COUNTRY PROFILE OF ARGENTINA

CAPITAL: BUENOS AIRES

GDP (OFFICIAL EXCHANGE RATE): $484.6 BILLION (2013)
FISCAL YEAR: CALENDAR YEAR
CURRENCY: ARGENTINE PESO
1 PESO = 4.66 INR
1 USD = 14.32 PESO

GUIDED BY: PROF.

Country Overview
Argentina is the 8th largest and Spanish speaking country in the world. The
country is sub divided into 23 provinces and 1autonomous city Buenos Aires

which is the federal capital of the nation and has their own constitution. In 1816,
independence was declared from Spain by the United Provinces of the Rio Plata.
After separating from Bolivia, Paraguay and Uruguay the remaining land became
Argentina. The constitution of Argentina defines a system of checks and balances.
The federal government is composed of 3 branches: The Legislative, The
Executive and The Judicial. Argentina has 91.8% (2015) of the total population
living in the city along with 97% literacy among men and women. In 2012, 20.3%
of the GDP accounts for manufacturing. Argentinas one fourth of exports of about
US$86 billion in 2011 was composed of unprocessed agricultural primary goods,
mainly soybeans, wheat and maize. A further one third was composed of processed
agricultural products, such as animal feed, flour and vegetable oils. The country
exports and imports goods from Brazil, China, Chile, US, Netherland, Spain,
Germany, Italy, Uruguay, Iran, Venezuela, Canada, India, Columbia, Mexico and
may other nations in the world.

Countrys Economy
Argentina has the 3 rd largest economy in latin America. The nations GDP were
$540.2 Billion in the year 2014 making it the 24th largest economy in the world.
Argentina has a variety of natural resources with a well educated population and a
export oriented agriculture sector with a diversified industrial base. Argentina is
still an emerging market. Argentina suffered from the Economic crisis during the
20th century. The country suffered from severe depression, growing public and
external indebtedness. The economy rebounded from the 2009 recession in 2010
even if the country continued to rely on the expansionary monetary and fiscal
policy, the economy slowed down in the year 2011and the inflation rate has
drastically increased. In the year, the government expanded various restrictions on
Import and Export. The country continues with a mix expansionary monetary and
fiscal policy and foreign exchange imports and exports in 2013, since the inflation
rate remained 25% and the GDP increased by 3%. In 2014, Argentina introduced
many changes in the economic, monetary and fiscal policy which resulted in the
devaluation of Peso by 20%.

History of Currency

Peso is the currency of Argentina, denoted as a symbol $ and it was

introduced in 1992 and replaced a currency called Austral. From 2002 to 2008, the
official exchange rate hovered around 3 pesos per USD, around 4 pesos from the
year 2009 to 2011, increased to 6 pesos in November 2013, and 6.5 pesos per
dollar in February and 10 per USD in December 2015. The Peso is subdivided into
centavos; 1 Peso = 100 centavos. The peso has evolved and a fewer zeros are
currently being used.
The Spanish silver eight-real coin was named the peso before 1826 and after
Argentina became independent, the country started using new coin denominated as
Escudos, Soles and Reales until 1881. The silver and gold pesos were used from
1881 to1969. The gold coin denominations were 2 and 5 Pesos, the silver coins
were 5, 10, 20, and 50 centavos, as well as 1 Peso, and the copper coins were 1 and
2 centavos. From 1970 to 1983, the "Peso Ley" replaced the previous peso; 1 Peso
Ley = 100 Pesos Nacionale. In 1992, the last Peso was introduced and is referred to
by the international market as the Peso Convertible. A fixed exchange rate was
established between the Central Bank of Argentina and the United States Dollar at a
rate of 1 USD = 1 Peso. The agreement expired in 2001. The fixed agreement of the
USA expired in 2001 and since 2002 the exchange rate has been fluctuating.

Exchange rates
Money market decisions are taken by The Central Bank of Argentina. The
interest rates refer to the inter-bank rates. Average interest rate in Argentina from

1979 until 2016 was 67.45%. The highest rate was recorded in 1990 of 1389.88%
and the lowest in March 2004 of 1.20 %. The graph shows an continuous increase
in the inter-bank rates.

Gross Domestic Product (PPP)

The gross domestic product (GDP) measures of national income and output for
a given country's economy. The gross domestic product (GDP) is equal to the total
expenditures for all final goods and services produced within the country in a
stipulated period of time.
As reported by the World Bank group, the Gross Domestic
Product in 2014 was 537.6 billion USD. The average GDP of
Argentina from 1962 until 2014 was 177.72 USD Billion, and the
highest GDP was recorded in the year 2013 of 614.38 USD billion
and the lowest GDP was recorded in the year 1963 of 18.27 USD
Billion. The Gross Domestic Product per capita in Argentina was
last recorded at 17554.12 US dollars in 2011, when adjusted by
purchasing power parity (PPP). The GDP per Capita, in Argentina,
when adjusted by Purchasing Power Parity is equivalent to 99
percent of the world's average. GDP per capita PPP in Argentina
averaged 11020.94 USD from 1990 until 2011, reaching an all
time high of 17554.12 USD in 2011 and a record low of 7462.31

USD in 1990. GDP per capita PPP in Argentina is reported by the

World Bank.

Economic Crisis
The Argentina economy suffered a deep crisis during 2001
and 2002. Both the financial crisis and the public debt default
undermined both local and foreign investors confidence. It was
believed that the crisis caused due to the existence of 4 main
causes which includes, inappropriate Fiscal policy, wage and price
rigidities inconsistent with a fixed exchange regime, a
considerable external shock and political turmoil. In the decade,
1991-2001 the government expenditure rose by 77%while the
Argentina GDP rose by 57% and the prices fell of the dollar
denominations.
Argentina traded intensively within the region, exported
agricultural and industrial commodities, and relied heavily on
capital inflows. From the year 1997, all these factors fell behind. A
drop of 15% in the export prices was seen between 1996-2000.
Argentinas condition worsened due to the depreciation in the
currency of their main trading partners (Europe, Brazil, and Chile).
The peso was pegged rigidly to the USD.

Monetary Policy
In March 2012, the legislature and the president approved a new Ley
Organica for the central bank that incorporates an unambiguous growth mandate.
This exchange-rate regime included a fixed peg to the U.S. dollar, unlimited and
unconditional conversion of the national currency (the peso) into foreign
currencies, and the requirement that the central banks holdings of foreignexchange reserves be equivalent, at least, to the domestic components of the
countrys monetary base. The appointment of a new governor has been
accompanied by the introduction of a new legal framework for the central bank
that institutionalizes its ability to implement counter-cyclical monetary policies.
This new law eliminates the strict link between the countrys foreign exchange
reserves and its money supply, which had led invariably to deflationary monetary
policies.
The importance of this change cannot be over-estimated because it provides
an enabling environment for rational economic policy-making. Argentinas new
stance enables counter-cyclical monetary policy to function as a valuable
complement to counter-cyclical fiscal policy. It also simultaneously enables
rational debt management, rather than artificially linking national debt to the stock
of foreign-exchange reserves. The new Ley Organica institutionalizes the principle
that the function of monetary policy is to help achieve long-range development
goals, and to coordinate with fiscal policy in selecting and prioritizing such goals.

Unemployment Rates
According to INDEC, the 3rd highest unemployment percentage is in South
America of 7.55%.Despite the recent decline, Argentina does have an
unemployment rate that is higher than most of the countries in the continent. The
data corresponds to INDECs numbers for the third quarter of last year,
representing the percentage of the working-age population which tried to get a job
during that time, but failed. Until the 1990s, unemployment was never an issue in

Argentina but until late 2000 the unemployment rate increased drastically and after
the crisis everything started to fall apart. The unemployment rate in the year 2012
was 7.2% which has increased up to 7.5% in the year 2013.

Inflation Rate
Inflation Rate in Argentina averaged 203.46 percent from
1944 until 2015, reaching an all time high of 20262.80 percent in
March of 1990 and a record low of -7 percent in February of 1954.
In Argentina, the most important categories in the CPI basket are
Food and Beverages (37.9 percent of the total weight) and
Transportation and Communications (16.6 percent). Housing and
Basic Services account for 12.1 percent; Clothing for 7.3 percent
and Other Goods and Services for 6.3 percent. The remaining
include: Health Care (5.6 percent); Leisure (5.1 percent); House
Maintenance Items (4.9 percent) and Education (4.3 percent). The
CPI index has a base of 100 as of April of 2008 and covers the
Buenos Aires metropolitan area and its 24 districts.

National Debt
In Argentina, external debt is a part of the total debt that is owed to creditors
outside the country. In 2014, Argentinas national debt increased by 85279 million
dollars from 330876 million dollars. It means that the debt in 2015 reached
56.51%of Argentina GDP, and 11.41% rise in 2014 , when it was 45.10%of GDP.
Argentina per capita debt in 2015 was 5716 dollars per inhabitant. The debt has
increased by 398 dollars to 6114 dollars in 2014.In the year 2015, the positioned of
Argentina has worsened as compared to the rest of the world.

The above graph shows an increase in the total external debt of Argentina over a
period of time.

Tax Rate

In Argentina Income Tax is collected by the Government of Argentina. It uses a

system of progressive taxation on personal income that is collected as deferred tax,
a flat tax rate on business income and a stamp tax of 1.5% on the total value of real
property. Income tax is 9% to 21% paid by the residents whereas non residents
pay a withholding tax of 21%. Sales tax is 21% and a higher rate of 27% is levied
on certain utilities. Transfer tax is 1.5%. Income tax on capital gain will be applied
on the income earned from the sale of a property. Regular income tax is levied at
35% for the residents and 21% for the non-resident on the gross annual rent.
Income earned from renting of property is taxable, rate vary by the province and
are applied to the assessed value of the property whereas Buenos Aires is exempt.

Foreign Direct Investment

In the South American countries, Argentina ranks 4th in terms of FDI stock
(after Brazil, Chile and Columbia) and it is 6 th in terms of FDI influx. The 3 main
investors in Argentina are the United States, Spain and France. Argentina has assets
which includes natural resources (copper, gas and oil) with a highly skilled and
competitive workforce. However, the country suffered the economic crisis in the
late 1990s and the early 2000s. In the agricultural sector, restrictions have been
imposed on FDI since it is strategically important for the countrys food security.
Recently measures have been taken to restrict property law and nationalization in
the energy sector, which have affected the Spanish oil giant Repsol) which resulted
in a decrease in FDI.
FDI in Argentina has declined by 60% in the year 2014 due to the
compensation granted to Repsol after the nationalization of YPF. FDI flows in
telecommunication are expected to recover due to the future 4G network. The
government has established various measures to encourage foreign investment in
the form of incentive so to invest in the capital goods and infrastructure, financing
program, capacity promotion, encouraging innovation and technological
development.
In the year 2015, FDI has increased by 349.39 USD million. Argentina has a
lowest record of FDI in 2003 of 118.06 USD million and a highest record of
1454.20USD million in the year 2011.

Derivatives Market
The derivatives market flourished between the 1970s and 1980s because of
trade increase in forwards, futures and options. According to a study by the Bank
of International Settlements, the value of outstanding positions of over the counter
(OTC) was over USD 99 trillion.
In Argentina, transaction of forwards on agriculture started in the beginning
of the 20th century. Futures have been traded in the Buenos Aires Future market
similarly exchange has taken place at the futures market of Rosaria, Argentinas 2 nd
largest city. The most actively future traded were those on agricultural and
livestock, which included grains, oilseeds, cattle and hogs. Only call options on
individual stocks are traded at the Buenos Stock Exchange. Traded in a relatively
small volume.
All the procedures related to the futures and options contracts were handled
by each individual Exchange. On trading of Forwards, futures and options contract
regulatory duties is assumed by National Commission of Securities. It is allowed
for the foreign entities to participate in the derivatives market through the CNV or
broker. The contracts available at the MATBA were futures on corn, soybean,
sunflower seeds and wheat, and options on corn futures, soybean futures,
sunflower futures and wheat futures. The top three agricultural exchanges in 2001
were the CBOT (74.3 percent), Tokyo Grain Exchange (14.6 percent), and Kansas
City Board of Exchange Trade (4.35 percent). Trade on Exchange increased in the
decade of 1920s. At the beginning of the 1990s, it was allowed by the government
to negotiate future contracts in grain denominated in USD. The Rosafe Soybean
Index (RSI) futures and Option contracts were cashed settled at the spot price of
Soybean at Rosario. The most actively traded contracts were futures and options.

Argentinas Stock market (MERVAL) index gained 1488 points or11.99%

from 12409.39 points in April 2015. In February 1988, the MARVEL reached the
lowest record of 0.03 in February 1988 and a all time high of 14173.87 in
November 2015.

Reference Links:
https://en.wikipedia.org/wiki/Argentina
http://www.indexmundi.com/argentina/background.html
https://en.wikipedia.org/wiki/Foreign_trade_of_Argentina
https://www.angloinfo.com/argentina/how-to/page/argentina-moving-country-filecountry-overview
http://www.economywatch.com/world_economy/argentina/
http://www.indexmundi.com/argentina/economy_overview.html
http://www.tradingeconomics.com/argentina/interest-rate
https://www.soas.ac.uk/cdpr/publications/dv/progressive-monetary-policy-inargentina-a-return-to-democratic-control.html
http://www.buenosairesherald.com/article/181890/clar%C3%ADn-argentina'sunemployment-rate-is-one-of-the-highest-in-the-region
http://www.tradingeconomics.com/argentina/inflation-cpi
https://en.wikipedia.org/wiki/Taxation_in_Argentina
https://internationalliving.com/countries/argentina/argentina-taxes/
https://en.wikipedia.org/wiki/Argentine_peso
https://www.oanda.com/currency/iso-currency-codes/ARS
https://en.santandertrade.com/establish-overseas/argentina/foreign-investment
http://www.tradingeconomics.com/argentina/gdp-per-capita-ppp
http://www.dii.uchile.cl/~ceges/publicaciones/ceges36.pdf

http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2003/5/cj23n13.pdf