Argentina`s Economy Argentina lives in a democracy since 1986. Before this year lived it under a military regime. In the nineties under the presidency of Menem the country experienced a great increase in the liberalization of trade. Argentina has a free market economic system. Due to the recent privatization program, the State now has a very limited role in the economy. According to the Competitiveness Report of the World Economic Forum Argentina is classified as one of the most open, least protectionist countries in the world.
Its currency is convertible to the US dollars and there is total freedom for moving capital internationally. Argentina has conducted one of the most intensive privatization programs in the world. The telephone company, airlines, most railroads, electric power production companies (including hydroelectric power plants), the Argentine oil company YPF (bought by the Spanish company Repsol) steel mills, ports, TV stations and most public services were transferred recently to the private sector. Consistent with Fundacion Invertir the combined value of privatized firms amounts more to more than US$ 30 billions. Many foreign firms have participated in this large-scale privatization program.
Foreign investors do not need to seek any kind of prior approval and are free to repatriate full amount of their capital and earnings any time. Foreign and domestic companies are treated equally. Under the law, they have access to all economic sectors and are eligible for incentive program and state procurement. II. TRADE PATTERN It is hard to state the type of trade that exists between Argentina and Brazil in the automobile industry because both countries import and export cars of the same brand and very similar models.
Volkswagen produces some of its model of cars in Argentina and some others model in Brazil. The reason for this is to achieve economies of scale; each country specializes in a certain model of car, by doing so they reduce the cost of each additional unit. Another reason for specialization of production in each country is that it might be cheaper to produce a certain model in either Argentina or Brazil. Several companies as Volkswagen have invested in production facilities in Mercosur. Additionally, joint ventures between local and foreign parts manufacturers have improved quality.
A report on Argentina auto parts/services announced that local production in Argentina was estimated at $1.9 billion in 1997. From 1996 to 1997 the import market for automobile parts and accessories grew by 30 percent to $2.2 billion. Imports from Brazil represent 35 percent of the local import market. The gains in imports with exports from Brazil boost employment in Argentina by a 30 percent and bilateral trade with Brazil as well as nine fold growth in investments. (States-USA). See AUTO PARTS/SERVECE table in appendix.
In the period of July 1997-June 1998 Argentina exported wheat to the following countries: Brazil, Turkey, Egypt, Iran, Peru, Indonesia, Sir Lanka, Jordan, Tunisia and Kenya. Argentina experiences “inter” trade with these countries because it has the comparative advantage of producing wheat at a cheap cost. Soils in Argentina are fertile and farmers do not need to use as much fertilizers as in the case of European farms. European farms have been harvested for years. As a consequence of this farms need to be fertilized or remain unused for a period of four years to produce crops.
Argentina engages in”inter” trade on the exports of corn to the following counties: Japan, Brazil, Egypt, Taiwan, Peru, Chile, Spain, Iran, Venezuela, and Colombia. Argentina exports corn to Brazil because it does not produce enough corn to supply its domestic demand. Argentina also produces “Inter” trade exports of sorghum with Japan, Mexico, Taiwan, Colombia, Norway, Spain, and Chile. Argentina and Brazil benefit from trade among themselves because each country exports something in which it does not have the comparative advantage or in which its domestic production is not enough. Argentina imports coffee and sugar from Brazil. Argentina does not produce coffee while Brazil is the largest exporter in the world. In 1997 was the first time in 67 years that Argentina exported beef to the United States of America.
This country has been declared free of foot and mouth disease in May 1997. Beef is an example of “Inter” trade between Argentina and countries as Brazil because Argentinas production exceeds by far its demand. The “Comparative International Statistics” has ranked Argentina as the number 1 country in the consumption of beef followed by the United States in a second place. Argentina, as well as the US, has been struggling to export their beef in the European Union. Both countries had no positive results due to the high subsidies given by the European governments to their farmers. Though primary products account for 38 percent and 37 percent for agricultural manufacturers Argentine cattle ranchers as well as farmers receive no subsidies from the Argentine government.
They were not financially aided for the floods they have suffered with “El Nio” current in 1998. The Argentine government hopes to export beef to Asia, especially to Japan. Argentina exports oilseeds in the type of sunflowerseed or soybean to Brazil, China, Costa Rica, Egypt, Germany, Holland Indonesia, Italy, Japan, Lebanon, Malaysia, Russia, Spain, Taiwan, Thailand, United Kingdom, United States, and Venezuela. As reported by the U.S Department of Agriculture, (Foreign Agriculture Service) China was the largest importer of soybean in June 1999. The opening of the economy of China and its possible entrance in the WTO could increase Argentinas exports of soybean and other products to China. III. TRADING PARTNERS Argentinas dominant trade partner is its largest neighbor, Brazil.
Brazil achieved this standing in 1992 and so far has retained it in every year since then. In 1994 Brazil accounted for US $ 7.98 billion (21.3) percent of Argentinas total trade, in 1995 this grew to $9.658 billion (23.5 percent), by 1996 total foreign trade with Brazil grew 25 percent. The nations second largest partner was the US, with $ 6.110 billion (16.3 percent) of total trade in 1994, $ 6.011 billion (14.6 percent) in 1995, $ 6.72 billion or (14.2 percent) in 1996, and $ 8.285 (or 14.6 percent) in 1997. Argentina conducts almost 42 percent of its trade with these two countries. (World Bank) Argentina also trades with the following countries: Italy (US$2.470 billion), Chile (US$ 2.598), Germany (US$ 2.155), Spain (US$ 1.873), China (US$ 1.872), France (US$ 1.679), and Japan (US$ 1.681). (Stat-USA). The top ten trade partners accounted for more than 72 percent of Argentinas trade in that year. Mercosur has significantly affected Argentina trade relationship with its neighbors. Mercosur means Market of the Southern Cone.
The cone representing Argentina, Brazil, Uruguay and Paraguay in South America. As said by Stat-USA, this market is “one of the largest and most dynamic integrated markets in the developing world, and close cooperation between Brazil and Argentina-historic competitors-is key to mercosurs impressive growth. Argentina accounts for 27 percent of …