Natural resources that stimulate the economy
Argentina's economy finds its salvation in its agricultural power, which represents 10.7% of GDP. Argentina is a major producer of meat, wool, wine and fish products. The soaring prices of agricultural products are an essential vector for the recovery of the entire economy. Soybeans, destined for Asian consumers and biofuels, are the new gold mine for Argentine farmers, who rank their countrythird in the world in soybean production, behind the United States and Brazil, alas with the use of glyphosate and deforestation. A country rich in energy resources, it ranks first in Latin America in gas production, fourth in oil and third in electricity. This last resource is essentially based on thermal and hydroelectric production. There are also several gold, silver, copper, lead, zinc, iron, tin, tungsten, mica, uranium and salt mines in the country. The industrial sector is growing rapidly and accounts for more than a third of the GDP. Automobiles, textiles, food processing, flour mills, rubber, cement and paper are the main industries in the country. The tertiary sector has followed the same trend as industry. It now contributes 58% of GDP. The growth of the tertiary sector is constantly increasing, especially in the services of advanced sectors such as software development, call centers, nuclear power, tourism and recently biotechnology.
A fragile territory with coveted resources
Today, a precious resource is attracting covetousness: lithium. If Argentina has the advantage of covering a huge territory, it also seems to be on borrowed time, as the abundance of its natural resources attracts national and foreign companies. With global energy demand on the rise, the country has proven to be a market of prime importance. For several decades, northern Patagonia has been riddled with gas and oil wells. Along the way, Argentina has become the largest producer of natural gas in Latin America with 37.1 km3 in 2017. Its natural wealth has been diverted by various economic policies and has almost caused harm: during the 2001 crisis, the Argentine government even considered the possibility of ceding Patagonia to the United States in exchange for the cancellation of the enormous debt contracted with the International Monetary Fund! Massive pollution, exploitation of the soil and ecological disasters, the landscapes are gradually being disfigured by the world's largest companies that have come to settle in the region in recent decades. Between hydroelectric dam projects, cut down national parks and mining, all the big companies are present: Total, YPF, Tecpetrol, Chevron, Exxon... And despite the intervention of various associations and NGOs, denouncing a disregard for environmental rules and indigenous peoples' rights, the oil industry operates without any control. Thus, in the huge exploitation of the shale gas deposit of Vaca Muerta, in the province of Neuquén, Greenpeace has already alerted on the dysfunctions of this platform opened in 2010 on Mapuche territory. The government has already received two warnings from the UN, but unfortunately the environmental decrees are being modified to benefit the companies.
Political and social issues
Since 2018, Argentina has been going through a deep economic crisis and yet managed to obtain the largest loan in the history of the IMF: $57 billion. Barely two months after obtaining the IMF aid, Buenos Aires is worried: the peso has lost half its value since January 2019 and continues its fall, the government expects a decline of 1% this year. Bringing forward the IMF funds that was already foreseen in all calculations will not change the situation, the confidence that the international markets gave to the government has partly disappeared: the markets are now demanding results. In default, Argentina has not paid back the IMF in time and has taken on a huge debt (88% of its GDP). Today the state coffers are empty, inflation has exceeded 52% in one year and one in three Argentines lives below the poverty line. The IMF confirms that it is impossible to repay their debt. A veritable economic and political pendulum, Argentina cannot seem to get out of the crisis it has been going through for nearly twenty years. On December 10, 2019, neo-liberal President Mauricio Macri was punished at the polls and gave way to Alberto Fernandez, the new center-left president who received 47% of the vote. Argentina has been in recession for more than a year, with inflation at more than 37 per cent, and is witnessing the return of Peronism. Created in the 1940s around the figure of Juan Perón, Peronism embodies the desire for social justice in a country that is becoming increasingly unequal. Faced with a catastrophic economic situation and a social policy in perdition, the objectives of this new president are significant. Indeed, in 2018, the IMF granted the largest loan in its history and is expecting the first repayments scheduled for 2021. A symbol of democracy, the return of Peronism embodies for many Argentines the hope of a renewal both socially and economically. Did the IMF lend too much to Argentina? Two conditions are necessary for a way out of the crisis: obtain a new maturity date by renegotiating the interest cost of the debt and reform public spending to be able to free up funds to repay the debt.
Argentina facing the Covid-19 crisis
But how does Argentina see its economic future, already affected by a significant health crisis? Despite a low number of deaths at the national level, the Covid-19 pandemic has not spared the Argentinean territory. During the first months of the epidemic, the country was doing relatively well, but the situation deteriorated at the beginning of summer 2020. Argentina implemented the containment quite early, at the end of March when the virus was barely present, it is one of the longest containments in the world in its duration since the beginning of the health crisis. At the beginning of July, the containment was tightened again in view of the particularly worrying situation in the capital Buenos Aires: the region concentrates 90% of the cases of contamination in the country with almost 2,000 new cases per day. Concretely, in the whole agglomeration, only essential businesses remain open and all the others (70,000 businesses) are closed for at least 15 days, public transport is reserved for essential professions and police controls are reinforced. Covid-19, the catalyst for the economic crisis, has totally paralyzed the country. Weakened, Argentina stopped repaying its debts and was hoping to obtain a delay in repaying part of its 66 billion dollar debt. The country is still waiting for a favourable response from its foreign creditors, a process that is essential to revive its economy, which has been damaged by the coronavirus pandemic. Dollar outflows are high: investors invest their dollars because of higher interest rates, but as soon as the risk increases (as it has with the pandemic), they return to the United States for safekeeping. When the dollars leave, the local currency depreciates, but Argentina needs the financial means to counter the effects of the coronavirus. It is therefore difficult to accept an economic crisis and impossible to accept that the economy should stop even during a pandemic. Dependent on raw materials, indebted in dollars and already bankrupt before the health crisis, Argentina is facing new challenges. Moreover, depending also on tourism, the country will not be able to count, as expected, on dollars: the peso does not stop collapsing.
Place du tourisme
Obviously, Covid-19 and tourism do not mix well. In June 2020, the winter sports resort of San Carlos de Bariloche, the most famous in South America, closed its doors while the streets of Buenos Aires remained empty and silent. The tourism sector in Argentina has been hit hard by the pandemic and has lost millions of dollars, which has not helped to slow down the economic crisis. However, in recent years, the country has been recording records, counting more and more tourists: 4 million foreign tourists in 2006, 5.8 million in 2011, more than 6 million in 2015 and 7.4 million in 2019. Before the Covid-19 epidemic, Argentina was beating its record for visitors. In 2017, the country recorded an annual increase of 5.7% and the National Institute of Tourism predicted to double the arrival of international tourists by 2020... Thanks to an increasingly favorable exchange rate (the peso crisis is a real boon for tourists) and undeniable tourist assets, Argentina is the most visited country by foreigners in Latin America. In 2014, tourism already represented a weight of 8.5 billion dollars. Brazilians and Chileans form the major part of these visitors with more than 60%, with Europeans and North Americans making up only 15% of the total. In 2019, Buenos Aires welcomed 2 million visitors, of which 67,200 were French. This foreign tourist traffic is causing a readjustment of the infrastructure and hotel offer, which finally encourages Argentines themselves to discover their own country and the magnificent riches it abounds in. After closing its borders for two long years during the health crisis, Argentina reopened them in April 2022. With nearly 1.5 million tourists in the first quarter of 2022, tourism in Argentina is now back on track.
