Economy

Argentina's robust economic recovery since its financial crisis in 2002 has been welcomed by foreign investors almost as much as its inhabitants. Averaging an 8% annual growth over the past 6 years, Argentina's economy is one of the fastest growing in the world. In the early 1990's the Argentine government pegged the peso (ARP) 1-to-1 against the US dollar (USD), and while it certainly boosted the economy, it proved to be a short lived maneuver. Over the next decade the newly overvalued peso could not hold up to the US dollar, and with a continuously mounting international debt, a default in late 2001 was inevitable. One of the first acts of Argentina's newly elected president at the time was to cease the peso's existing convertibility to the dollar; sending the peso to fall to about 4 ARP to 1 USD for the next several months. It recovered slightly and has held steady at a little more than 3 ARP to 1 USD since then. Argentina's budget bill for 2008 envisages the peso exchange rate averaging 3.21 ARP per USD this year; a rate that continues to attract investors and travelers from around the world. Argentina's economic resurgence has also enabled the government to accumulate substantial official reserves (over $46 billion as of January 2008) to help insulate the economy from external shocks.

Argentina's exchange rate policy is based on a managed float that appears to be targeting a nominal exchange rate in the 3.15-3.20 ARP per USD range. Market analysts consider the peso's real exchange rate broadly undervalued. This, along with historically high global commodity prices, has helped lift export volumes and value to record levels, resulting in a $12 billion trade surplus in 2006, falling to $11.2 billion in 2007 due to a strong increase in imports. Foreign trade equaled approximately 39% of GDP in 2007 (up from only 11% in 1990) and plays an increasingly important role in Argentina's economic development. Exports totaled approximately 22% of GDP in 2007 (up from 14% in 2002), and key export markets included MERCOSUR (22% of exports), the EU (18%), and NAFTA countries (11%). Two-way trade in goods with the U.S. in 2006 totaled almost $9 billion (according to both US and Argentine government statistics). Total two-way trade in services in 2006 exceeded $3.2 billion (according to the Bureau of Economic Analysis, U.S. Department of Commerce). The production of grains, cattle, and other agricultural goods continues to be the backbone of Argentina's export economy. Energy products, high technology goods, and services are emerging as significant export sectors. (US Department of State)

Although Argentina's economy is booming, the inflation rate is still a concern. Argentina's 2008 budget bill expects inflation to average 7.3 percent, down from 8.5 percent in 2007. Some fear that inflation rates may threaten the country's robust economic recovery. Even though the Argentine government acknowledges that actions must be taken to bring the inflation problem under control, the current administration seems quite willing to tolerate it for now in exchange for the economy's continued rapid growth and its tremendously beneficial influence on poverty, employment, exports, and income distribution. Argentina's unemployment rate also fell to a 15 year low in 2007. According to the US Department of State, in the first half of 2007, 23.4% of the population in the 28 largest urban areas remained below the poverty line, down from over 50% in the immediate aftermath of the economic crisis.