory is biologically diverse, with 300 species of mammals, 970 speciesof birds, 180 reptiles, 70 amphibious and 10,000 plant species. Althoughmechanisms to preserve biodiversity are not well developed, the number ofprotected areas has been rising since the mid-1960s. Protected areas represent3-4% of the territory, low by developed country standards but similar to that ofneighbouring countries.

Some 73% of the territory is devoted to extensive or semi-extensive cattle breed-ing, 4% is predominantly used for arable crops, 18% is of mixed use and 5% isdevoted to other uses. Although the yield per unit of land in the production ofgrains is similar to that of Australia or Canada, use of fertilisers (about 5 kg/ha)is much less intensive. Similarly, the use of pesticides is still only one-third ofAustralia’s and one-tenth of that of some European countries despite a rapidincrease in recent years.

Forest resources The exploitation of natural forests began in the 19th century when 39% ofArgentinian territory was natural forest. By the mid-1980s the natural forest areahad contracted to 38m ha, or 14% of the continental area. The deforestation ratefell from 1m ha per year in the early part of the century to 160,000 ha per yearin the 1980s. The remaining natural forests are in danger unless legislation isenforced. Large forest fires in 1995 brought up the issue of deficient manage-ment on the part of the public sector.

Fishing resources A large coastal region south of the Río de la Plata provides abundant fishingresources. Exploitation is uneven, with overfishing of some species, such assquid. In total 20 species of fish are caught.

Mineral resources Vast mineral resources are known to exist, but only 20% of the country hasbeen surveyed. A number of large mining projects are under way and Argentinais set to become one of the world’s largest gold and copper producers by theend of the century. Since the natural gas and petroleum sectors were privatised,exploration for hydrocarbons has increased. Natural gas reserves are large andArgentina is scheduled to become a major gas supplier to neighbouringmarkets, particularly Chile and Brazil.

Environmental legalframework and problems

Argentina has a well-developed, but poorly enforced, environmental legalframework, particularly in respect of the exploitation of natural resources (oiland gas, minerals, and forestry). Legislation on the disposal of dangerous wastes,on the use of substances damaging the ozone layer and on ship pollution

24 Argentina: Natural resources and the environment


control have been recently passed. In 1996 the government announced that theSecretariat of Natural Resources and Environment, created in 1991 under thedirect control of the presidency, is to be upgraded to a ministry. State and localgovernments have also created environmental agencies but the links betweennational and local bodies are poor. Article 41 of the new constitution establishesthe right to a healthy and balanced environment, the duty to preserve it, theobligation to repair environmental damage and the prohibition of entryinto the country of dangerous or radioactive waste. Regulations require budgetallocations to make enforcement possible.

The government’s decision to privatise the nuclear power-generating stationshas raised the issue of nuclear waste disposal. At present, highly radioactivenuclear waste is treated and stored in nuclear stations while low and mediumradioactive nuclear waste is treated and stored in a plant close to Buenos Aires.After attempts to create a storage site in Patagonia provoked opposition,Congress passed legislation requiring a technical assessment and a provinciallaw authorising establishment of the site.

Economic infrastructure

Transport and communications

Transport infrastructure is of paramount importance but the private and publictransport system has been deteriorating for many years. Since the early 1990sthe government has tried to improve the quality of services offered throughprivatisation, deregulation and decentralisation. Railways, the undergroundnetwork, most of the port system (including Buenos Aires, the largest port),domestic and international airlines, and a large share of road construction andmaintenance have all been privatised. Deregulation eased or removed adminis-trative constraints on river and maritime transportation, truck freight trans-portation, port operations, road passenger transportation and air travel andcargo. The administration of ports and the provision of long-distance railwaypassenger transportation services were decentralised. Improved railway servicesand lower airfares have shifted cargo and passengers away from road transport-ation. (Transport statistics are given in Reference table 12.)

The modernisation of thevehicle fleet slows down

In the early 1990s the average age of the automobile fleet was 14 years, with 64%more than 11 years old. Until 1994 there was a rapid increase in sales of newcars, fostered by economic stabilisation and the availability of credit. Sales to thedomestic market were badly hit in 1995 and 1996 by the consequences of theMexican crisis. In 1992 the road cargo fleet had an average age of 16 years, with24% of vehicles in good condition, 38% reasonable and 38% poor. About 41%of the road cargo fleet is owned by proprietors of one or two vehicles. Mosturban and inter-urban passenger transport is by road, but that share hascontracted. In 1995 the government launched a programme to encourage themodernisation of the automobile fleet to improve security and foster domesticdemand.

Argentina: Transport and communications 25


New investment in roadinfrastructure

In 1990 only one-quarter of the total road network of approximately211,000 km was in good condition. The national road system is made up of36,837 km, 76% of which is paved. Maintenance and improvement of mainnational roads (approximately 10,000 km) has been transferred to the privatesector through a toll system.

Construction and improvement work on three major highways in the BuenosAires metropolitan area was completed in 1996. Two long-delayed projects (theBuenos Aires-La Plata and the Arturo Illia highways) were inaugurated, andthe Panamerican highway and the Buenos Aires ring road were overhauled.Examples of major projects under way are the expansion of the 600-km-longMesopotamic highway (which handles the bulk of Argentine-Brazilian roadcargo) and the construction of a bridge linking Santo Tomé in Argentina withSao Borja in Brazil. Projects at the preliminary stage are the construction of theRosario-Victoria bridge over the Paraná river (linking central and westernArgentina with Brazil), the Buenos Aires-Colonia bridge (of uncertain economicviability) and a low-altitude tunnel across the Andes mountain range linkingMendoza in Argentina with Santiago in Chile.

Railways services improve The rail network, which totals 35,700 km, is the largest in Latin America and iscomposed of three subsectors: freight, passenger transportation in the BuenosAires metropolitan area and inter-city passenger transportation. Between 1987and 1992 the number of passengers transported by urban and suburban railwaysfell by 38%, while inter-urban passengers transported fell by 58% and cargocontracted by 51%. In 1993 the cargo system as well as the urban, suburban andprofitable inter-city passenger services were privatised. The six urban and sub-urban passenger networks, including the Buenos Aires underground system,were transferred to four private operators for periods of ten and 20 years. Thecargo railway network was transferred to five operators. Most cargo operators arerenegotiating their contracts with the government in an attempt to modifyinvestment commitments, extend the length of concessions and limit responsi-bility to the 65% of the 19,500-km network transferred which is currently underexploitation.

Air transportation takes alarger share

Competition in air transportation has increased following privatisation andderegulation. Falling fares led to a sharp increase (50%) in the number ofpassengers transported between 1991 and 1995. In some cases, airfares fell to50% of their pre-deregulation levels, making air transport competitive withroad transport.

In November 1995 Aerolíneas Argentinas lost exclusive rights to the regionalmarket, a preliminary step towards the removal of all special rights by 2000.Deregulation of cargo services had results similar to those for passenger services.Although domestic air freight is tiny compared with road or even rail transport-ation, it has been expanding rapidly.

The privatisation of the airport network is at an advanced stage and theauthorities expect to transfer their maintenance and improvement to theprivate sector by the end of 1997. As only 15 of 59 airports have sufficienttraffic to guarantee their economic viability, a scheme will have to be workedout whereby profitable airports subsidise loss-making ones.

26 Argentina: Transport and communications


Ports reduce costs sharply In the last decade over 90% of total foreign trade was carried by river andmaritime transportation. Port infrastructure is therefore critical to the economy.To resolve longstanding problems of high costs and red tape, the port system isbeing decentralised and transferred from public ownership to private hands. Themain port is Buenos Aires, which handles 50% of total imports. In October 1994the administration of the five port terminals was transferred to the privatesector. Greater efficiency and competition among operators have sharplyreduced costs: whereas two years ago rates in the port of Buenos Aires were70-80% above those of other South American ports, they are now the lowest inthe region.

In May 1995 the Paraná-Rio de la Plata corridor was transferred to the privatesector. The concession was granted for ten years, with a commitment to imple-ment a signalling system to permit 24-hour navigation and to deepen thechannel. This will sharply reduce transportation costs. The corridor accountsfor the largest share of Argentine river and maritime transportation, carrying70% of agricultural exports. A toll system has been in operation since the startof 1996.

A major project under study is a 3,440-km corridor (Hidrovía) linking Cáceres inBrazil and Nueva Palmira in Uruguay through the Paraná and Paraguay rivers.

Telecommunicationsthrive

In the late 1980s the Argentinian telecommunications system was outdated andthe investment backlog considerable. In 1990 the state telecommunicationsfirm, Entel, was privatised and its assets and operations were transferred to fourfirms. The Argentinian territory was divided into two regions (northern andsouthern) and basic telephone services were transferred on a monopoly basis totwo privately owned firms, Telecom Argentina and Telefónica de Argentina.International telephone, fax and data-transmission services were transferred toTELEINTAR while domestic telex, data-transmission and maritime mobile radiotransmissions went to STARTEL. TELEINTAR and STARTEL are owned andoperated by Telecom and Telefónica respectively.

Telephone service indicators

1990 1995

No of lines (’000) 3,471 6,362

No of lines in service (’000) 3,087 5,532

No of digital lines (’000) 460 4,931

Network digitalisation (%) 13.0 77.5

Lines in service per 100 inhabitants 12 16

No of cellular telephones (’000) 25a 405

a 1991.

Source: Ministerio de Economía.

Under the privatisation agreement, Telefónica and Telecom hold exclusiverights for basic telephone services until 1997, with a possible two-year exten-sion if investment commitments are met. Both operators have tried hard toconsolidate their position in the market before 2000, when basic telephoneservices will be subject to open competition. Heavy investment by operatorshas led to a rapid rise in the number of telephone lines and digitalisation.

Argentina: Transport and communications 27


In recent years mobile telephone services have been expanding at 70% annuallybut growth has been concentrated in the Buenos Aires metropolitan area servedby Movicom and Miniphone. The Compañía de Teléfonos del Interior (CTI)consortium, which began operations in 1994 to service Argentina’s interior andhad a monopoly until 1996, has 100,000 subscribers, compared with 285,000 forMovicom and Miniphone combined in the metropolitan area.

Planned investments in the telecommunications sector($ m)

1996 1997 1998 1999 Total

Telecom Argentina 820 660 510 575 2,565

Telefónica de Argentina 1,268 975 936 1,054 4,233

Satellite system 127 21 21 0 169

Other telecommunication services 51 49 47 62 209

Total 2,266 1,705 1,514 1,690 7,175Source: Ministerio de Economía.

With the growing use of wireless communications, the Comisión Nacional deTelecomunicaciones (CNT) has decided to organise a public tender for a licenceto operate the country’s first personal communications system providing tele-phone, cellular, paging, video and data transmission services. The CNT willgrant three concessions to operate over a geographical area of 100 sq km aroundBuenos Aires with a total population of 12 million.

Regulation The CNT was established in 1990 to regulate the sector, enforce legislation andintervene in disputes between providers, and between providers and users. Aspart of the so-called second reform of the state, the CNT will be merged with theComité Federal de Radiodifusión (COMFER) and the Comisión Nacional deCorreos y Telégrafos (CNCT) into a new Comisión Nacional de Comunicaciones(CNC) under the charge of the presidency’s communications secretary.

COMFER has issued regulations to govern Direct to Home (DTH) televisiontransmissions. Providers of DTH services will find it difficult to compete withcable TV operators, which currently provide services to 50% of householdswith TV sets. Argentina has the third largest cable network in the continent(behind the USA and Canada).

In 1993 Nahuelsat, a consortium comprising domestic and foreign firms, wonthe tender to establish the first Argentinian satellite system (Nahuel), due toprovide services to Argentina, Uruguay, Chile and Brazil in 1997. Telecomjoined the consortium in 1995.

Energy provision

The energy sector has been transformed by privatisation and deregulation.Traditionally run by the state, the sector is now owned and operated by privatefirms. Electricity generation, transportation and distribution is largely priv-atised. (National energy statistics are given in Reference table 13.)

28 Argentina: Energy provision


Electricity generation anddemand

In 1994 electricity was generated by hydroelectric (44.5%), thermal (41%), andnuclear (13.2%) facilities, the balance of 1.3% being self-generated. The share ofhydroelectric facilities in total generation has increased rapidly in recent years,from a low of 27.6% in 1989. This trend is expected to continue as the Yaciretádam in the upper Paraná river reaches full potential by 1999, supplying theequivalent of 40% of current national consumption.

Energy balance, 1995(m tons oil equivalent)

Elec- Oil Gas Coal tricity Other Total

Primary supplyProduction 38.0 22.8 0.2 8.3a 2.0 71.3Imports 1.0 1.8 0.8 0.4a 0.0 4.0Exports –18.4 0.0 –0.1 0.0a 0.0 –18.5

3.0b

Total 20.6 24.6 0.9 8.7a 2.0 56.8

Processing & transformationLosses & transfers 3.4 10.2 0.5 1.3 0.3 15.7Transformation output 0.2 0.0 0.0 2.9b 0.0 3.1Total 4.6 11.0 0.3 3.6 0.3 19.8

Final consumptionTransport fuels 11.0 0.8 0.0 0.0b 0.0 11.8Industrial fuels 0.8 5.9 0.4 2.4b 0.7 10.2Residential etc 3.0 7.3 0.0 2.1b 1.0 13.4Non-energy uses 2.6 0.4 0.0 0.0b 0.0 3.0Final consumption 17.4 14.4 0.4 4.5b 1.7 38.4

a Input basis on an assumed generating efficiency of 33%. b Output basis.

Source: Energy Data Associates.

Energy demand has increased steadily in recent years, mainly as a result of theeconomic recovery. Most of the increase has been met by hydroelectric power,with the full utilisation of the Piedra del Aguila station from 1994 and arecovery of water reservoirs in Patagonia following the 1989-91 drought.

Before privatisation, generation, transmission and distribution were provided bypublic firms such as Segba, Agua y Energía and Hidronor. Local cooperativesdistributed electricity in rural and small urban areas. Although in the early 1990sthe system had excess capacity as a result of large investments made in the1970s, maintenance problems and obsolete equipment created severe energyshortages.

Electricity privatisation In 1992 privatisation split up electricity generation, transmission and distrib-ution. Most thermal and hydraulic electricity generation stations were priv-atised, with private operators making sizeable investments to address themaintenance backlog. The private sector also invested in new thermal stations(adding about 1 mw) to take advantage of natural gas production.

Argentina: Energy provision 29


A concession to operate the electricity transmission system was granted to threeprivate firms organised on a regional basis and regulated by the public authority.Distribution networks were also privatised. The Ente Nacional Regulador de laElectricidad is responsible for service control and consumer protection. Thewholesale market is administered by CAMMESA, a non-profit organisationcomposed of representatives of generating, transmission and distribution com-panies, large users and the energy secretary. Electricity delivered to the market isadministered by CAMMESA and is priced on a marginal cost basis. CAMMESAdetermines the amount of energy which each generating company delivers tothe wholesale market.

Edesur and Edenor, the two distribution companies in the Buenos Aires metro-politan area, have invested more than $1bn to modernise and expand theirnetworks. To overcome transmission constraints eight firms with generatingplants in the Comahue region are to invite international tenders for a contractto build a fourth transmission line, linking Piedra del Aguila hydraulic stationto Buenos Aires. This would raise transmission potential from 2,700 mw atpresent to 4,600 mw in 1999.

The government plans to privatise the bi-national hydroelectric dams Yaciretáand Salto Grande and the nuclear power-generating stations. But manycongressmen are opposed to the sale of Yaciretá at a time when it is beginningto generate revenue, particularly since the government would remain respon-sible for all liabilities incurred in its construction.

Having been approved by the House of Deputies, privatisation of the nuclearpower-generating stations is being considered by the Senate. The bill establishesthat a minimum of 20% plus one share of Nucleoeléctricas capital must remainin the government’s hands, and defines the framework to reorganise theComisión Nacional de Energía Atómica (CNEA). Nucleoeléctrica’s three stations,Embalse, Atucha I and Atucha II (still under construction), generate total annualrevenue of about $220m from electricity sales.

The gas and petroleumsector is overhauled

There has also been extensive privatisation in the gas and petroleum sectors.Two companies are engaged in natural gas transportation: Transportadora deGas del Norte and Transportadora de Gas del Sur. There are eight distributioncompanies which distribute gas among consumers in urban centres. EnteNacional Regulador del Gas is the agency in charge of regulating gas transport-ation and distribution. Gas extraction is completely deregulated.

The joint-venture Gas-Andes (formed by Novacorp of Canada, Techint andCompanía General de Combustibles) is building a gas pipeline betweenMendoza (Argentina) and Santiago (Chile). The pipeline is expected to beconcluded by January 1997, at a total cost of $1bn (including the constructionof new electricity generation plants). Other projects include natural gas pipe-lines connecting northern Argentina with Chile, northern Argentina withBrazil, and Buenos Aires with Montevideo. Argentina is poised to become alarge natural gas supplier to neighbouring countries.

30 Argentina: Energy provision


Financial services

Mergers and acquisitionsdominate

A long tradition of inefficiency and high costs has hindered the developmentof the financial system. Fewer than 10% of Argentinians hold bank accountsand the level of financial intermediation is modest by international standards:prior to the Mexican crisis bank deposits were just 15% of GDP, half the levelin Mexico and one-third that of Chile.

The financial system has undergone substantial restructuring as a result of theMexican crisis. In March 1996 the financial system comprised 155 institutions,126 of which were banks (27 public—mostly provincial—banks, 60 privatenational banks, 33 private foreign banks and nine cooperative banks). BetweenDecember 1994 and March 1996 the total number of financial institutions fellby one-quarter as a result of mergers and acquisitions, with cooperative banksand non-banking institutions most severely hit.

Total bank deposits increased fivefold between January 1991 and late 1994, toa total of about $45bn. Foreign currency (dollar) deposits expanded muchfaster than peso-denominated deposits, to reach about half of total deposits.The Mexican crisis led to a 18% contraction in the level of bank deposits in thefirst five months of 1995, but pre-crisis levels were recovered by the end of theyear. But the “dollarisation” of banking liabilities deepened as a result of theturmoil: by the end of 1995 dollar-denominated deposits were 56% of bankingliabilities, compared with 50% 12 months earlier. The Mexican crisis also con-tributed to a concentration of deposits: the five largest institutions (ranked bythe value of total deposits) increased their share in total deposits from 36% inDecember 1994 to 46% one year later. (Various banking statistics are given inReference table 14.)

Main indicators of the banking system, 1995(%)

Deposits/GDP ratio 16.0

Deposits/total assets ratio 46.4

Loans/total assets ratio 55.4

Deposits/loans ratio 83.9

Equity/total assets 13.9Source: Corrigan Report.

Until 1994 economic stability fostered financial intermediation: total bankloans grew from less than $1bn in the hyperinflation of 1989 to more than$45bn in 1994. But credit was expensive and most of it short-term, except formortgage lending. The restructuring of Argentina’s foreign debt in 1992enabled banking institutions to regain access to international capital markets,allowing them to provide longer-term funding mainly for mortgage finance.After the turmoil caused by the Mexican crisis, banking credit did not recoveras fast as deposits. Most banking institutions chose instead to improve theirliquidity ratios and follow extremely prudent lending policies. Credit demandwas not brisk either, as economic activity remained depressed for most of 1995and 1996.

Argentina: Financial services 31


Banking concentration was accelerated by the Mexican crisis. Fewer institutionsshould allow banks to reap economies of scale and reduce unit costs, partly byattracting more customers. Provincial banks will continue to restructure. Prior tothe Mexican crisis the central government had exerted pressure on local admin-istrations to privatise provincial public banks, most of which have a high shareof bad loans, incur systematic losses and have disproportionately high costs andexpenditures. About half of the provincial banks were privatised in 1995 and1996, and other sales are under way. Buenos Aires province, owner of the largestprovincial bank, is among those provinces which have not agreed to privatisetheir banks.

Deposits and lending by banks, Mar 1996

Ten largest banks Share of All banks Value all banks Value % of(Ps m) (%) (Ps m) total

Peso-denominated deposits 12,345 55.4 22,271 45.4

Dollar-denominated deposits 16,424 61.3 26,798 54.6

Total deposits 28,630 58.3 49,068 100.0

Peso-denominated lending 11,267 55.7 20,191 36.3

Dollar-denominated lending 21,921 61.8 35,442 63.7

Total lending 32,246 58.0 55,633 100.0Source: Banco Central de la República Argentina.

Thin and open capitalmarkets

After decades of stagnation owing to high inflation, capital markets havegrown rapidly since the 1991 Convertibility Plan although they remain thinand volatile. Since 1991-92 the autonomous supervisory and regulatoryagency, the Comisión Nacional de Valores (CNV), has implemented changes tofacilitate the financing of working capital and investments, to increase trans-parency, to provide security to domestic and foreign investors and to modern-ise operations. While regulatory change has contributed to the rapid expansionof capital markets, the decisive factor behind stock-market growth was thepublic offerings of part of the state-owned oil company, YacimentosPetrolíferos Fiscales, and the telephone companies’ shares. The creation ofprivate pension funds gave an additional impetus to both fixed and variablereturn instruments. The Mexican currency crisis depressed Argentinian assetprices, but values recovered rapidly after the re-election of Carlos Menem inMay 1995 and rallied during most of 1996.

The government has removed all investment barriers to encourage inflows intodomestic capital markets. Entering, trading and leaving the market is straight-forward: there are no exchange controls, no registration requirements, andcapital gains and dividends are not taxed. Brokers’ commissions are fixed com-petitively and there are no sectoral restrictions on foreign investors. This hasmade Argentina’s capital markets among the most open in the world.

Trade in stocks is highlyconcentrated

Although market capitalisation has increased rapidly as a result of rising shareprices and the flotation of big privatised public utilities, five stocks accountfor three-quarters of the total and liquidity can be a problem for trading in theshares of all but the largest companies. The total number of listed companies has

32 Argentina: Financial services


not increased, partly because many Argentinian firms are family-owned andprefer to raise debt rather than open their capital by issuing equity. In the early1990s, after hyperinflation virtually eliminated their debts, companies had con-siderable room to borrow, particularly following new regulations easing theissuance of debt instruments. (Stock-market indicators are given in Referencetable 15.)

Reorganisation of thepublic-debt market

Hyperinflation severely disrupted the domestic public-debt market. Between1991 and 1994 the government obtained fresh funds almost exclusively inforeign markets: purchasers were frequently Argentinian residents. In 1996 thegovernment took the first steps to recreate a domestic public-debt market. Newdebt instruments similar to those in developed country markets (short-termbills and medium- and long-term bonds) were created. To increase the liquidityof debt instruments, traditionally a problem, market-makers were created andappointed. Regular sales went ahead, in accordance with the 1996 budgetrequirement that a proportion of public debt should be placed in the domesticmarket.

Pension funds become aplayer

Pension funds experienced fast growth in their first two years of existence.There are more than 5 million members (67% of the labour force), total fundsmanaged have reached $3.6bn and returns have averaged 18% per annum. Bythe year 2000 pension funds are expected to manage resources worth $20bn. Sofar pension funds have channelled most of their resources into purchases ofpublic debt instruments (51%) and term deposits (25%). Only 17% has beenused to purchase stocks or private-sector debt instruments.

Insurance undergoesmajor change

The insurance market has grown and changed rapidly since 1989. Until 1995the rise in sales (15% per year) was associated with the increase in new car salesand new regulations making life insurance more attractive (such as the authori-sation to issue dollar-denominated policies). The creation of pension funds wasanother stimulus, as members are forced to buy disability and life insurance. Thegrowth cycle ended in 1995 when insurance sales contracted by 5.6%. Almosthalf of the insurance market is accounted for by automobile insurance, with lifeinsurance contributing a quarter.

The market has been largely deregulated. The public-sector reinsurance mono-poly was terminated, foreign firms receive the same treatment as national ones,and prices and conditions are freely set by contracting parties. In mid-1994 thegovernment authorised a wide range of businesses to sell consumer policies andbanks to collect premiums, in an effort to reduce high broking costs. Capitalrequirements were also raised for insurance firms.

The Mexican crisis accelerated concentration in the insurance market. Since1991 a total of 61 insurance firms have closed down, while more than 20 are indifficulties. Only about half of the 25 largest companies meet the solvency andliquidity requirements established by the supervisory authority. As a result,further concentration can be expected. Foreign firms have been moving rapidlyinto the industry, including Metropolitan Life, General American, LeucadiaNational, AIG and Eagle Star. In 1996 the government instituted a regime ofcompulsory labour risks insurance. Specialised firms (Aseguradoras de Riesgos del

Argentina: Financial services 33


Trabajo, ART) were created for a market estimated to reach a yearly totalof $1.2bn.

Other services

Tourism expands rapidly A rapid rise in the number of foreign visitors in recent years (see Reference table16) has made Argentina the favourite destination in South America and thefourth in the continent. Its attractions include beautiful natural scenery, goodhotel and medical services and relatively minor security problems. Domestictourism is relatively underdeveloped considering the average income per head.Argentinians devote only slightly over 3.1% of consumption spending to traveland tourism.

There are over 4,800 hotels, with a total capacity of 141,000 rooms. Some 10%of the total number of establishments are in the three- to five-star category. Tomeet a rising demand for first-class accommodation, a number of internationalhotel chains have opened in Buenos Aires, while others have acquired aninterest in existing firms. The process is extending into other cities and touristsites. Projections of a continuing flow of tourists have led to new investmentplans in infrastructure. The growing importance of the sector is reflected in theupgrading of the tourism secretary to ministerial level in 1996.

Retail sector restructuring Previously organised around small, specialised and owner-operated shops, retailtrade is being transformed by the emergence of large retail outlets. Parallel tothis transformation, new commercial mechanisms such as franchising, tele-marketing and catalogue sales have increased rapidly. In 1995 self-service outletswere responsible for 63% of total sales of consumer goods, compared with only25% in 1980. Financed by both domestic and foreign capital, supermarkets haveexpanded in large urban centres such as Buenos Aires, Córdoba and Mendoza,with eight chains sharing most of the turnover. So far, supermarket growth hasbeen at the expense of small retail shops, but in future competition among largeself-service stores is likely to intensify.

Production

Manufacturing

Protection is left behind Manufacturing expanded rapidly until the late 1970s, behind protectivebarriers. The result was a diversified manufacturing base in which multi nat-ionals played a leading role, but which was oriented to the domestic market. Inthe late 1970s a combination of trade liberalisation and an appreciating dom-estic currency caused a sharp contraction in manufacturing capacity. By theonset of the 1982 debt crisis, manufacturing had changed dramatically: metal-mechanic industries had lost their leading role and the processing of rawmaterials (such as oilseeds) and the production of standardised intermediategoods (which expanded rapidly under the stimulus of special promotional

34 Argentina: Other services


regimes) had grown in importance. Many foreign firms abandoned the countrywhile domestically controlled diversified conglomerates expanded.

Productivity increasesafter the economic reforms

The Convertibility Plan and the structural reforms launched at the beginning ofthe decade transformed the sector. As a result of pent-up demand, manufacturingGDP rose by almost 30% between 1990 and 1994, although the expansion wasnot uniform across sectors. The automobile and home appliance industriesexpanded rapidly, while capital and intermediate goods producers (textiles,steel, paper and petrochemicals) were affected by overcapacity, trade liberalis-ation and falling international prices. The outlook for intermediate goods-producing sectors began to change in 1994 as a result of higher world pricesfor steel, aluminium and petrochemicals products and industrial restructuring.The 1995 recession reinforced this trend. Export sectors (intermediate goods andagroindustrial commodities) continued to expand, whereas consumer durables(mainly the automobile industry), non-durable goods sold in the domesticmarket and capital goods contracted sharply.

The manufacturing sector(1984=100 unless otherwise indicated)

% change 1995 1994/90 1995/94

Industrial output index 106.9 24.2 –6.5

Non-durable consumer goodsFood 122.8 14.7 5.8Beverages 115.1 51.7 –8.8

Intermediate goodsAgrochemicals 126.8 –10.7 15.7Mineral chemicals 113.5 –23.4 10.9Plastic & rubber inputs 143.5 4.6 8.3Iron & steel 145.1 20.4 6.1Aluminium 134.6 6.0 5.7Petrochemicals 91.3 –13.8 –1.3Tyres 133.9 47.5 –2.1Processed petroleum 97.2 1.3 –3.2Textile inputs 86.8 –9.2 –12.5Cement 104.7 75.8 –13.1Paper & cellulose 113.1 4.9 6.3

Durable consumer goodsRefrigerators, air conditioners & washing-machines 126.8 136.2 –15.6Automobiles 165.8 305.8 –29.7Capital goods inputs & capital goods 22.7 –35.8 –17.9

Exports of manufactures ($ m)Agricultural 7,474.4 24.4 28.8Industrial 6,504.1 38.1 40.0Manufacturing productivity index (1982=100) 186.9 44.6 1.7Manufacturing employment (1990=100) n/a –10.6 n/a Hours worked (1990=100) n/a –2.7 n/a

Memorandum itemShare of manufacturing output in GDP (constant prices; %) 25.3 – –Sources: INDEC; Carta Económica; Fundación de Investigaciones Económicas para Latinoamericanas (FIEL).

Argentina: Manufacturing 35


Latin America in 1995

0 100 200 300 400 500 600 700

Brazil

Argentina

Mexico

Colombia

Venezuela

Chile

Peru

Ecuador

Uruguay

Paraguay

Bolivia

Gross domestic product$ bn

Sources: EIU estimates; national sources.

0 2,000 4,000 6,000 8,000 10,000

Argentina

Uruguay

Chile

Brazil

Venezuela

Mexico

Peru

Colombia

Paraguay

Ecuador

Bolivia

Gross domestic product per head$


0 10 20 30 40 50 60 70 80 90

Brazil

Venezuela

Uruguay

Mexico

Ecuador

Colombia

Paraguay

Peru

Bolivia

Chile

Argentina

Consumer prices% change, year on year; average


-8 -6 -4 -2 0 2 4 6 8 10

Chile

Peru

Colombia

Paraguay

Brazil

Bolivia

Ecuador

Venezuela

Uruguay

Argentina

Mexico

Gross domestic product% change, year on year


36


map

The strong recovery in industrial production in 1991-94 was accompanied by arapid rise in productivity and by improved organisational and managerialtechniques and new technologies. Labour productivity in manufacturingin mid-1996 was 47% higher than in 1990. In the context of a more openinternational economy, manufacturing firms seem to be undergoing a processof intra-industry specialisation whereby they increase their import coefficient,reduce the number of production lines and expand production runs to gaineconomies of scale.

A revival of foreign investment has been an important factor in raising prod-uctivity. In the late 1980s foreign investment was stimulated by the capital-isation of external liabilities and, in the early 1990s, by structural reforms,rapid growth of domestic demand and the prospect of easier access to regionalmarkets. A large share of new foreign investment in tradeables has been chan-nelled to the automobile and food industries. Meanwhile, some Argentinianmanufacturing firms (mainly in the food and oil industry) have expandedabroad, mostly in the subregional market. (Detailed manufacturing statisticsare given in Reference tables 17-20.)

Foreign investment

Foreign investment regulations are as follows.

• No registration requirements.

• Free repatriation of capital and profit remittances.

• Unrestricted access to foreign exchange and no discrimin-ation against foreign

investors.

• No performance requirements.

• Equal tax treatment.

• Few sectors restricted (mass media, real estate in border regions, nuclear power

generation).

Sectoral and “horizontal”policies

Privatisation has reduced the public sector’s role in production, particularly inintermediate goods sectors, such as steel, petroleum and petrochemicals.Although the government rejects the idea of an industrial policy, the authoritieshave implemented a number of sectoral and “horizontal” initiatives. The mostimportant example of the latter is the Régimen de Especialización Industrial(industrial specialisation regime) launched in 1992 and scheduled to end in1999. Firms taking part in the programme are allowed to import finished goodsor parts at preferential tariff rates in exchange for a commitment to increaseexports of similar goods. Fiscal constraints led to a suspension of the programmein 1996 and to the elimination of zero-tariff import rates for capital goodsintroduced to promote modernisation and investment in new equipment.

The most important sectoral programme is for automobiles and autoparts.The regime protects the domestic market with import quotas and authorisesestablished manufacturers to import finished cars and parts at preferential tariffrates in exchange for investment and export commitments. The programme iscontractual and due to expire in 1999.

38 Argentina: Manufacturing


Scarcity and expense havebeen hindrances toindustrial growth

Commercial banks’ credit is short-term and expensive, and access has beenuneven across sectors. Whereas small and medium-sized firms must rely onself-finance and suppliers’ credits even for the short term, large domestic firmsand subsidiaries of multinationals can raise money in the corporate bond mar-ket. Larger firms also have access to international capital markets, where costsare lower. Public-sector banks do not play an important role in financing theindustrial sector or exporters. To ease the financial constraint faced by smalland medium-sized firms, in 1992 the government implemented a programmeto subsidise lending rates by 400 basis points. It also authorised ReciprocalGuarantee Partnerships to improve small and medium-sized business access tobank credit. Other programmes implemented in 1994 encouraging the devel-opment of suppliers and production poles and the enhancement of small andmedium-sized business support structures have so far made only a modest impact.The Banco de Inversión y Comercio Exterior (BICE), set up in 1992 to financeforeign trade and foreign trade-related investment, has passed largely unnoticed.Although lack of resources is a constraint, administrative capabilities have alsobeen a hindrance on policy effectiveness.

The automobile industry The automobile industry was established in Argentina in the 1950s and thriveduntil the mid-1970s in a highly protected domestic market. Trade liberalisationproduced a major shake-out in the late 1970s with many firms (such as GeneralMotors, Chrysler and Citroen) leaving the country. By the early 1990s auto-mobile manufacturing was controlled by subsidiaries of Ford and Volkswagenand by two domestically controlled firms producing under licence agreementswith Renault (CIADEA) and Fiat and Peugeot (SEVEL). Fiat Iveco, Scania andMercedes-Benz produced commercial vehicles.

In recent years the automobile sector was undergone a major restructuring.General Motors, Chrysler, Toyota and Fiat entered or returned to the market.Established manufacturers have specialised in producing a small number ofmodels for domestic and export markets (mainly Brazil). Specialisation is alsotaking place among autopart producers, where a share of the new investmentshas been geared towards export markets. Leading autopart makers such asNippondenso, Marelli, Magnetto and Valeo have established green-field facili-ties in recent years. The process of regional integration and the establishmentof a unified car market with Brazil have been key factors in this process ofindustrial reorganisation. For car- makers located in Argentina, MercadoComún del Sur (Mercosur) means a fourfold increase in market size.

Between 1990 and 1994 automobile output increased fourfold, helped by rapiddemand growth and the special sectoral regime. This was accompanied by amarked rise in productivity: between 1990 and 1994 units produced peremployee almost trebled from six to 16 per year, with the number of man-hours worked per unit produced falling from 209 to 118. The share of exportsexpanded, from 1.1% of output in 1990 to 9% in 1994.

In 1995 the sharp contraction of domestic demand severely affected the auto-mobile industry. As stocks accumulated, plants were temporarily closed andthe workforce laid off. The slowdown was softened by rapidly growing exports(36%), with sales abroad absorbing 18% of 1995 output. The depressed marketconditions of 1995 have not affected planned investments of approximately

Argentina: Manufacturing 39


$4bn to take advantage of medium-term prospects in the enlarged regionalmarket. Export growth continued in 1996.

Argentina-Brazilautomobile trade

agreement

The Argentinian and Brazilian regimes for the automobile sector both author-ise preferential imports by established manufacturers, subject to compensationthrough exports. Brazil has established a 70% domestic content requirement,higher than Argentina’s 60% (to rise to 70% by 1999). The Argentinian regimewas notified to the GATT but the Brazilian regime is being challenged becauseit was implemented after the conclusion of the Uruguay Round.

The food industry Although the food industry has not grown rapidly in recent years, except forsubsectors such as beer and confectionery, it has great potential owing to low-cost natural resources and free access to the large Brazilian market. Traditionallydominated by family-owned firms, in recent years the industry has witnessedthe arrival of large multinationals such as Nabisco, Parmalat, Philip Morris,Cadbury-Schweppes and Danone. More recently, Chilean and Brazilian firmshave established facilities in Argentina, mainly in the beverages sector. Thesubsectors which fared best in the 1995 recession were those traditionallyoriented towards the export market (such as edible oils) and those which com-pensated for the contraction in domestic demand through higher sales abroad(such as flour and dairy products).

The steel industry Since the early 1990s the structure of the steel sector has changed dramaticallyas a result of the privatisation of SOMISA and Altos Hornos de Zapla andindustry concentration. In 1990 the total number of employees in the steelsector was 30,730; by 1994 the figure had halved. The number of estab-lishments also fell, with most of the output concentrated in four large inte-grated steel mills which between 1991 and 1995 invested almost $600m inrestructuring. As a result of productivity gains, the number of hours worked toproduce 1 ton of steel halved from 14.8 in 1990 to seven in 1995.

Production costs are higher than in Brazil but Argentinian steel mills benefitfrom proximity to domestic users and concentration in products such as tubes,where domestic firms are world leaders, and in specialised products with highervalue added. Between 1990 and 1994 growth in steel output was driven bydomestic demand, mainly from the automobile and construction industries. In1995 export growth took total output to the highest level in a decade.

The petroleum industry Since 1991 the petroleum and gas industries have been transformed by privat-isation and deregulation. Argentina has traditionally been self-sufficient in oilproduction and has turned into an exporting country in recent years, withneighbouring Brazil and Chile the natural markets. Yacimentos PetrolíferosFiscales (YPF), the former state petroleum company, extracts approximately45% of total oil production, while the rest is supplied by private domestic andforeign firms (the largest of which are Pérez Companc, US Amoco, Petrolera SanJorge, Astra, Total Austral, Bridas, Quintana and Tecpetrol).

Petroleum extraction expanded by almost 50% between 1990 and 1995 butrefining contracted by 2%. In 1995 exports (particularly to Chile and Brazil)represented almost 40% of total extraction. Although higher exports softened

40 Argentina: Manufacturing


the impact of the 1995 recession on the petroleum industry, refining was hit bythe slump in domestic demand. High transport costs and domestic regulationsin importing countries have prevented Argentina from exporting a greatershare of downstream products.

Argentinian petroleum companies have been expanding into other SouthAmerican countries, particularly those where the private sector is being openedup (such as Venezuela, Peru and Bolivia). YPF is establishing service stationnetworks in Chile and Peru and is taking part in exploration and extractionactivities in Bolivia, Peru, Ecuador and Venezuela. YPF has also signed cooper-ation agreements with Petrobrás of Brazil, with an eye on the large Braziliandomestic market.

Mining and semi-processing

Although Argentina has considerable mining potential, this sector (excludinggas and petroleum) contributes only 0.2% to GDP. Argentina has similar geo-logical characteristics to neighbouring countries with a more developed miningtradition, such as Bolivia, Chile and Peru. The most important mining productsare zinc, gold, silver, lead, uranium and copper. Iron-ore extraction has fallenprecipitously as a result of the closure of high-cost mines. There are large copperdeposits in the Pachón area (San Juan province) and uranium deposits at SierraPintada (Mendoza province). Most mining sites and reserves are located in theAndes mountain range in the western part of the country. (Mineral and quarry-ing output statistics are given in Reference table 21.)

Although no new mines have been opened since the 1960s, there is an upsurgeof foreign investment in the sector, particularly by Canadian, US, Australian andSouth African firms. The new regulatory framework enacted in 1993 removesrestrictions on foreign investors; guarantees fiscal stability for 30 years and a 3%ceiling on the annual royalty paid to provincial governments; allows accelerateddepreciation of fixed investments; and applies zero tariffs to capital goodsimports. The new framework has attracted considerable foreign investmentinterest, with an estimated $1.5bn in new projects scheduled for 1993-98. Withthese new investments output is expected to treble and exports to reach $1bn by2000 from $45m in mid-1996. Bajo la Alumbrera—currently in the constructionphase—is the largest mining project in Argentina’s history. By the year 2000 thesite is expected to become the world’s ninth largest copper mine and 15thlargest gold mine.

Major planned investments in the mining sector

Project Mineral Province Value ($ m) Starting date

Bajo la Alumbrera Gold/copper Catamarca 782 1997

Potasio Río Colorado Potassium salt Neuqén 280 1998

El Pachón Copper San Juan 220 1999

Cerro Vanguardia Gold/silver Santa Cruz 150 1998

Salar del Hombre Muerto Lithium Catamarca 95 1997Source: Subsecretaría de Inversiones.

Argentina: Mining and semi-processing 41


Agriculture, forestry and fishing

Agriculture, livestock, forestry and fishing contributed 7.5% of GDP in 1995.However, as many processed raw materials are not included in the calculation,this figure underestimates the economic importance of the sector. Furthermore,about 60% of total exports are agricultural or agro-industrial goods. In terms ofoutput, the primary sector performed poorly under the Convertibility Plan:between 1990 and 1994 total output increased by only 4.4% compared with a34.4% expansion of total GDP. Fishing bucked the trend, with total catch andexports expanding rapidly. During the 1995 recession primary output recordedpositive growth while overall GDP contracted by 4.4%. (Agricultural data aregiven in Reference tables 22 and 23.)

Argentina is well endowed with natural resources, and with a climate rangingfrom subtropical to subarctic it can produce a wide variety of agriculturalproducts. Furthermore, the pampas, the heart of Argentinian temperate agri-culture (cereals and oilseeds), are among the most fertile lands in the world.Industrial crops are mostly cultivated outside the pampas, particularly in thenorth-west (sugar cane and tobacco) and north-east (cotton, tobacco and tea).Fruit production is spread nationwide, the most important districts beingMendoza (grapes, peaches and plums), Río Negro and Neuquén (apples, pearsand grapes), and Tucumán and Corrientes (citrus).

Output and exports of key crops, 1995/96a

(’000 tons)

Output Exportsb

Wheat 9,199 4,350

Maize 10,660 5,500

Soybeans 12,518 2,400

Sorghum 2,118 700

Sunflower 5,600 750

a Estimates. b 1996.

Sources: Secretaría de Agricultura, Ganadería y Pesca; Comisión Económica para América Latina y el Caribe (CEPAL).

About 23m ha were sown, mainly with cereals (11.9m ha) and oilseeds(9.9m ha) in the 1995/96 season, for a total estimated production of43.9m tons (4.2% below the previous season). Total cereals output is estimatedto have been 23.7m tons in 1995/96, composed mostly of maize (10.7m tons)and wheat (9.2m tons). The emergence of oilseeds (soybeans and sunflowers) asimportant crops in the late 1970s has transformed agriculture. In recent yearsthe use of fertilisers and pesticides has expanded rapidly, raising yields. Oil-seeds and processed products contributed almost $4.8bn in export earnings in1995 (23% of total sales abroad). Cereal exports amounted to $2.1bn in 1995.

In late 1995 and in 1996 contracting world stocks and adverse weather condi-tions in the USA pushed prices upwards, boosting export earnings. In thisenvironment, a sharp increase in sown area is expected for the 1996/97 season,which may raise total output to a record level of 50m tons. The medium- andlong-term prospects for agricultural activity should benefit from rising worldfood demand and the gradual dismantling of subsidies in Europe and the USA.

42 Argentina: Agriculture, forestry and fishing


Livestock and meat Livestock and meat production are important economic activities. In the early1990s the sector suffered from low world prices and intense competition ininternational markets. In 1995 it was further affected by the fallout of the bovinespongiform encephalopathy (BSE) outbreak in Europe. Cattle production hasbeen also been affected by the rise in the price of agricultural products, whichhas displaced cattle breeding to more marginal regions.

Cattle stocks (52.6 million in 1995) have been recovering slowly after a sharpcontraction in the second half of the 1980s. Two years with no outbreak offoot-and-mouth disease has qualified Argentinian fresh meat to enter newmarkets in the developed world, such as the USA. This in turn may open up thelarge market potential of Asia. In 1995 exports of meat and meat preparationsreached $1bn.

The number of sheep has continued to decline from an average 31.5 million in1979-81 to 15.2 million in 1995. A volcano catastrophe in 1991 and harshwinters in 1994 and 1995 have been responsible for the decrease. Wool exportsremained depressed in 1991-93 but began to recover in 1994. In 1995 woolexports reached $200m.

Dairy production has been one of the most dynamic primary activities in1990-95, recording average annual growth of 8.8%. Modernisation loweredcosts and raised competitiveness, contributing to rapid export growth (mainlyto neighbouring markets). Poultry also expanded but pork production hassuffered from foreign competition.

Higher prices stimulatetechnological upgrading

A high level of debt (nearly $8bn) is a major burden to the agricultural sector,particularly for small and medium-sized producers which are technologicallybackward. In response the authorities have launched programmes offering tech-nical, social, financial and organisational assistance to rural producers. Theyhave also implemented a comprehensive plan to restructure all producers’ liabil-ities with the Banco de la Nación Argentina, which holds the bulk of agriculturaldebt. Higher agricultural prices in 1995/96 have improved the financial plight ofrural producers, stimulating a process of technological upgrading. The use offertilisers and pesticides has increased substantially, as have purchases of newmachinery, the implementation of new cultivation techniques (direct seeding)and the introduction of irrigation machinery.

The agricultural sector has undergone a concentration into larger units. Newbusiness organisations, such as agricultural investment funds and seeding pools,manage an estimated 10% of the most productive lands in the pampas. Theyhave plentiful funds and benefit from scale economies, improved technologyand management. Foreign investors have been playing an important role.

Government policies havebeen overhauled

Government policies towards the sector have been overhauled in recent years.All export taxes have been eliminated, key transport networks, such as theBuenos Aires-Bahía Blanca railway, have been privatised, as have grain elevatorsand port facilities. Furthermore, the sector was completely deregulated with theremoval of foreign exchange controls and the elimination of the NationalGrains Board and the National Meat Board. Trade liberalisation reduced the costof imported inputs and machinery.

Argentina: Agriculture, forestry and fishing 43


Overall, the Argentinian agricultural sector is set to gain from the MercadoComún del Sur (Mercosur) and free access to the Brazilian market, to which itcould supply grains, meat and dairy produce. Some crops, such as sugar cane,will suffer from Brazilian competition. The outcome of the Uruguay Round ofthe GATT has been broadly beneficial, although progress was much slower thanexpected by Argentinian negotiators. The most significant achievement hasbeen to include agriculture in the international trade regime. A recently signedagreement on mutual recognition of veterinary and phytosanitary regulationswith the European Commission may boost bilateral trade.

Forestry Forestry contributes an estimated 1% of GDP. Argentina’s clear comparativeadvantages in the sector have not been exploited. Although planting has in-creased rapidly in the last two decades, at 780,000 ha the planted area is just 5%of its potential. The national and provincial governments provide incentivesfor forestry development. Exploitation is concentrated in Misiones, Entre Ríos,Buenos Aires and Corrientes.

In 1995 the government launched the Plan Nacional de Desarrollo Forestal toattract investment and double the planted area in a period of three years. Theregulatory framework is similar to that in the mining sector. Foreign investmentprojects under way in the forestry sector amount to an estimated $850m.

Fishing expands rapidly The total fish catch has trebled in the last decade, to reach 1.14m tons in 1995.Of the total catch, more than 75% is fish (mainly hake), squid and prawnaccounting for much of the rest. Export growth has been particularly strong,reaching a total of $910m in 1995, almost three times the 1990 level. Squid hasbeen the fastest-growing export item, generating revenue of $250m in 1995. It isexpected that exports will level off because sales to Asian countries have reachedquota levels and products have low value-added (fish is filleted and frozen only).

The fishing regulatory regime establishes that resources in the Argentinianmaritime zone (200 miles around its coastline) may only be exploited by ves-sels flying the Argentinian flag and with prior permission. A special fisheriesaccord with the EU grants EU fleets the right to fish in the 200-mile reservedzone in exchange for a 50% reduction in the EU import tariff on Argentinianfishing products, new investments in the fleet and onshore plants, and finan-cial contributions to the scientific and technological development of thesector. The agreement may increase Argentinian export revenue by morethan $120m. Rising fishing activity in the South Atlantic has reduced stocks,and the Argentinian government is searching for ways to foster conservationbeyond the 200-mile economic zone.

Construction

In 1990-94 the construction sector recorded average annual growth of 17.2%.This recovery was from depressed levels at the turn of the decade: the constantprice share of construction in GDP reached 5.9% in 1995, compared with 4.4%in 1990. The 1995 economic slowdown severely depressed construction activityonce more. Scarce credit and households’ fear of borrowing led to an 11%contraction in activity.

44 Argentina: Construction


The expansion in residential construction between 1990 and 1994 reflected therelease of pent-up demand and the reappearance of mortgage credit. Initially,residential construction focused on units for high-income families but eventu-ally medium-priced units became the most dynamic sector. Construction activ-ity has also been stimulated by the building of new shopping centres, hotelsand the renewal of petrol station networks. The privatisation of public utilitiesand services, which has frequently involved new investment commitments,improvements in road infrastructure and telecommunications, and large urbanprojects, such as the renewal of Puerto Madero docklands in Buenos Aires, havealso contributed. The government has announced an ambitious investmentprogramme for 1995-99 which may stimulate construction, but its implement-ation has been delayed by fiscal constraints and lack of finance. The govern-ment has also been offering fiscal incentives (such as a reduction in the VATrate levied on purchases of new homes) in an effort to tune up the sector. Acredit programme backed by securitised mortgages came into operation in1996, with estimated total credits of $850m this year and $1.1bn in 1997.(Construction statistics are given in Reference table 24.)

The external sector

Merchandise trade

Foreign trade, 1995

Exports ($ m fob) 20,963 Manufactures of agricultural origin 7,474 Manufactures of industrial origin 6,504 Primary products 4,816 Petroleum products 2,169

Imports ($ m cif) –20,121 Capital goods, parts & accessories 8,119 Intermediate goods 7,219 Consumption goods 3,174 Petroleum products 809 Passenger vehicles 775 Others 25

Trade balance ($ m) 842 Balance with Brazil 1,309 Balance with USA –2,403 Balance with EU –1,558

Exports (% growth)Value 32.4Volume 25.7Unit value 5.3

Imports (% growth)Value –6.8Volume –11.3Unit value 5.1

Purchasing power of exports (1986=100) 288.2

Terms of trade (1986=100) 125.9Sources: INDEC; CEPAL.

Argentina: Merchandise trade 45


Recession brings the tradedeficit down

Notwithstanding rapid trade liberalisation since the late 1980s, Argentinaremains a relatively closed economy in terms of its foreign trade coefficient:total merchandise trade represented only 14.1% of GDP in 1995. After reachinga record surplus of $8.3bn in 1990, the trade balance deteriorated markedly upto 1994, when it recorded a $5.8bn deficit. In 1995 it went into surplus becauseof the fall in domestic demand and rapidly growing exports.

During the 1990-94 period imports expanded at an annual average of 52% as aresult of far-reaching trade liberalisation, a real appreciation of the domesticcurrency and strong domestic demand. Imports had been repressed after thedebt crisis of the early 1980s as the Argentinian economy had to make largetransfers of resources abroad, and fell further during the hyperinflation of 1989and 1990. The fall in capital inflows following the Mexican currency crisischoked import growth in 1995.

Annual export growth averaged 2% per year in the 1990-93 period but expandedrapidly to 26.3% in 1994-95, aided by structural reforms, high internationalprices and the demand boom in Brazil. Rapid export growth in the context of afixed nominal exchange rate was an important factor in Argentina’s remarkableexternal adjustment following the Mexican crisis. Export growth slowed tosingle digits in 1996.

Exports Export growth in recent years has been driven by manufactures (both agricul-tural and industrial) and energy products. Automobile exports have grownrapidly, stimulated by the sectoral regime and subregional trade agreements.Transport equipment exports reached $1.32bn in 1995, more than five timesthe 1991 figure. In 1995 manufactures contributed two-thirds of total exports.(Detailed export statistics are given in Reference tables 25, 27 and 28.)

Imports Up to 1994 import growth was evenly spread across sectors. Capital goods andspare parts accounted for about 44% of total exports in 1994. In 1995 importsof these sectors declined as a result of the contraction in domestic aggregatedemand and in investment. Although a large share of capital goods imports hasbeen channelled to investment in non-tradable sectors, they will contribute toenhancing international competitiveness through modernisation of infrastruc-ture. (Statistics on imports are given in Reference tables 26, 27 and 28.)

Brazil becomes a keymarket

In recent years Brazil has become the largest single outlet for Argentinianexports, its share in total sales abroad rising from 12.4% in 1991 to 26.1% in1995. This trend has been stimulated by Mercosur, unilateral trade liberalis-ation in Brazil and, more recently, by the demand boom brought about byBrazil’s stabilisation plan. Meanwhile, exports to the USA and the EU havestagnated. In 1995 exports to countries in the North American Free TradeAgreement (NAFTA) were less than one-third of sales to Mercosur. Almost athird of the increase in exports in 1995 was accounted for by the Brazilianmarket. (Historical statistics on main trading partners are given in Referencetable 29.)

46 Argentina: Merchandise trade


Main trading partners, 1995($ m)

Exports to: Imports from:

Mercosur 6,733 Mercosur 4,594 of which: of which: Brazil 5,458 Brazil 4,174

USA 1,769 USA 4,177

Chile 1,475 Italy 1,259

Netherlands 1,191 Germany 1,251

Italy 735 France 1,039Source: INDEC.

Mercosur and the commonexternal tariff

Trade policy has moved away from import substitution towards free trade.Tariffs have been reduced since the beginning of the 1980s and most non-tariffbarriers removed. Trade liberalisation proceeded much faster with Brazil,Paraguay and Uruguay in the context of Mercosur’s customs union. All exporttaxes and restrictions were removed, export procedures streamlined and salesabroad stimulated by tax rebates which offset the real appreciation of thedomestic currency. Fiscal constraints imposed by the Convertibility Plan forcedthe government to raise tariff rates on capital goods imports and to slash exportincentives in 1996.

In January 1995 Argentina adopted a common external tariff with its Mercosurpartners. The tariff ranges from 0% to 20% with 11 tariff levels and an 11.4%average tariff rate. Although some temporary exceptions remain, adoption of acommon external tariff has reduced the government’s discretion over tradepolicy management. Mercosur has greatly increased economic interdependencein the region, particularly between Argentina and Brazil.

Invisibles and the current account

Invisibles trade is heavilyin deficit

Invisibles trade has traditionally been in deficit. Argentina is a net importer ofreal services, and net factor payments abroad have been positive. High externalindebtedness and rising interest rates raised interest payments to almost 5% ofGDP in the mid-1980s. Although falling interest rates and more readily avail-able foreign finance in the early 1990s reduced interest payments, they remainan important factor in the invisibles account deficit. Following the surge inforeign investment in the early 1990s profit remittances abroad have increased,reaching $1.6bn in 1995, more than net interest payments ($1.3bn). Travel andtransportation are the largest contributors to the deficit on real services trans-actions, accounting for over 85% of the $2.1bn imbalance recorded in 1995.

Interest payments In 1993 interest payments abroad fell to $3.2bn, the lowest value since 1980,but they increased by 68% in 1995 to $5.4bn. Whereas in the early 1990s thepublic sector, which is the largest external debtor, made over 80% of interestpayments abroad, this share fell to 70% in 1995. By contrast, almost three-quarters of interest payments received from abroad accrued to the privatesector. Interest payments received have expanded by over 120% since 1992,owing to the rise in international reserves.

Argentina: Invisibles and the current account 47


Profit and dividends Net profit and dividend payments abroad have been rising and should continueto do so owing to the foreign investment inflows of the early 1990s. A largeshare of private capital inflows has been channelled into privatised public utili-ties which operate in markets subject to natural monopolies with guaranteedreturns on investment. Since Argentinians do not have large direct investmentsabroad, investment income is negligible. Between 1992 and 1995 profit remit-tances abroad doubled.

Transfer payments Transfer payments are relatively small, yielding a net inflow of $432m in 1995,most of which was private. A large part of incoming private transfers is due toEuropean expatriates (mainly Italians) receiving pensions from their countriesof origin.

In the first half of the 1990s the current-account deficit widened to peak at$9.4bn in 1994 (3.4% of GDP), compared with a $4.6bn current-account surplusin 1990. The reduction in capital inflows following the Mexican crisis reducedthe current-account imbalance to $2.4bn (below 0.9% of GDP). (The IMF pres-entation of the balance of payments is given in Reference table 30; the nationalbreakdown is in Reference table 31, and, analysed using new methodology, inReference table 32.)

Balance of payments, 1995($ m)

Current-account balance –2,399 Merchandise trade balance (fob) 2,241 Non-factor services balance –2,158 Factor services balance –2,914 Transfers 432

Capital-account balance 2,330 Banking sector 4,187 Non-financial public sector 5,478 Non-financial private sector 1,772 Others –9,107

Change in net international reserves –69Source: Banco Central de la República Argentina.

Capital flows and foreign debt

The debt crisis of the 1980s Following the 1982 debt crisis Argentina became involved in continualrescheduling negotiations with commercial banks and parallel talks with inter-national financial institutions. With a high debt burden and cut-off from inter-national capital markets, the economy had to undergo a traumatic adjustmentin the 1980s in order to service external liabilities. The policies required, suchas large devaluations, disrupted the domestic economy. Because the publicsector was the largest debtor, the private sector’s trade surpluses had to be“purchased” by the public sector to finance public debt interest paymentsabroad. The size of the fiscal adjustment required was too large as a share ofGDP. Monetary expansion and a build-up of domestic public debt ensued,laying the basis for the hyperinflation of 1989 and 1990.

48 Argentina: Capital flows and foreign debt


The Brady agreement After almost five years of partial and non-declared moratorium with commercialbanks, in 1993 the government concluded a Brady debt restructuring agree-ment. Commercial bank debt was retired and replaced with bonds, with a slightfall in the debt stock. The total external debt at the end of 1995 was estimated at$90bn, equivalent to 31% of GDP and almost four and a half times exportearnings. (World Bank figures on debt are given in Reference table 33.)

Foreign debt ratios, 1995(%)

Total external debt/GDP 31.1

Debt service/real exports of goods & services 22.7

Total external debt/real exports of goods & services 376Source: Banco Central de la República Argentina.

Capital inflows recover inthe early 1990s

The Brady agreement coincided with a change in conditions in the inter-national capital markets. As interest rates fell and Argentina restored its finan-cial relations with commercial banks, capital began to flow into the country. In1992-94 net capital inflows reached a total of $32.2bn. In contrast to the 1980s,the private sector was the main source of capital inflows, contributing a total of$13.5bn to privatisations, according to balance-of-payments statistics, andlarge sums of portfolio investment, which peaked at $3.1bn in 1993. Tradefinance was also an important factor, as was repatriation of flight capital,which was reflected in the increase in dollar deposits in the domestic bankingsystem.

Gross external debt by resident sector, end-1995

$ m % of total

Public sector (incl Central Bank) 66,991 74.7 Public bonds 37,968 42.3 International organisations 15,088 16.8 Official creditors 11,609 13.0 Commercial banks 1,709 1.9 Suppliers’ credit & others 617 0.7

Non-financial private sector 9,061 10.1 Private bonds 7,784 8.7 International organisations & private banks 1,277 1.4 Direct financial liabilities n/a n/a Direct trade liabilities n/a n/a

Financial sector (excl Central Bank) 13,627 15.2 Bonds 2,516 2.8 Credit lines 7,249 8.1 International organisations 331 0.4 Deposits 1,728 1.9 Miscellaneous liabilities 1,803 2.0

Total gross external debt 89,679 100.0Source: Secretaría de Hacienda.

Some of the circumstances surrounding the large capital inflows in the early1990s—rapid domestic demand expansion, growing trade deficits and realappreciation of the domestic currency—were similar to those before the 1982debt crisis. Two important differences were the more solid fiscal position andthe preponderance of private-sector investment.

Argentina: Capital flows and foreign debt 49


The Mexican crisis bringscapital inflows to a halt

Rising US interest rates had reduced foreign capital inflows throughout 1994 butthe Mexican devaluation of December 1994 caused a sharp deterioration inArgentina’s perceived country risk. Capital flows reversed and Argentinian assetprices plummeted. Although by mid-1995 the government had succeededin stemming the outflow of capital, the shock had demonstrated the risks ofrelying heavily on external capital. The government’s resolve to stick to thefixed exchange rate and improved conditions in international financial marketseased Argentina’s access to international capital markets in the second half of1995 and in 1996. But availability of external finance has again become aconstraint on economic growth.

Foreign reserves and the exchange rate

Foreign reserves stagnate Until 1993 the counterpart of large capital inflows was a rapid recovery offoreign exchange reserves. Foreign reserves (excluding holdings of dollar-denominated Argentinian public debt) of the Banco Central de la RepúblicaArgentina (the Central Bank) increased from $7.9bn at end-1991 to $15.5bn atend-1993. The accumulation of foreign exchange reserves slowed in 1994and levelled off during 1995, after a $6bn contraction immediately after theMexican devaluation. (Foreign reserves data are given in Reference table 34.)

Foreign reserves, Mar 1996($ m)

Gold 1,723

Foreign exchange & foreign exchange deposits 708

LAIAa –6

International reserve assets 16,138

Foreign-currency denominated public debt 2,643

Total international reservesb 18,781

a Net position with the Latin American Integration Association (LAIA). b Total international reservesas defined by the Convertibility Law.

Source: Banco Central de la República Argentina.

The peso stopsappreciating

The exchange rate was pegged at par to the US dollar by the Convertibility Lawof April 1991. Any change in the exchange rate requires a change in the law. Atthe outset of the plan, the divergence between domestic and US inflation ratescontributed to a real appreciation of the domestic currency but most of thestrengthening took place before the implementation of the Convertibility Plan.Since 1994 domestic inflation has converged towards OECD rates and in the lasttwelve months it has been lower than in the USA. Since 1994 the peso’s effectivereal exchange rate has become more competitive because of the real apprec-iation of the Brazilian currency and the real depreciation of the US dollaragainst European currencies and the yen. (Exchange rates are given in Referencetable 35.)

50 Argentina: Foreign reserves and the exchange rate


But exchange rate policyremains a key issue

The fixed exchange rate has been instrumental in stabilising the economy andrestoring credibility to the authorities. Few advocate a change despitethe constraints which the Plan imposes on economic policy. Moreover, thewidespread “dollarisation” of financial assets and liabilities means that a nomi-nal devaluation would not only change relative prices but also redistributewealth between creditors and debtors. However, if economic growth is slowand unemployment remains high, pressures may mount for a change in duecourse.

Recent capital market developments

• Elimination of fixed commissions for agents operating in the market and reduc-tion of charges levied upon stock-market transactions. Elimination of stamp andtransfer taxes. National treatment for capital gains (no tax) (1991-92).

• Authorisation to issue commercial paper. Companies must obtain credit ratingsfrom two private and independent firms (November 1992).

• Minimum capital requirements for firms operating in the stock market(July 1992).

• Common information and reporting requirements for all markets operating inthe country. The use of insider information is prohibited and public disclosure ofcompany holdings of directors and representatives is mandatory. Company report-ing formats simplified to facilitate interpretation of balance sheets (1991-92).

• Authorised companies permitted access to international capital markets throughthe issuance of American Depository Receipts (1993).

• Securitisation of financial assets allowed (December 1994).

• The first commodities market offering futures and options contracts opened in1991. A grains futures market opened in 1992.

Argentina: Foreign reserves and the exchange rate 51


Appendices

Sources of information

National statistical sources Banco Central de la Républica Argentina, Boletín Estadístico (monthly)

Banco Central de la Républica Argentina, Estados Contables de las EntidadesFinancieras (monthly)

INDEC, (Instituto Nacional de Estadística y Censos), Anuario Estadístico de laRepública Argentina (yearly)

INDEC, Censo Nacional Económico 1994, Avance de Resultados

INDEC, Censo Nacional de Población y Vivienda 1991

INDEC, Comercio Exterior Argentino (yearly)

INDEC, Encuesta Industrial (quarterly)

INDEC, Encuesta Nacional Agropecuaria (yearly)

INDEC, Encuesta Permanente de Hogares, Gran Buenos Aires (semi-annual)

INDEC, Encuesta Permanente de Hogares, Total de aglomerados (semi-annual)

INDEC, Estadísticas de Productos Industriales (semi-annual)

INDEC, Indec Informa (monthly)

INDEC, Indicador de Demanda Laboral (monthly)

INDEC, Indice del Costo de la Construcción (monthly)

INDEC, Indice de Precios al Consumidor (monthly)

INDEC, Indice de Precios al por Mayor (monthly)

INDEC, Indice de Salarios básicos de convenio de la industria y la construcción (monthly)

INDEC, Intercambio Comercial Argentino (monthly)

INDEC, Navegación Aerocomercial (yearly)

INDEC, Situación y Evolución Social, Síntesis (yearly)

Ministerio de Economía, Boletín Fiscal (quarterly)

Ministerio de Economía, Estimaciones Trimestrales del Balance de Pagos (quarterly)

Ministerio de Economía, Informe Económico (quarterly)

Secretaría de Agricultura, Ganadería y Pesca, Estadísticas Agropecuarias yPesqueras (yearly)

Secretaría de Agricultura, Ganadería y Pesca, Estimaciones Agrícolas (weekly)

Secretaría de Energía, Boletín Mensual de Combustibles (monthly)

52 Argentina: Sources of information


Secretaría de Energía, Informe del Sector Eléctrico 1992-94

Secretaría de Hacienda, Ingresos y Egresos de la Tesorería (monthly)

Secretaría de Minería de la Nación, Estadística Minera de la República Argentina,1987-93

Subsecretaría de Inversiones, Informe sobre Privatizaciones (quarterly)

International statisticalsources

IMF, International Financial Statistics (monthly)

ONU, Anuario estadístico de la Unesco

UN, Monthly Bulletin of Statistics

WHO, World Health Statistics (annual)

World Bank, World Debt Tables (annual)

World Bank, World Development Report (annual)

Select bibliography Miguel A M Broda y Asociados, Carta Económica (monthly), Buenos Aires

Comisión Económica para América Latina y el Caribe (CEPAL), Notas sobre la Evolución de la Economía Argentina (yearly)

Economist Intelligence Unit, Argentina Country Forecast (quarterly), London

Economist Intelligence Unit, Argentina Country Report (quarterly), London

Economist Intelligence Unit, Motor Business International (1st quarter 1995),London

Fundación de Investigaciones Económicas Latinoamericanas, Indicadores de Coyuntura (monthly), Buenos Aires

Instituto de Estudios Económicos sobre la Realidad Argentina y Latinoamericana, Fundación Mediterránea Newsletter (monthly), Buenos Aires

William C Leitch, South America’s National Parks, The Mountaineers, Seattle, 1990

Félix Luna, Breve Historia de los Argentinos, Editorial Planeta, Buenos Aires, 1993

OMS, Las condiciones de salud en las Américas, 1994

Robert Potash, The Army and Politics in Argentina, 1928-45, 1945-62, 2 vols,Stanford University Press, Stanford 1969, 1980 and 1994

David Rock, Authoritarian Argentina: The Nationalist Movement; Its History and ItsImpact, University of California Press, Berkeley, 1993

Secretaría de Industria, Industria Argentina en los ’90, Buenos Aires, 1994

Secretaría de Industria, Política Industrial para una Argentina en Crecimiento, Buenos Aires, 1994

Subsecretaría de Inversiones, Argentine Investment Update, Buenos Aires, 1995

Subsecretaría de Inversiones, Ministerio de Economía, Investing in Argentina(bi-monthly), Buenos Aires

Argentina: Sources of information 53


Reference tables

Reference table 1

Government finances(non-financial national public sector)

1991 1992 1993 1994 1995

Ps bnCurrent revenue 36.8 47.3 50.1 50.3 49.0 Tax revenue 25.7 36.3 44.4 47.8 46.4 Other current revenue 11.1 11.0 5.7 2.5 2.6Current expenditure 37.6 46.0 44.2 47.5 48.4 Personal services 7.4 7.9 7.6 7.6 7.2 Transfers to the national social security system 8.8 12.7 12.5 15.2 15.6 Interest on the public debt 4.1 3.5 2.9 3.2 4.1 Other transfers & current spendings 17.3 21.9 21.2 21.5 21.5Current savings –0.8 1.3 5.9 2.8 0.6Capital revenue 1.8 1.9 0.7 0.8 1.3 Privatisations 1.8 1.8 0.5 0.7 1.2 Others 0.0 0.1 0.2 0.1 0.1Capital expenditure 1.8 1.8 3.8 3.9 3.2Total revenue 38.6 49.2 50.8 51.1 50.3Total expenditure 39.4 47.8 48.0 51.4 51.6Financial result –0.8 1.4 2.7 –0.3 –1.3Primary surplus 3.2 4.9 5.6 2.9 2.8Primary surplus, excl privatisations 1.4 3.1 5.1 2.1 1.5

% of GDPCurrent revenue 20.3 20.9 19.6 17.9 17.4Capital revenue 1.0 0.8 0.3 0.3 0.5Total revenue 21.3 21.7 19.9 18.2 17.9Current expenditure 20.8 20.3 17.3 16.9 17.2Capital expenditure 1.0 0.8 1.5 1.4 1.1Total expenditure 21.8 21.1 18.8 18.3 18.3Financial result –0.5 0.6 1.1 –0.1 –0.5Primary surplus 1.8 2.2 2.2 1.0 1.0Primary surplus, excl privatisations 0.8 1.4 2.0 0.7 0.5Source: Secretaría de Hacienda.

54 Argentina: Reference tables


Reference table 2

Money supply(average unless otherwise indicated)

1991 1992 1993 1994 1995

Monetary base (Ps m) 5,589 9,610 13,090 15,800 14,722

Currency in circulation ($ m) 3,335 5,606 7,786 9,553 9,754

M1 “domestic” ($ m) 5,471 9,907 13,414 16,450 17,271

M3 “domestic” ($ m) 9,735 17,303 24,997 31,229 29,008

M3 “domestic” plus US dollar deposits ($ m) 14,508 26,515 39,725 52,197 50,917

M1 (% of GDP) 3.0 4.3 5.2 5.8 6.1

M3 “domestic” (% of GDP) 5.4 7.6 9.7 11.1 10.3

M3 “domestic” plus dollar deposits (% of GDP) 8.0 11.6 15.4 18.5 18.1

Note. M1 “domestic”: notes and coins plus peso-denominated demand deposits. M3 “domestic”: M1 plus peso-denominated interest-bearingdeposits.


Reference table 3

Interest rates(%; annual)

1991 1992 1993 1994 1995

Interbank rate 69.3 15.7 6.4 7.3 9.9

Term deposits 53.0 11.6 10.2 8.0 12.2

Private loans rate 85.8 34.8 30.2 28.4 32.9Source: Carta Económica.

Reference table 4

Gross domestic product(Ps m unless otherwise indicated)

1991 1992 1993 1994 1995a

Total GDP at current prices 180,898 226,636 257,570 281,645 281,039 GDP per head ($) 5,490 6,851 7,632 8,239 8,123

Total GDP at constant 1986 prices 10,270 11,159 11,832 12,710 12,149 % change 8.9 8.7 6.0 7.4 –4.4

a Estimates.

Sources: Banco Central de la República Argentina; Secretaría de Programación Económica.

Argentina: Reference tables 55


Reference table 5

Gross domestic product by expenditure(Ps m unless otherwise indicated; constant 1986 prices)

1991 1992 1993 1994 1995a

Consumption spending (incl inventory change) 8,379 9,332 9,792 10,395 9,825 % change 12.6 11.4 4.9 6.2 –5.5

Gross domestic investment 1,672 2,189 2,506 2,975 2,502 % change 25.1 30.9 14.5 18.7 –15.9

Exports of goods & real services 1,080 1,066 1,119 1,285 1,568 % change –8.2 –1.3 5.0 14.8 22.0

Imports of goods & real services –860 –1,428 –1,585 –1,916 1,705 % change 64.8 66.0 11.0 20.9 –11.0

Total GDP 10,270 11,159 11,832 12,710 12,149 % change 8.9 8.7 6.0 7.1 –4.4

a Estimates.


Reference table 6

Gross domestic product by sector(Ps m unless otherwise indicated; constant 1986 prices)

1991 1992 1993 1994 1995a

Agriculture, forestry & fishing 872 872 863 896 911 % change 4.0 0.1 –1.0 3.8 1.7

Mining & quarrying 238 257 272 304 317 % change –5.6 8.0 5.8 11.7 4.3

Manufacturing 2,811 3,017 3,153 3,285 3,071 % change 11.9 7.3 4.5 4.2 –6.5

Construction 513 624 692 800 712 % change 21.3 21.7 10.9 15.6 –11.0

Electricity, gas & water 203 214 237 251 258 % change 2.3 5.4 10.7 6.1 2.6

Commerce 1,705 1,863 1,946 2,102 1,925 % change 16.5 9.2 4.5 8.0 –8.4

Transport & communications 497 553 591 637 n/a % change 4.4 11.2 6.9 7.8

Finance, insurance & real estate 1,552 1,757 1,932 2,179 n/a % change 10.0 13.2 10.0 12.8

Community, social & personal services 1,877 1,895 2,032 2,099 n/a % change –1.4 1.0 7.2 3.3

a Estimates.




Reference table 7

National income, savings and investment(% of GDP; constant 1986 prices)

1990 1991 1992 1993 1994 1995

Terms of trade effect 1.0 1.4 1.6 1.8 2.2 2.8

Net factor payments –2.9 –2.9 –2.5 –1.9 –2.0 –2.6

National income 98.1 98.5 99.1 99.9 100.2 100.2

Consumption 78.9 81.6 83.6 82.8 81.6 80.5

Domestic savings 21.1 18.4 16.4 17.3 18.3 19.5

National savings 19.2 16.9 15.5 17.1 18.6 19.7

External savings –5.0 –0.6 4.1 4.1 4.8 0.9

Balance on goods & real services 6.9 2.1 –3.2 –3.9 –5.1 –1.1

Gross domestic investment 14.2 16.3 19.6 21.2 23.4 20.6Source: Comisíon Económica para América Latina y el Caribe (CEPAL).

Reference table 8

Productivity and labour costs

1991 1992 1993 1994 1995

Manufacturing productivity index (1982=100) 148.2 165.6 176.8 186.8 189.9 % change 14.7 11.7 6.8 5.7 1.7

Index of real labour costsa

(1991=100) 100.0 113.3 121.4 117.2 114.8 % change 18.1 13.3 7.1 –3.5 –2.1

Labour costs ($; at current prices)b 719.7 818.6 883.8 878.4 903.0 % change 29.4 13.7 8.0 –0.6 2.8

a Deflated by industrial wholesale price index. b Exchange rate adjusted by export taxes and thestatistical import levy.

Sources: Carta Económica; FIEL.



Reference table 9

Prices and earnings(annual average unless otherwise indicated)

1991 1992 1993 1994 1995

Consumer price index (1988=100; year-end) 242,185 284,555 305,512 317,288 322,389 (% change) 84.1 17.5 7.4 3.9 1.6

Wholesale price index (1981=100; year-end) 2,080,379,058 2,146,698,918 2,148,673,849 2,274,364,513 2,410,161,810 (% change) 56.7 3.2 0.1 5.8 6.0

Combined price index (1985=100; year-end) 3,463,485 3,891,038 4,083,451 4,266,699 4,395,143 (% change) 73.1 12.3 4.9 4.5 3.0

Index of export prices (1986=100) 120.8 120.9 123.3 127.0 133.4 (% change) 0.2 0.1 2.0 3.0 5.0

Index of import prices (1986=100) 101.5 99.3 99.5 101.0 106.2 (% change) –5.7 –2.2 0.2 1.5 5.1

Terms of trade index (1986=100) 119.0 121.8 123.9 125.7 125.9 (% change) 6.2 2.4 1.7 1.5 0.2

Real wage index (1991=100) 100.0 94.7 93.2 93.8 92.5 (% change) –11.2 –5.3 –1.6 0.6 –1.4

Real wage purchasing power index (1991=100) 100.0 98.2 97.3 98.1 97.1 (% change) 4.2 –1.8 –0.9 0.8 –1.0Sources: Instituto Nacional de Estadística y Censos (INDEC); CEPAL; FIEL.

Reference table 10

Population trends

1991 1992 1993 1994 1995

Total population (m; mid-year) 33.0 33.4 33.8 34.2 34.6

Growth rate (% change) 1.3 1.2 1.2 1.2 1.2

Crude birth rate (per ’000) 20.6 20.4 20.2 20.0 19.9

Crude death rate (per ’000) 8.33 8.25 8.17 8.09 8.06

Infant mortality rate (per ’000) 25.2 24.7 24.2 23.7 23.1Source: INDEC.

Reference table 11

Labour force statistics

1991 1992 1993 1994 1995

Labour force (’000) 13,035 13,360 13,942 14,005 14,532

Participation rate (%)a 39.5 40.0 41.25 40.95 42.0

Number unemployed (’000)a 847 922 1,338 1,596 2,529

Unemployment rate (%)a 6.5 6.9 9.6 11.4 17.4

a Average of May and October figures.

Source: INDEC.



Reference table 12

Key transport statistics

1991 1992 1993 1994 1995

RailwayPassengers transported (m) 216.0 214.5 213.6 248.3 351.9Passengers km (m passengers km) 8,045.4 6,748.7 5,835.7 6,460.1 n/aCargo loaded (’000 ton) 9,731.0 8,666.0 9,275.0 1,318.1 1,518.8

Road transportPassenger cars (’000) 4,405 4,809 4,856 4,427 4,665Goods vehicles (’000) 1,488 1,573 1,589 1,204 1,201Interurban passenger vehicles 2,597 2,844 2,934 3,278 3,665Passengers transported (m) 48.0 49.8 51.7 50.5 48.3Persons per passenger car 5.5 5.1 5.2 6.0 6.9

Air servicesTotal no of flights 76,021 80,914 84,278 95,976 n/aPassengers transported (’000) 6,548 7,712 7,958 9,517 9,795Cargo loaded (tons) 92,095 115,286 122,092 132,971 130,796

MaritimeVessel arrivals (Buenos Aires port) 1,508 1,624 1,846 1,841 n/aNo of containers handled (inward/outward) 254,745 341,992 474,512 532,681 n/aSources: INDEC; Asociación de Fabricantes de Automóviles (ADEFA); Comisíon Nacional de Transporte Automotor (CONTA), Anuario Portuario y Marítimo.

Reference table 13

Electricity, oil and gas statistics

1991 1992 1993 1994 1995

Electricity generation (mwh) 51,090 54,605 58,788 62,286 64,733

Total electricity sales to final users (mwh) 38,553 41,363 44,536 47,982 51,459 of which: residential (%) 30.6 31.7 32.4 33.1 32.3 industrial (%) 45.6 44.0 44.0 42.1 41.8

Natural gas output (m cu metres) 24,643 25,043 26,663 27,699 30,469

Petroleum output (000 cu metres) 28,440 32,246 34,466 38,732 41,736Source: INDEC.



Reference table 14

Banking statistics(year-end)

1991 1992 1993 1994 1995

Banks 167 167 167 168 127 National public 6 7 6 4 4 Provincial public 29 29 28 29 27 Private domestic 57 59 63 66 56 Private foreign 31 31 31 31 30 Cooperative 44 41 39 38 10

Non-banking financial institutions 47 43 39 37 30 Finance companies 26 24 21 21 18 Savings & loans 2 1 1 1 0 Credit houses 19 18 17 15 12

Total no of financial institutions 214 210 206 205 157

Assets of public banks & credit houses (Ps m) 10,625 10,973 13,166 10,839 14,599a

Assets of private banks & credit houses (Ps m) 22,550 34,772 42,600 50,974 49,392a

Assets of public non-banking financial institutions (Ps m) 41.7 30.0 26.4 36.4 35.4a

Assets of private non-banking financial institutions (Ps m) 219.8 440.9 643.7 838.3 715.2a

a September.


Reference table 15

Stock market indicators

1991 1992 1993 1994 1995

Merval index ($) 407.8 626.0 435.5 576.8 945.0

Market capitalisation ($ bn) 18.5 18.3 42.9 36.5 37.1

Share trading volume ($ m) 4,611 15,857 50,531 11,0361 33,688

No of stocks listed 170 169 165 157 144Source: Comisión Nacional de Valores.

Reference table 16

Number of visitors(000)

1991 1992 1993 1994 1995

Total no of visitors 2,870 3,030 3,532 3,865 4,100 of which from: border countries 2,181 2,223 2,557 2,785 2,870 European countries 290 366 443 480 533 USA 139 160 219 261 287 rest of American continent 141 149 156 181 246Source: Secretaría de Turismo.



Reference table 17

Manufacturing production

1991 1992 1993 1994 1995

Manufacturing gross domestic product (Ps ’000; 1986 prices) 2,811 3,017 3,153 3,285 3,071 % change 11.9 7.3 4.5 4.2 –6.5

Volume indices (1986=100)Industrial production 92.4 105.9 111.0 117.3 109.4Food, beverages & tobacco 99.0 101.8 101.7 106.6 108.1Textiles 96.3 97.0 93.4 88.9 81.7Paper & cardboard 97.2 99.9 80.3 98.4 107.4Chemicals 107.1 116.6 123.3 133.7 140.9Cement 79.2 91.5 102.1 114.3 99.1Basic metal industries 96.0 96.0 101.3 130.6 134.6Machinery & equipment 74.8 112.7 130.2 133.3 101.7Sources: Banco Central de la República Argentina; Secretaría de Programación Económica; Carta Económica.

Reference table 18

Output of main industrial products(’000 tons unless otherwise indicated)

1991 1992 1993 1994 1995

Vegetable oils 3,067 3,100 2,755 3,027 3,724

Steel 2,972 2,680 2,870 3,274 3,575

Aluminium 166 153 171 173 183

Cement 4,399 5,051 5,647 6,306 5,477

Paper 966 977 927 970 1,026

Sulphuric acid 235 222 194 192 180

Synthetic fibres 23.1 19.1 14.9 15.8 13.6

Automobiles (’000 units) 140 262 342 409 285

Tractors (units) 3,099 3,783 2,926 3,667 2,551

Tyres (’000 units) 4,739 5,627 6,243 7,329 7,174

Washing & drying machines (’000 units) 436 756 801 702 458

Colour TV sets (’000 units) 607 1,386 1,612 1,523 949Source: INDEC.

Reference table 19

Miscellaneous manufacturing statistics

1974 1985 1994a

No of establishments 126,388 109,376 102,232 Food, beverages & tobacco 27,462 28,499 24,828 Textiles, garments & leather products 18,310 12,353 11,721 Wood products, paper & printing 25,132 14,921 14,551 Chemical, rubber & plastic products 6,217 6,556 6,061 Non-metal mineral products 14,216 10,919 4,615 Metals, machinery, transport & others 35,051 36,124 40,456

Total manufacturing employment (no) 1,525,221 1,381,805 1,056,767

Workers per establishment 12.1 12.6 10.3

a Preliminary: number of locals (one local may host more than one establishment).

Source: INDEC, Censo Económico Nacional.



Reference table 20

Manufacturing sector’s sales to the domestic market(domestic output)

1991 1992 1993 1994 1995

Vehicles (units) 137,175 243,363 311,213 360,721 224,961 % change 61.8 77.4 27.9 15.9 –37.6

Beverages (beer, wine & soft drinks; ’000 hl) 40,650 45,256 45,428 48,000 43,743 % change 21.8 11.3 0.4 5.6 –8.9

Machine tools (1985=100) 100.0 160.0 145.1 135.6 123.5 % change 66.1 60.0 –9.3 –6.5 –8.9

Pharmaceuticals (m units) 431.2 458.0 474.4 432.5 407.4 % change 11.2 6.2 3.6 –8.8 –5.8

Cigarettes (m packets) 1,727.7 1,845.0 1,928.5 1,974.6 1,962.8 % change 4.3 6.8 4.5 2.4 –0.6

Tractors (units) 3,231 3,518 2,966 3,604 2,515 % change –28.5 8.9 –15.7 21.5 –30.2Source: INDEC.

Reference table 21

Minerals and quarrying output(Ps ’000; 1992 prices)

1991 1992 1993 1994 1995

Metallic minerals 69,203 55,875 44,137 40,821 42,357

Non-metallic minerals 109,889 120,603 126,264 117,617 119,446

Precious stones 237,168 257,170 306,882 328,661 343,237

Semi-precious stones 577 5 1,194 958 1,402

Total output 416,838 433,654 478,477 488,057 506,442Source: Secretaría de Minería.

Reference table 22

Agricultural production(’000 tons; crop years)

1991/92 1992/93 1993/94 1994/95 1995/96

Cereals 25,440 25,550 23,810 26,129 23,705 of which: maize 10,701 10,901 10,360 11,404 10,660 wheat 9,884 9,874 9,659 11,306 9,199 sorghum 2,767 2,860 2,148 1,650 2,118

Oilseeds 15,282 14,411 16,142 18,330 18,739 of which: soybeans 11,310 11,045 11,720 12,133 12,518 sunflower 3,408 2,956 4,095 5,800 5,600

Industrial crops (raw cotton, sugar cane, tobacco, tea & yerba mate) 14,277 11,584 12,530 14510 n/a

Fruits 6,608 5,379 5,815 5,697 n/a

Vegetables 4,312 4,525 5,122 5,707 n/aSource: Secretaría de Agricultura, Ganadería y Pesca.



Reference table 23

Livestock and fishing

1991 1992 1993 1994 1995

Cattle stock (m) 51.2 53.0 52.7 53.2 52.6

Cattle slaughtered (’000) 12,345 11,713 11,895 11,880 11,585

Sheep slaughtered (’000) 4,654 4,440 4,388 4,459 3,948

Pigs slaughtered (’000) 1,682 1,848 2,081 2,167 1,926

Poultry (’000 tons) 374 448 500 520 565

Wool (’000 tons) 125 110 103 88 80

Milk production (m litres) 5,937 6,591 7,002 7,777 8,528

Total fishing catch (tons) 630,006 692,110 919,503 938,602 1,136,899 of which: hake 416,612 381,364 468,245 465,529 621,015 squid 46,313 77,468 193,690 196,893 199,048 pollock 44,143 85,549 109,829 86,084 104,208 white corvina 4,663 10,672 12,805 18,261 30,030 anchovy 20,615 19,289 19,149 19,458 24,457 cod 18,124 22,994 23,788 20,338 23,265Sources: Secretaría de Agricultura, Ganadería y Pesca; INDEC; Dirección Nacional de Cuentas Nacionales.

Reference table 24

Key construction statistics

1991 1992 1993 1994 1995

No of construction permits 43,841 56,909 62,893 80,862 69,599 Residential (%) 74.2 72.0 73.9 79.4 79.9 Non-residential (%) 25.8 28.0 26.1 20.6 20.1

Area covered by permits (’000 sq metres) 8,162 11,352 11,532 14,931 12,806 Residential (%) 61.2 62.2 60.2 65.1 61.7 Non-residential (%) 38.8 37.8 39.8 34.9 38.3

Total cement sales (’000 tons) 4,386 5,068 5,641 6,298 5,476Source: INDEC.

Reference table 25

Exports($ m; fob)

1991 1992 1993 1994 1995

Food & live animals 4,712 5,388 5,319 5,579 7,208

Beverages & tobacco 188 189 162 160 269

Non-edible crude materials 1,551 1,140 984 1,503 1,835

Mineral oils & fuels 766 1,081 1,235 1,651 2,167

Vegetable oils 1,219 1,104 1,070 1,525 2,085

Chemicals 692 711 708 935 1,337

Manufactures, classified mainly by material 1,733 1,377 1,685 1,984 2,870

Machinery & transport equipment 831 920 1,444 1,772 2,277

Miscellaneous manufactured articles 285 324 492 695 913

Non-classified goods 2 1 17 36 1

Total 11,978 12,235 13,118 15,839 20,964Source: INDEC.



Reference table 26

Imports($ m; cif)

1991 1992 1993 1994 1995

Food & live animals 381 752 777 993 970

Beverages & tobacco 54 120 96 97 92

Non-edible crude materials 470 524 541 592 715

Mineral oils & fuels 470 424 403 633 844

Animal & vegetable oils 10 21 19 25 31

Chemicals 1,675 2,080 2,357 3,017 3,591

Manufactures, classified mainly by material 1,287 2,219 2,240 2,783 2,921

Machinery & transport equipment 3,107 7,072 8,469 11,231 8,961

Miscellaneous manufactured articles 806 1,652 1,842 2,200 1,979

Non-classified goods 15 8 40 20 18

Total 8,275 14,872 16,784 21,590 20,118Source: INDEC.

Reference table 27

Key exports and imports($ m)

1991 1992 1993 1994 1995

ExportsMineral oils & fuels 766 1,082 1,236 1,651 2,169Vegetable oils 1,221 1,109 1,079 1,534 2,097Cereals 1,067 1,548 1,454 1,333 1,863Food industry 1,270 1,459 1,451 1,348 1,254Vehicles 219 356 664 867 1,238Skins & leather 504 461 603 742 903Oilseeds 1,081 790 696 952 885Meat & edible residues 506 463 473 628 848Fish, crustaceans & molluscs 414 516 649 672 839Boilers, machines & mechanical equipment 477 446 578 519 736

ImportsBoilers, machines & mechanical equipment 1,375 2,589 3,236 4,256 3,861Electrical machinery 914 2,191 2,577 3,190 2,632Vehicles 627 2,018 2,369 3,389 2,169Organic chemicals 705 740 815 1,020 1,189Plastic materials 385 559 690 833 1,003Mineral oils & fuels 465 424 403 633 844Iron & steel 385 684 544 728 776Paper & cardboard 206 360 453 527 672Optical, photographic, measurement & medical equipment 260 442 461 632 550Miscellaneous chemicals 224 280 306 352 436Source: INDEC.



Reference table 28

Trade volume indices(1990=100)

1991 1992 1993 1994 1995

Exports 97 99 104 122 153

Imports 215 395 445 564 500Source: CEPAL.

Reference table 29

Main trading partners($ m)

1991 1992 1993 1994 1995

Exports to:Brazil 1,489 1,671 2,814 3,655 5,484USA 1,244 1,349 1,264 1,724 1,770Chile 488 581 592 999 1,475Netherlands 1,328 1,212 1,271 1,180 1,191Italy 574 525 505 654 736Spain 460 486 495 584 696Uruguay 311 384 512 650 654Germany 732 731 625 605 650Paraguay 178 272 358 498 631Iran 323 324 248 229 510Mercosur 1,977 2,327 3,684 4,803 6,769EU 3,956 3,732 3,646 3,891 4,424NAFTA 1,517 1,614 1,557 2,070 2,029

Imports from:USA 1,871 3,226 3,859 4,928 4,177Brazil 1,526 3,339 3,570 4,286 4,175Italy 356 760 980 1,431 1,259Germany 729 1,083 1,024 1,382 1,251France 255 574 739 1,072 1,040Spain 199 406 507 865 930Japan 393 697 669 620 711China 55 170 215 217 608Chile 381 646 706 831 514UK 102 197 259 355 413EU 2,033 3,633 4,140 6,168 6,009NAFTA 2,073 3,453 4,184 5,344 4,819Mercosur 1,805 3,755 4,214 5,129 4,512Source: INDEC.



Reference table 30

Balance of payments, IMF estimates($ m)

1991 1992 1993 1994 1995

Merchandise exports fob 11,978 12,235 13,117 15,840 15,904

Merchandise imports fob –7,559 –13,685 –15,543 –20,076 –18,730

Trade balance 4,419 –1,450 –2,426 –4,236 2,239

Services credit 2,408 2,492 2,505 2,666 2,890

Services debit –4,007 –4,703 –5,166 –5,525 –5,044

Income credit 1,746 1,824 2,159 2,934 4,168

Income debit –6,006 –4,228 –4,531 –5,524 –7,082

Net unrequited transfers 793 662 412 319 430

Current-account balance –647 –5,403 –7,047 –9,366 –2,399

Net direct investment 2,439 2,555 3,482 603 1,319

Net portfolio investment –34 882 26,226 4,465 4,239

Net other capital –2,245 3,665 –11,570 3,616 –5,382

Net errors & omissions –341 194 31 7 13

Overall balance –828 1,893 11,122 –675 –2,210

Financing (– indicates inflow)Reserve assets –2,040 –3,263 –4,279 –685 81Use of IMF credit & loans –590 –73 1,211 455 1,924Liabilities constituting foreign authorities’ reserves 22 Exceptional financing 3,436 1,443 –8,054 904 205Source: IMF, International Financial Statistics.

Reference table 31

Balance of payments, national estimates (old methodology)($ m)

1991 1992 1993 1994

Trade balance 3,703 –2,637 –3,666 –5,805 Merchandise exports fob 11,978 12,235 13,117 15,739 Merchandise imports cif –8,275 –14,872 –16,783 –21,544

Current-account balance –259 –6,664 –7,288 –10,074

Real services –815 –1,120 –1,262 –933

Financial services –3,940 –3,656 –2,922 –3,654 of which: profit & dividends –805 –845 –917 –1,200 interest due –5,196 –4,180 –3,608 –4,393 interest received 2,061 1,369 1,603 1,939

Transfers 793 749 446 318

Capital-account balance –7,232 3,658 17,532 11,634

continued



1991 1992 1993 1994

Public sector 974 –5,688 3,624 2,706

Private sector –8,206 8,689 13,908 8,928 of which: direct investment 465 518 587 677 privatisation 1,974 3,661 5,718 605 loans from international organisations –27 –20 –11–3 private-sector bonds 690 1,946 4,530 1,447 financial loans 142 459 241 936 others –11,450 2,125 2,843 5,266

Errors & omissions –125 –57 55 74

Balance-of-payments financing 7,616 3,392 –10,299 –1,634 of which: reserve assets (– indicates increase) –2,728 –3,826 –4,834 –538Source: Banco Central de la República Argentina.

Reference table 32

Balance of payments, national estimates (new methodology)($ m)

1992 1993 1994 1995

Trade balance –1,450 –2,426 –4,239 2,241 Merchandise exports fob 12,235 13,117 15,839 20,969 Merchandise imports fob –13,685 –15,543 –20,078 –18,728

Current-account balance –5,403 –7,047 –9,365 –2,399

Real services –2,210 –2,660 –2,856 –2,158

Financial services –2,404 –2,372 –2,590 –2,914 of which: profit & dividends –845 –1,273 –1,270 –1,624 interest paid –3,383 –3,223 –4,240 –5,426 interest received 1,824 2,124 2,920 4,136

Transfers 661 411 320 432

Capital-account balance 8,507 11,528 9,926 2,330

Banking sector 775 –1,982 2,066 4,187 of which: Central Bank –177 –2,818 306 1,929 Other financial institutions 952 836 1,760 2,258

Non-financial public sector 1,376 7,211 3,171 5,478 of which: national government 1,976 6,566 3,877 5,969 local governments –1 870 99 320 enterprises & others –599 –225 –805 –811

Non-financial private sector 1,358 3,378 1,780 1,772

Other capital movementsa 4,998 2,921 2,909 –9,107

Change in international reserves 3,104 4,481 561 –69

a Includes errors and omissions.




Reference table 33

External debt($ m)

1990 1991 1992 1993 1994

Total external debt 62,233 65,397 68,339 70,566 77,388 Long-term debta 48,706 49,368 49,849 58,393 66,005 Short-term debt 10,445 13,546 16,176 8,653 7,171 Use of IMF credit 3,083 2,483 2,314 3,520 4,211

Public & publicly guaranteed debt 46,906 47,568 47,605 52,024 55,785 Official creditors 11,226 12,570 13,160 16,806 18,766 Multilateral 5,007 5,419 5,037 7,112 7,695 Bilateral 6,220 7,151 8,124 9,694 11,070 Private creditors 35,679 34,998 34,445 35,218 37,020 Bonds 11,514 11,661 11,620 33,974 35,628 Commercial banks 22,661 22,019 21,618 804 918 Other private 1,504 1,318 1,207 440 474

Private non-guaranteed 1,800 1,800 2,244 6,369 10,220

Debt service 6,161 5,545 5,003 6,562 6,692 Principal 3,444 2,618 2,178 3,261 2,581 Interest 2,717 2,927 2,826 3,301 4,111

Ratios (%)Total external debt/exports of goods & services 414.7 429.6 441.3 395.4 368.0Total external debt/GNP 46.0 35.6 30.4 27.7 27.8Debt serviceb 41.1 36.4 32.3 36.8 31.8

a Maturity over one year. b Total debt service as a proportion of exports of goods and services.

Source: World Bank, World Debt Tables.

Reference table 34

Foreign reserves($ m; end-period)

1991 1992 1993 1994 1995

Foreign exchange 5,812 9,615 13,339 13,764 13,749

SDRs 193 375 453 563 539

Total reserve assets excl gold 6,005 9,990 13,791 14,327 14,288

Golda 1,430 1,446 1,672 1,651 1,679

Total reserves 7,435 11,436 15,463 15,978 15,967

a National valuation.

Source: IMF, International Financial Statistics.



Reference table 35

Exchange rates

1991 1992 1993 1994 1995

Nominal (end-period)Ps:$ 0.9985 0.9905 0.9985 0.9995 1.0000Ps: SDRs 1.4283 1.3619 1.3715 1.4591 1.4865

Real (annual averages; 1990=100)a

Ps:$ 92.7 91.6 92.0 92.5 86.1Ps:DM 92.3 97.6 91.3 93.4 98.8Ps:¥ 99.7 102.5 111.6 118.3 117.4Ps:Real 78.0 74.5 75.2 94.7 98.4

Effective real exchange rate index 89.1 89.3 88.4 94.6 94.8

a Deflated by wholesale prices.

Sources: IMF, International Financial Statistics; Carta Económica.

Editor:All queries:

John BowlerTel: (44.171) 830 1007 Fax: (44.171) 830 1023



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Argentina - International University of Japan · Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK ISSN 0269-4468. September