View the information below regarding the economy of Argentina. The summary and statistics contains
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Argentina Country Page.
GDP: $98 billion.
(reflects devaluation of peso and shrinking of the economy) Annual real growth rate: -10.9%.
Per capital GDP: $2,600.
Natural resources: Fertile plains (pampas); minerals--lead, zinc, tin, copper, iron, manganese, oil, and uranium.
Agriculture (5% of GDP, about 40% of exports by value): Products--grains, oilseeds and by-products, livestock products. Industry (28% of GDP): Types--food processing, oil refining, machinery and equipment, textiles, chemicals and petrochemicals.
Trade: Exports ($25.3 billion)--grains, meats, oilseeds, manufactured products. Major markets--MERCOSUR 22%; EU 20%; NAFTA 15%; Chile 12%.
In January 2002, after 3 years of recession, a prolonged bank run, and a sovereign debt default, Argentina abandoned the quasi-currency board system ("convertibility") which had pegged the peso to the dollar at a one to one rate for over 10 years. While convertibility had brought the country macroeconomic and price stability, and provided the framework for a broad-based deregulation, privatization, and market liberalization in the 1990s, it had proved unable to withstand the persistent fiscal deficits. The Mexican "Tequila" crisis of 1995, the East Asian crisis of 1997, the Russian default of 1998, and the Brazilian devaluation of 1999 combined to raise the cost of external borrowing and make Argentine exports and production uncompetitive in world markets. Meanwhile, the national and provincial governments continued to run fiscal deficits even in boom years, and the debt service burden eventually became unsustainable.
While most observers recognized by late 2001 that a devaluation and default had become almost inevitable, the manner in which the devaluation was implemented has significantly increased the damage done to the economy. Strict limitations on cash withdrawals from bank accounts (the "corralito") imposed in December 2001 after a prolonged bank run were followed in January 2002 by the freezing of almost all dollar-denominated bank accounts and their conversion to pesos at an artificial rate of 1.4 pesos to the dollar. Subsequent floating of the peso in February 2002 increased depositors' sense of expropriation. Meanwhile, almost all dollar-denominated loans within Argentina were converted to pesos at 1 to 1. This "asymmetric pesification" has destroyed banks' balance sheets as well as their reputations. The banking system, once one of the strongest in Latin America, has been hollowed out. The number of banks and the scale of banking operations is shrinking, with most domestic banking now limited to transactional operations.
GDP fell by 20% between 1999 and 2002, but recovery began in late 2002. GDP is expected to grow over 7% in 2003, with inflation staying low at 3%. Exports rose 17% in the first seven months of 2003 thanks to strong prices for agricultural commodities. Imports rose 41% in the first seven months after declining 56% in 2002. The official unemployment rate dropped below 16% in late 2003.