ARGENTINA: On the Path to Sustainable Development?

• by Marcela Valente (buenos aires)
• Friday, January 07, 2011
• Inter Press Service

The latest report by the Association of Automobile Manufacturers (ADEFA) points to a record year last year, with over 724,000 cars produced, 41 percent more than in 2009, when the industry was already one of the stars of the national economy.

The main destination for automobile exports is Brazil, Argentina's partner -- along with the much smaller Paraguay and Uruguay -- in the Southern Common Market (Mercosur) trade bloc.

This year, ADEFA projects more moderate growth, of 12 percent from 2010.

Significant growth was also seen in other areas. Sales of electronics climbed 67 percent and sales in shopping centres grew nearly 40 percent, while the rise in construction was 10 percent and the grain harvest hit a record of 95 million tonnes.

The Economic Commission for Latin America and the Caribbean (ECLAC) reported that South America grew 6.6 percent in 2010, while growth in Argentina reached 8.4 percent.

The Argentine government of Cristina Fernández put growth for 2010 at 8.9 percent.

From 2003 to 2008, Argentina's economy grew an average 8.5 percent per year. And despite the impact of the global economic crisis, the national economy even managed to grow in 2009 -- 0.9 percent, compared to -1.9 percent for Latin America as a whole, according to ECLAC.

In 2010, investment rose 17 percent, exports went up 24 percent and imports expanded by 45 percent, according to figures from the Secretariat of Economic Policy exclusively published by the Página 12 newspaper.

In addition, unemployment fell to 7.3 percent, while poverty continues to decline, although at a slower rate than in previous years.

Experts agree that the main challenges facing the centre-left Fernández administration this year are reducing precarious employment and extreme poverty, and controlling inflation, which stands at around 25 percent a year according to private-sector forecasters, who are sceptical of the much lower figures reported by the National Statistics and Census Institute.

'For 2011, we estimate that growth will be between six and 6.5 percent, because the situation in the world, with low interest rates and a weak dollar, makes a continued high level of consumption possible,' economist Marina Dal Poggetto told IPS.

She noted as well that commodity prices remain high, which also has a positive impact on Argentina, as its exports are principally grains and other farm products, minerals and natural gas.

Dal Poggetto, an analyst with the Bein consulting firm, added however that consumption is very high, which should trigger warning lights. She pointed out that in the 1990s, when the peso was pegged to the dollar, per capita consumption of imports was 960 dollars, compared to 1,400 dollars today.

'What makes that consumption possible is the world, and the situation in the world is going to remain steady this year, which is promising for Argentina. But perhaps in 2012 it will be necessary to see if the external conditions are the same, or if changes have to be made,' she said.

Ramiro Castiñeira, an economist with the Econométrica consultancy, also predicts a strong 2011. But he is more optimistic with respect to the sustainability of the economic growth model in the medium term, even if external conditions change.

'This year promises to be excellent for Argentina, with an international context that will play very much in its favour,' he told IPS, projecting 5.5 percent growth for the next 12 months.

He stressed that this year's harvest is expected to be abundant, despite the drought that began in late 2010. Soy, Argentina's main export crop, is fetching around 500 dollars a ton on the international market, the highest price in a decade.

'The external context might be very positive, but without good policies to take advantage of the situation, it does no good,' Castiñeira said, pointing to government policies that are making the most of the current situation. By contrast, he mentioned the case of Venezuela, which is in the same international context but whose economy shrank in 2010.

In Venezuela, GDP went down 1.6 percent in 2010, and will merely recover lost ground this year in the best of scenarios, according to a recent ECLAC report. Both consumption and investment dropped, but inflation remains high.

Argentina took advantage of high commodity prices to generate a budget surplus, accumulate foreign reserves and restructure its debt, in order to reduce its vulnerability to future crises, as demonstrated in 2009.

The foreign debt of 127 billion dollars is equivalent to 48 percent of GDP -- a far cry from the 144 billion dollar debt (70 percent of GDP) of late 2001, when the country defaulted.

Nearly 95 percent of that debt has been refinanced since 2005.

The country's foreign reserves have reached 52.5 billion dollars, and the results of negotiations with the powerful group of bilateral creditors known as the Paris Club -- the last step in Argentina's effort to regain access to world financial markets, which it lost after the 2001 default -- are to be announced this month.

Last year was also a good year for the Buenos Aires stock exchange, with profit gains of 50 percent among the top companies. And treasury bonds were the best financial investment, with returns of more than 200 percent in the case of bonds in pesos.

'Argentina now has a foundation for growth. If the external conditions change, it will also be felt here, that happens in all economies, but the country is making good use of the current context,' Castiñeira said.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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