Economy of Argentina

Main article: Argentina

GDP

2023: 2.2% fall forecast

2022

GDP estimate - $0.6 trillion

GDP size forecast - $0.56 trillion

2021: GDP size - $0.46 trillion

2020: Argentina's GDP has only grown by 33% in 20 years

Financial system

Non-financial debt

2022: Aggregate non-financial debt

National debt

2022: Awaiting a new loan from the IMF

The Argentine government in June 2022 paid the IMF $2.7 billion. This is a fairly significant amount for a country whose foreign exchange reserves amount to $9.7 billion. Amid capital outflows and an increase in the discount rate, Argentine officials are actively looking for ways to subsidize energy tariffs. This is extremely important for maintaining social stability due to global price increases. And their plan is to get a new $4 billion loan from the IMF after another payment on Argentina's huge debt.

2020: Ninth default on $65 billion of external bonds

Argentina defaulted on external bonds - the ninth in the history of the country. The government on May 22, 2020 did not pay $500 million in interest on three series of bonds and is negotiating with creditors to restructure external debt.

By early August 2020, the Argentine authorities reached an agreement with a group of foreign creditors on the restructuring of the $65 billion public debt, according to which the government has been in default since May. Paper owners will receive 55 cents per dollar, which will bring losses to many.

Instead of default debt, the Argentine government will provide creditors with three long-term bond issues.

Argentina's next default is the third in the last 20 years and the ninth since the beginning of the 20th century.

2018: Repayment of private investor loans with $57 billion IMF loan - the reason for the country's endless default in the future

In 2018, the IMF provided Argentina with a loan, totaling about $57 billion, of which $44 billion was actually paid. After that, the program was curtailed. These funds did not reach the real economy. They were used to repay loans from private investors, mainly American investment funds. One of the main investors was George Soros.

Before the upcoming 2019 elections, amid the outright looting of Argentina by American investors, there was a real threat of the left opposition coming to power. This meant that investor funds were in jeopardy, with the big players fearing they would not be able to withdraw them. It was necessary to urgently take action. To solve this (in general, political) task, the IMF was involved as a convenient performer.

Argentina's lending program was initially aimed at ensuring the victory of President Mauricio Macri in the upcoming elections in the fall of 2019. Even Donald Trump, who was then the president of the United States, entered the game. Trump has been open about continuing good relations with Macri's family and the need to support him.

IMF cash flow poured into the pockets of American investors in Argentina for 1.5 years, before the presidential election. In the election, Macri was expected to lose. But American investors managed to withdraw their money, some even with a profit. Argentine society has received hope for change for the better, but in reality, Argentina's debt to the IMF has weighed an overwhelming burden on the country's economy.

In 2022-2023 alone, the volume of loan payments will be about $20 billion per year. This is a short-term loan, and according to the IMF charter it cannot be restructured. For a country with reserves of $9.7 billion, this means default. Moreover, cyclical, since it is impossible to correct the situation due to economic growth. All free funds will go to pay the debt.

2001: $80 billion bond default

In 2001, the country stopped payments on a debt of 80 billion, dollars declaring the largest sovereign default in history at that time.

This was preceded by a scandal surrounding official Argentine statistics, when it turned out that the authorities had been fabricating inflation data for years, underestimating the rate at which the national currency, the peso, was depreciating.

Gold and foreign exchange reserves

2024: Paltry $30m

Currencies: Pesos and US Dollars

2024: Allowing US dollars to be used to pay for everyday purchases

Argentine President Miley wants Argentines to dollarize the country's economy. The approach, dubbed "endogenous dollarization," involves reducing the peso supply by forcing Argentines to use dollars to pay for day-to-day expenses. Supermarkets and other businesses for September 2024 accept payment in dollars.

2023

Banknotes for 20 thousand and 50 thousand pesos

In December 2023, Argentina's new president, Javier Miley, said the government would print 20,000 and 50,000 pesos notes. Currently, the largest bill in Argentina is 2 thousand pesos. Inflation in Argentina in November amounted to 12.8%, in 11 months exceeded 148%.

The Central Bank will issue securities with a face value much higher than those in circulation at this time. "The banknote theme is torture. You have to pay something in cash, you have to go with a bag of pieces of paper, "he said. "This is obvious," he answered the question of whether bills in denominations of 20 and 50 thousand pesos will appear in the country.

Currency devaluation by 54% to 800 pesos per dollar

In December 2023, immediately after the election of a new president, Argentina devalued the peso by 54%. The government has announced spending cuts as the first steps in President Javier Miley's shock therapy program to revive the country's troubled economy.

The new administration has weakened the official exchange rate to 800 pesos per dollar, the Louis Kaputo economy minister said in a televised address after local markets closed on December 12. "There is no more money," Caputo repeated repeatedly in the footage.

Other measures announced include halving the number of ministries, cutting transfers to provinces and suspending public works. In addition, the government will reduce subsidies for transport and power. At the same time, Argentina will increase some welfare programs

Issue of new 2000 peso notes due to inflation of 94%

The Central Bank of Argentina in February 2023 decided to print a new banknote for 2000 pesos ($10.6). Reason: high inflation - at the end of the year it amounted to 94.8%.

Banks run out of space to hold cash due to frenzied inflation

In mid-January 2023, it became known that the peso in Argentina is depreciating very quickly, as inflation approaches 100%. Most banks in the state lack space in depositories to store banknotes. For commercial establishments that have to transport cash to branches and ATMs, it also creates not simple problems with space and the transportation of banknotes.

On January 11, 2023, the Buenos Aires Chamber of Business, which brings together small firms in the capital, called on Argentina's Central Bank (CB) to start printing higher denomination banknotes to address the growing problems associated with transactions with an increasing number of banknotes.

As of January 24, 2023, the Central Bank resisted calls from the Argentine government to print bills with a face value of more than 1 thousand pesos, which on January 18 cost only $2.65 when estimated at generally accepted unofficial exchange rates. With prices rising almost threefold annually, the dilemma has led Argentines to withdraw dozens of notes from ATMs for ordinary amounts, with tourists often carrying bundles of cash.

In response to this problem, Banco Galicia Bank plans to open two cash storage facilities in 2023, having already increased the total number of storage facilities from two in 2019 to 10 in 2022. These investments, according to a Banco Galicia representative, will expand storage capacity by 30% to $164 million in 100 peso bills. Second bank Santander Rio also plans to double its storage space.

Since President Alberto Fernandez took office in December 2019, the amount of money in public circulation has quadrupled from 895 billion pesos to 3.8 trillion pesos, according to the Central Bank. At the same time, the banknote of 1 thousand pesos remains the largest denomination.

Argentina has been among the countries with the highest inflation since the beginning of 2018. The rise in prices in July 2022 in the country was not only the highest since 2002. In 2021, inflation in Argentina amounted to 50.9%, in 2020 - 36.1%, in 2019 - 53.8%, in 2018 - 47.6%.^[1]

2021: Multiple exchange rates

2019

Inflation

2024: Inflation nears 300%

Consumer price growth in May 2024 slowed to 4.2% m/m and 276.4% y/a.

2023: Inflation rises to 200%

The Argentine inflation crisis has led the country to overtake Venezuela and become the country with the fastest price increases in Latin America.

Earlier, inflation in Argentina in April continued to accelerate faster than expected - rising to 109% in April, as a peso drop fueled by fears of devaluation pushed prices higher.

Inflation in Argentina in February 2023 exceeded 100% for the first time since 1991.

Inflation in Argentina reached an impressive 98.8% in January 2023.

2022

Inflation in November - 88%

Inflation in August - 78%

Inflation in Argentina exceeded 78% in August 2022.

Earlier in August 2022, the Central Bank of Argentina raised the key rate from 60% to 69.5%. This is the steepest increase since 2019. The rate rises against the background of accelerating inflation - in July, price growth in the country exceeded 70%.

2021: 50,9%

In 2021, inflation in Argentina reached 50.9%. This is significantly higher than in 2020 (36.1%), when the country's economy was actually paralyzed due to the COVID-19 coronavirus pandemic. In 2019, the growth in the total level of prices for goods and services was measured at 53.8%, in 2018 - 47.6%. This is evidenced by data from statistics and the country's census, published in January 2022.

As noted, when TASS forming the budget in 2020, the Argentine government planned that the price increase would be 29%. Thus, the forecast of the authorities turned out to be much lower than the real indicator inflations^[2]

Argentina's consumer price index remains one of the highest in the world, according to the Buenos Aires Times. The largest price increase in 2021 was observed in hotels and restaurants (65.4%), the transport sector (57.6%) and the food market (50.3%). Beef, one of Argentina's most key exports, rose 60% in 2021.

In 2021, the government tried to contain inflation, mainly by regulating prices for utility tariffs and the exchange rate, says Hernan Fletcher of the Argentine Center for Economic Policy (Centro de Economia Politica Argentina). - Although this was certainly unsuccessful, inflation would have been even higher without such measures.

Since 2019, Argentina has had strict currency controls, allowing individuals to buy just $200 a month at the official rate. Such measures were put in place to protect the Central Bank's reserves.

Argentine President Alberto Fernandez said in January 2022 that price controls would be extended to more than 1,300 products through April. According to the head of state, inflation growth has not one reason, but several.^[3]

2020: 36,1%

2019: 53,8%

2018: 47,6%

Key rate

2024: Cut rate to 40%

On May 14, 2024, Argentina cut its benchmark interest rate to 40% for the sixth time, as the country's government believes inflation is declining and the Central Bank's balance sheet is shrinking. Borrowing costs fell from a high of 133% last December.

Earlier on May 2, 2024, the Central Bank of Argentina reduced the base interest rate from 60% to 50%.

2023: Rate rises to 81%

The Central Bank of Argentina in April 2023 raised the rate to 81% after a jump in inflation.

2022: Rate rises to 75%

The Central Bank of Argentina in September 2022 raised the base interest rate immediately by 550 bp to 75%.

Cryptocurrencies

Main article: Cryptocurrencies in Argentina

Banks

2024: Population dollar deposits soar to $29bn

Unemployment

2020: Unemployment rate - 11%

Incomes of the population

2023

In Argentina, poverty reached a 20-year high of 57.4%

Argentina's poverty rate reached 57.4% by early 2024, the highest in at least 20 years. Such data were released on February 18, 2024 by the Pontificia Universidad Católica Argentina (UCA) University of Economics.

It is noted that at the end of 2023, the poverty rate in Argentina was 49.5%. However, the devaluation of the peso, carried out by President Javier Milei, elected in December 2023, and the price increases caused by it aggravated the situation. As of January 2024, at least 27 million people live in poverty throughout the country, while another 9 million are in extreme need. The total population of Argentina is estimated at 47.3 million people.

Argentina poverty rate reaches 57.4% by early 2024

The President, In mile taking over as head, states signed a decree on more than 300 reforms to liberalize the country's economy. Among the changes are the devaluation of the peso against the dollar by 50%, a reduction in state subsidies for energy and transport, as well as new labor legislation. Thus, the probationary period for hiring has been increased from three to eight months, the possibility of a 12-hour working day has been fixed, compensation for the period of vacations and dismissal has been reduced.

Miley promised to contain the annual inflation rate exceeding 200% in the country and eliminate the budget deficit. However, the ongoing reforms led to an actual drop in Argentines' income due to a sharp rise in prices. Against this background, according to the Center for the Study of Public Opinion, the president's rating decreased from 61% in December 2023 to 52% in January 2024. At the same time, the number of citizens who consider the ongoing reforms to be wrong has sharply increased: if at the end of 2023 about 29% of respondents stated this, then at the beginning of 2024 their number reached 45%.^[4]

Minimum wage - $336

2022: Share of citizens with a budget of less than $5.5 per day

Mining

Lithium mining

2022: Lithium reserves - 20 million tons. Produced - 6,200 tons of lithium

The "triangle" of South America and Mexico as of April 2022 accounts for 60% of the world's lithium deposits.

2021: Lithium production - 6,200 tonnes

Silver mining

Oil production

Power

2020: Energy consumption per capita

and

Agriculture

2021: Share of farmland - 54%

2019: Average use of pesticides in agriculture

2018: Horse industry

Foreign trade

2022

G7 countries are the main export destination

Trade turnover of Russia and Argentina for 9 months decreased by 30% to $711 million

The trade turnover of Russia and Argentina in January-September decreased by 30% to $711 million. Russian exports decreased by 45.2% - to $178.8 million, imports by 22.8% - to $532.2 million - Russian Ambassador to Buenos Aires Dmitry Feoktistov.

Among the largest exporters of vegetable oil

Grain exports

2023: World No. 9 for wheat exports

2022: Argentina is among the leading countries in grain exports (excluding rice)

2020

Argentina - in the top ten exporters of wheat with an indicator of 10.2 million tons

Soybeans are the main export item

2018: Wheat exports

R&D

2020: R&D spending - $5bn

Tourism

Alcohol market

Minimum age to purchase alcoholic beverages

Consumption

2023: Beef is the most consumed type of meat

Argentina is the world leader in bovine meat consumption (46.9 kg).

Notes