Argentina\'s Economy
Argentina lives in a democracy
since 1986. Before this year lived it under a military regime. In the nineties
under the presidency of Menem the country experienced a great increase in the
liberalization of trade. Argentina has a free market economic system. Due to the
recent privatization program, the State now has a very limited role in the
economy. According to the Competitiveness Report of the World Economic Forum

Argentina is classified as one of the most open, least protectionist countries
in the world. Its currency is convertible to the US dollars and there is total
freedom for moving capital internationally. Argentina has conducted one of the
most intensive privatization programs in the world. The telephone company,
airlines, most railroads, electric power production companies (including
hydroelectric power plants), the Argentine oil company YPF (bought by the

Spanish company Repsol) steel mills, ports, TV stations and most public services
were transferred recently to the private sector. Consistent with Fundacion

Invertir the combined value of privatized firms amounts more to more than US$ 30
billions. Many foreign firms have participated in this large-scale privatization
program. Foreign investors do not need to seek any kind of prior approval and
are free to repatriate full amount of their capital and earnings any time.

Foreign and domestic companies are treated equally. Under the law, they have
access to all economic sectors and are eligible for incentive program and state
procurement. II. TRADE PATTERN It is hard to state the type of trade that exists
between Argentina and Brazil in the automobile industry because both countries
import and export cars of the same brand and very similar models. Volkswagen
produces some of its model of cars in Argentina and some others model in Brazil.

The reason for this is to achieve economies of scale; each country specializes
in a certain model of car, by doing so they reduce the cost of each additional
unit. Another reason for specialization of production in each country is that it
might be cheaper to produce a certain model in either Argentina or Brazil.

Several companies as Volkswagen have invested in production facilities in

Mercosur. Additionally, joint ventures between local and foreign parts
manufacturers have improved quality. A report on Argentina auto parts/services
announced that local production in Argentina was estimated at $1.9 billion in

1997. From 1996 to 1997 the import market for automobile parts and accessories
grew by 30 percent to $2.2 billion. Imports from Brazil represent 35 percent of
the local import market. The gains in imports with exports from Brazil boost
employment in Argentina by a 30 percent and bilateral trade with Brazil as well
as nine fold growth in investments. (States-USA). See AUTO PARTS/SERVECE table
in appendix. In the period of July 1997-June 1998 Argentina exported wheat to
the following countries: Brazil, Turkey, Egypt, Iran, Peru, Indonesia, Sir

Lanka, Jordan, Tunisia and Kenya. Argentina experiences "inter" trade with
these countries because it has the comparative advantage of producing wheat at a
cheap cost. Soils in Argentina are fertile and farmers do not need to use as
much fertilizers as in the case of European farms. European farms have been
harvested for years. As a consequence of this farms need to be fertilized or
remain unused for a period of four years to produce crops. Argentina engages in"inter" trade on the exports of corn to the following counties: Japan,

Brazil, Egypt, Taiwan, Peru, Chile, Spain, Iran, Venezuela, and Colombia.

Argentina exports corn to Brazil because it does not produce enough corn to
supply its domestic demand. Argentina also produces "Inter" trade exports of
sorghum with Japan, Mexico, Taiwan, Colombia, Norway, Spain, and Chile.

Argentina and Brazil benefit from trade among themselves because each country
exports something in which it does not have the comparative advantage or in
which its domestic production is not enough. Argentina imports coffee and sugar
from Brazil. Argentina does not produce coffee while Brazil is the largest
exporter in the world. In 1997 was the first time in 67 years that Argentina
exported beef to the United States of America. This country has been declared
free of foot and mouth disease in May 1997. Beef is an example of "Inter"
trade between Argentina and countries as Brazil because Argentina’s production
exceeds by far its demand. The "Comparative International Statistics" has
ranked Argentina as the number 1 country in the consumption of beef followed by
the United States in a second place. Argentina, as well as the US, has been
struggling to export their beef in the European Union. Both countries had no
positive results due to the high subsidies given by the European governments to
their farmers.