Argentina WT/TPR/S/176 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Since its last Trade Policy Review in 1999, Ar gentina has succeeded in overcoming one of 
the worst recessions in its history, with GDP c ontracting by some 18.5 per cent between 1998 and 
2002.  This contraction was attributable to a series of factors, both internal and external, such as the 
accumulation of public debt and the loss of ex ternal competitiveness resulting from the real 
overvaluation of the peso.  The financial crisis whic h broke out in 2001 led to a moratorium on public 
debt payments, the abandonment of the system of co nvertibility and a sharp fall in the exchange rate, 
as well as to increases in inflation and unemployment. 
2. In response to the crisis, Argentina introduced  a programme of macroeconomic adjustment 
and support for the financial system.  In Decemb er 2001, it halted the repayment of principal and 
interest on its debt, a suspension which continued fo r more than three years.  At the beginning of 
2005, the Argentine authorities succe eded in refinancing over 76 per cent (US$62 billion) of the 
public debt, on very favourable terms, by excha nging old claims for three new types of bonds, at 
32 centavos to the US dollar.  It has not yet reach ed an agreement with the creditors who hold the 
other 24 per cent of the debt (some US$20 billion).  In early 2006, the Government paid off the entire 
IMF debt of US$9.6 billion.  This reduced the debt/GDP ratio to below 65 per cent.   
3. Since 2003, the Argentine economy has returned to  the path of growth, with GDP increasing 
at rates of more than 9 per cent.  The strong est boost has come from increased domestic demand, 
although exports, which have benefited from a favourable internationa l environment and the 
depreciation of the exchange rate, have also cont ributed to the recovery.  The fiscal accounts have 
been in surplus sin ce 2003, mainly owing to an increase in re venue resulting, in part, from improved 
receipts from export duties, which are now being applie d at higher rates to a wider range of products.  
In the 12 months to September 2006, inflation, meas ured in terms of the increase in consumer prices, 
reached 11 per cent, so that holding down inflati on on an ongoing basis remains the Government's 
chief macroeconomic concern.  With the resumpti on of growth, unemployment began to fall and in 
the second quarter of 2006 was down to about 10.2 pe r cent, while the percentage of the population 
living below the poverty line had fallen to 33.8 per cent in 2005. 
4. The current account of the balance of payments has been in substantial surplus since 2002.  
This is mainly the result of increased exports, lower import levels during the post-crisis period, 
although they have since been recovering, and redu ced debt payments.  One of the most striking 
features of the period under review is the re orientation of exports towards countries outside 
MERCOSUR.  Argentina, a large exporter of agricu ltural products and, increasingly, of manufactured 
products, could benefit considerably from a favourab le outcome of the Doha Development Round.   
5. The Government intends to continue implemen ting policies designed to keep public finances 
and the current account of the balance of payments in surplus, to create more jobs and to bring 
inflation under control.  To help them achieve their macroeconomic objectives, the authorities have 
made use of trade measures, such  as the application of export ta xes, incomes policies and price 
agreements with producers to prevent or moderate  price increases (see Chap ter III);  some of these 
measures were adopted under the powers tempor arily granted to the Executive by the Public 
Emergency and Exchange Regime Reform Law (see Chapter II).  The authorities have stressed the fact that these are temporary measures. 
6. Although the results achieved since 2003 have been  remarkable, there are risks with regard to 
the sustainability of the present model and the possi bility of a "soft landing" for the economy.  The WT/TPR/S/176 Trade Policy Review 
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main risk comes from overheating and the dist ortions created by the unorthodox economic measures 
adopted in recent years.  In particular, it would be  important to implement a strategy that allowed free 
rein to market forces in the allocation of  resources and the determination of prices. 
(2) MACROECONOMIC TRENDS  
(i) Structure and evolution of the economy 
7. The sectoral composition of the Argentine economy fluctuated considerably during the review 
period, reflecting the impact of the economic cr isis on the various sectors and their subsequent 
adjustment to the new thrust of economic policy and the changes in the internat ional environment.  In 
the primary sectors growth was above-average (Table  I.1).  Progress in the agricultural sector largely 
reflected an improved supply and a favourable inte rnational business climate, which translated into 
high international prices for Argentine exports.  There was also an increase in the contribution of 
manufactured products to GDP, largely attributable to the growth of the domestic market in recent 
years, and a sharp decline in the contribution of non-tradeable activities, although there have recently 
been signs of a recovery in this respect.  Services as a whole continue to ge nerate a little over 55 per 
cent of GDP;  after a sudden fall, due partly to the change in relative prices, services have slowly 
begun recovering their share of GDP. 
Table I.1 
Sectoral structure of GDP, 1998-2005 
(Percentage of current GDP at factor co st, including imputed bank service charges) 
 1998 1999 2000 2001 2002 2003 2004 2005 2006a 
G D P           
Agriculture (including forestry) 5.5 4.6 4.8 4.6 10.3 10.6 10.2 9.2 7.0 
Fishing 0.2 0.2 0.2 0.3 0.5 0.4 0.3 0.3 0.4 
Mining and quarrying  1.6 1.8 2.7 2.7 6.3 5.8 5.7 5.9 6.2 
Primary sector 7.3 6.6 7.7 7.5 17.2 16.9 16.2 15.3 13.6 
Manufacturing 19.4 18.3 17.8 17.2 21.6 24.0 24.2 23.3 23.1 
Electricity, gas and water 2.1 2.3 2.5 2.5 1.8 1.7 1.7 1.7 1.9 
Construction 6.0 5.9 5.1 4.6 2.7 3.3 4.2 4.9 5.2 
Secondary sector 27.5 26.5 25.4 24.3 26.1 29.1 30.1 30.0 30.2 
Trade 15.2 14.3 13.7 13.1 11.4 11.7 11.8 11.8 11.2 
Restaurants and hotels 3.0 3.0 3.0 2.9 2.3 2.3 2.4 2.6 3.4 
Transport, storage and communications 8.9 8.9 9.2 9.1 7.8 8.5 9.1 9.0 10.0 
Financial intermediation 4.0 4.4 4.4 5.5 5.6 3.9 4.1 4.4 4.9 
Real estate, rentals and business servi ces 16.4 17.0 16.9 17.0 13.5 12.0 11.2 10.9 11.6 
Public services and defence 6.1 6.7 6.8 6.8 5.7 5.4 5.2 5.5 5.7 
Education, social and health services  8.0 8.8 9.1 9.6 7.7 6.9 6.6 7.0 6.9 
Other services activities  5.2 5. 4 5.5 5.7 4.0 3. 8 3.9 4.1 3.8 
Services 66.8 68.6 68.5 69.7 58.1 54.6 54.2 55.3 57.0 
Less imputed financial services  1. 6 1.7 1.6 1.6 1.3 0.5 0.5 0.6 0.8 
GDP at factor cost 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 
a First quarter.  
Source:  Ministry of the Economy and Production, http: //www.mecon.gov.ar/downloa d/infoeco/apendice1.xls. 
8. Argentina experienced a severe recession duri ng the period 1999-2002 (it began in the course 
of 1998), followed by a period of solid growth starting in 2003 (Table I.2).  GDP grew at an annual average rate of 0.4 per cent between 1998 and 20 05, mainly as a result of the sharp economic 
downturn during the years 1999 to 2002.  However, th e subsequent recovery and stabilization of the 
economy led to the achievement of growth rates of the order of 9 per cent a year.   Argentina WT/TPR/S/176 
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Table I.2 
Basic economic indicators, 1998-2005 
2006  1998 1999 2000 2001 2002 2003 2004 2005 Ia IIb 
Current GDP (Arg$ billion) 298.9 283.5 284.2 268.7 312.6 375.9 447.6 532.3 568.8 676.0 
Current GDP (US$ billion) 298.9 283.5 284.2 268.7 102.0 129.6 153.2 193.2 185.9 211.0 
Real GDP and components,  
growth rates (%)  
Real GDP 3.9 -3.4 -0.8 -4.4 -10.9 8.8 9.0 9.2 8.8 7.9 
Total consumption 3.5 -1.3 -0.5 -5.2 -12.9 7.0 8.3 8.5 8.4 7.9 
  Private 3.5 -2.0 -0.7 -5.7 -14.4 8.2 9.5 8.9 8.4 8.2 
  Government 3.4 2.6 0.6 -2.1 -5.1 1.5 2.7 6.2 8.3 6.5 
Gross fixed capital formation 6.5 -12.6    -6.8  -15.7 -36.4 38.2 34.4  22.7 22.9 18.5 
  Changes in inventory plus 
statistical discrepancy -22.9 117.6 -350.9 148.5 -54.3 81.4 -44.9 -274.8 .. .. 
Exports of goods and services 10.6 -1.3 2.7 2.7 3.1 6.0 8.1 13.8 6.4 3.1 
Imports of goods and services 8.4 -11.3 -0.2 -13.9 -50.1 37.6 8.1 20.3 17.8 6.3 
Real GDP, percentage breakdown (%) 
Final consumption 81.6 83.8 83.1 83.1 74.1 74.6 73.9 73.2 73.8 77.1 
  Private 69.1 70.1 69.3 68.9 61.9 63.2 62.8 61.3 61.8 65.1 
  Government 12.5 13.7 13.8 14.2 12.2 11.4 11.1 11.9 12.0 12.0 
Gross capital formation 19.9 18.0 16.2 14.2 12.0 15.1 19.2 21.5 21.5 20.9 
  Changes in inventory 1.1 -0.1 1.3 1.4 -1.0 -0.5 -0.2 -0.3 .. .. 
Exports of goods and services 10.4 9.8 10.9 11.5 27.7 25.0 25.3 24.6 23.8 13.4 
Imports of goods and services 12.9 11.5 11.5 10.2 12.8 14.2 18.2 19.1 19.1 11.1 
Other economic indicators  
(% GDP)           
Gross national savings 16.1 13.6 14.4 14.2 20.1 19.7 20.6 24.6c .. .. 
Gross domestic savings 21.0 17.9 17.5 15.6 11.0 14.6 19.0 21.3c .. .. 
Employment indicators            
Labour force participation rated 42.1 42.7 42.7 42.2 42.9 45.7 46.2 46.2 46.0 46.7 
Unemployment rated 12.4 13.8 14.7 18.3 17.8 14.5 12.1 10.1 11.4 10.4 
Underemployment rated 13.6 14.3 14.6 16.3 19.9 16.3 15.2 13.0 11.0 12.0 
Nominal wages (private sector)e .. .. .. .. 16.9 15.8 11.0 21.9 21.0 .. 
.. Not available. 
a First quarter. 
b Second quarter. 
c First nine months;  growth rate compared with the same period in the previous year. 
d Calculation method changed in 2003. 
e Variation of the wage index (December-December) corresponding to the registered private sector. 
Note: Domestic savings include the balance on current account of th e balance of payments (externa l savings).  If there is a def icit, 
domestic savings exceed national savings, since the country is importing capital. 
Source : Central Bank of the Argentine Republic an d Ministry of the Economy and Production. 
9. The downturn that began in mid-1998 largely re flected a loss of exte rnal competitiveness 
resulting from the real overvaluation of the peso and aggravated by adverse external factors such as 
the devaluation of the real  in Brazil in 1999.  In March 2000, Argentina turned to the International 
Monetary Fund (IMF) and received a US$7.2 billion st and-by loan, later increased to 14 billion, as 
part of a package, including contributions from ot her multilateral organizations  and private banks, that 
totalled 39.7 billion.   
10. The economic recession was made worse by a financial crisis at the end of 2001 (see 
Chapter IV(6)(iii)).  In response to  this crisis, characterized by severe capital flight, the Government 
announced restrictions on withdrawals from bank accounts ( corralito ).  Decree No. 1.570/01 of 
1 December 2001 imposed temporary restrictions  on withdrawals of cash, which were limited to WT/TPR/S/176 Trade Policy Review 
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US$250 a week, and temporarily prohibited transf ers abroad, except for those corresponding to 
foreign trade transactions, payments of expenses or withdrawals made abroad using credit or debit 
cards, or the cancellation of financial transactions.1  There was also a moratorium on the repayment of 
public debt.  This formed the prelude to the aba ndonment of the convertibility regime (see below).  
The IMF takes the view that the crisis was mainly triggered by a combination of two factors:  an 
insufficiently tight fiscal policy and an overvalued exchange rate, the reflection of relatively high 
inflation,2 a strong dollar and insufficiently flexible domestic markets, especially the labour market.3   
11. Law No. 25.561 of 6 January 2002 repealed the fi xed exchange rate regime and declared a 
state of social, economic, administrative, financia l and foreign-exchange emergency, to deal with 
which it delegated extraordinary powers to the Executive.4  Moreover, the foreign currency 
adjustment clauses and indexation clauses in contract s governed by public law were annulled.  Prices 
and tariffs were established in pesos at the exchange  rate of Arg$1 to the US dollar, and the Executive 
was authorized to renegotiate these contracts.   
12. In February 2002, the maturity of tim e deposits was extended (measure known as corralón ) 
and bank deposits and assets were c onverted into pesos at asymmetric  rates of Arg$1 to the US dollar 
for assets and Arg$1.4 for liabilities.5  This measure gave rise to a series of legal actions ( amparos ) 
brought by depositors demanding compensation from the banks for the losses incurred as a result of 
pesoization.  The IMF estimates that the injuncti ons granted in these cases cost the banks a total of 
Arg$8.8 billion between Februa ry 2002 and mid-2005.   
13. In January 2003, the IMF approved the first of a series of temporary eight-month stand-by 
loans for Argentina equivalent to US$2.98 billion.6  In this connection, the Argentine authorities have 
pointed out that, previously, during the 2001/200 2 crisis period, net payments amounting to 
approximately US$15 billion were made to the multilateral credit organizations (of which 9 billion 
went to the IMF).  In September 2003, the IMF approve d a new three-year stand-by loan equivalent to 
US$12.55 billion, as well as an extension of the payment period for debts amounting to US$2.43 billion.
7  In December 2005, Argentina announced the repayment of all its debt to the IMF.8   
                                                      
1 The complete and up-to-date text of the Decr ee is available at:  http://infoleg.mecon.gov.ar/ 
infolegInternet/anexos/70000-74999/70355/texact.htm. 
2 During the initial period of application of the Convertibility Plan, the divergence between the 
domestic inflation rate and the inflation rate in the Unite d States contributed to a rapid real appreciation of the 
peso.  Cumulative inflation between 1991 and 1995 was 145 per cent, primarily as a result of the inflation that 
built up in the first half of 1991.  As of 1995, inflation fell to very low levels, and from 1999 to 2001 there was 
deflation. 
3 In her analysis of the Argentine crisis, Anne Krue ger, former First Deputy Executive Director of the 
IMF, personally responsible for supervising the IMF's ne gotiations with Argentina during the crisis, notes that 
the lack of flexibility was especially significant since under a fixed exchange rate regime other sources of adjustment are needed to maintain competitiveness.  Krueger recognizes that the IMF should have insisted more 
on fiscal austerity, but says that the choice of the exchange rate to apply is a sovereign decision for each country 
to make (Krueger, Anne (2002)).  Fo r a critical analysis of the IMF's positi on prior to the Argentine crisis see 
Nielsen, Guillermo (2006), pp. 64-71. 
4 The state of public emergency was initially declared for the period up to 31 December 2004;  Law 
No. 25.972 of 17 December 2004  and Law No. 26.077 of 10 January 2006 were extended until 
31 December 2005 and 31 De cember 2006, respectively. 
5 Decree No. 214/02 (Pesoization) of 3 February 2002 and updates:  Decrees Nos. 320/02 of 
15 February 2002 and 410/02 of 1 March 2002, and Law No. 25.642 of 11 September 2002. 
6 IMF (2003a). 
7 IMF (2003b). 
8 IMF (2005b).  Argentina WT/TPR/S/176 
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14. In 2003, Argentina began emerging from the recessi on.  GDP grew at a rate of 9 per cent in 
2004 and 9.2 per cent in 2005.  Domestic demand made  a negative contribution to the growth of GDP 
during the period 1999-2002, with a sharp contraction in private consumption and an even more rapid 
decline in investment (Table I.2).  Domestic dema nd was mainly affected by the severe fall in income 
that followed the depreciation of the peso, as well as by high interest rates and a domestic credit 
crunch.  From 2003 onwards, domestic demand steadily  recovered.  The behaviour of investment, 
which outstripped the rate of growth of GDP, was particularly dynamic.  The private investment rate recovered and even surpassed its pre-crisis le vels, reaching 21.5 per cent of GDP in 2005. 
15. The unemployment index rose considerably between 1998 and 2002, when it stood at more 
than 18 per cent.  Since then, with the return of growth, employment has risen, and the unemployment 
rate fell to 10.2 per cent in the second quarter of 2006.  According to the authorities, the employment 
rate in 2006 was the highest in recent years.  Real  wages fell during the crisis period, with nominal 
wages increasing by less than inflation;  in the priv ate sector the fall in real wages ended in 2003.  
However, public sector wages continued falling in real terms until 2005.   
16. The 1998-2002 recession resulted in a general dete rioration in well-being:  per capita GDP 
shrank considerably in terms of its US dollar va lue between 1998 and 2002, after which it rebounded.  
The financial crisis of 2001-2002 led to a consider able worsening of the social indicators which, 
however, have improved significantly with the econom ic recovery and with the implementation of 
employment promotion and other income policies;  the percentage of the population living below the 
poverty line fell from 57 per cent in 2002 to 33.8 per cent in 2005.  According to the authorities, the 
alleviation of poverty is the G overnment's first priority.   
(ii) Fiscal policy 
17. The Ministry of the Economy and Production (MEP) is responsible for formulating and 
implementing fiscal policy in Argentina.  The objec tive of fiscal policy is to establish a sustainable 
situation of fiscal solvency as a basi s for stable and equitable growth.
9  According to the national 
budget for 2006, fiscal policy should help to achieve a primary surplus of 3.3 per cent of GDP for the 
non-financial public sector, through increased reve nue collection and the selective allocation of 
primary expenditure, with priority for social pr ogrammes and expenditure on education, science and 
technology, and infrastructure.10 
18. The fiscal situation deteriorated considerab ly between 1998 and 2001, mainly because of a 
fall in revenue attributable to reduced levels of activity and increased interest payments on federal and 
provincial debt.  The accounts for the non-financial public sector were in deficit between 1998 and 
2002 (Table I.3).  To remedy this situation, be tween 2000 and 2001 a contrac tionary fiscal policy was 
maintained.  In 2001, the Law on Fiscal Balance (Zero Deficit) ( Ley de Equilibrio Fiscal (Déficit 
Zero) ) (Law No. 25.453 of 30 July 2001) was introduced.  This stipulated that the total appropriations 
for a fiscal year could not exceed the revenue collected during the same year, and that if the estimated 
budget funds were not sufficient to cover all th e proposed appropriations, the appropriations, 
including those for paying salaries, would be reduced proportionately. 
19. The fiscal situation began to improve in 2003, with the trend strengthe ning in 2004 and 2005, 
due partly to lower interest payments but mainly to  a substantial increase in revenue as a result of the 
rebound in the economy.  Some of the additional revenue could be attributed to indirect taxes.  Thus, 
in 2005, tariffs represented 0.8 per cent of GDP a nd export duties 2.5 per cent.  However, there was 
                                                      
9 Decree No. 8 Promulgating Law No. 26.078 (General Budget 2006) of 9 January 2006.  Consulted at:  
http://www.mecon.gov.ar/onp/html/ley-2006/ley/veto.htm. 
10 Budget 2006.  Consulted at:  http://www.mecon .gov.ar/onp/html/ley-2006/ley/ley2006.pdf.   WT/TPR/S/176 Trade Policy Review 
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also an increase in direct taxes, due to the grow th of production and employment.  In 2005 and 2006, 
the authorities implemented an expansionary fiscal po licy, while maintaining certain levels of fiscal 
surplus, which, according to the authorities, is a basic feature of the economic policy in force.  The 
IMF calculates that the thrust of fiscal policy was contractionary in 2003 an d 2004, but expansionary 
in 2005.11   
Table I.3 
Non-financial public s ector financial accounts, fiscal years 1998-2006 
(Percentage of GDP and US$) 
 1998 1999 2000 2001 2002 2003 2004 2005 2006a 
(1) Current revenues 18.7 19.3 19.4 18.7 17.6 20.5 23.4 23.7 23.8 
A. Tax revenue 13.5 13.6 14.3 13.8 12.8 16.2 18.7 19.2 18.5 
B. Social security contributions 4.0 3.8 3.8 3.6 3.1 3.1 3.3 3.5 4.3 
C. Non-tax revenue 0.7 1.2 0.7 0.8 0.9 0.9 1.0 0.7 0.5 
D. Other revenue  0.6 0.6 0.6 0.6 0.8 0.4 0.5 0.3 0.5 
(2) Current expenditures 19.0 20.8 20.9 21.0 18.4 19.2 19.6 20.1 19.1 
A. Consumption and operating expenditure 3.1 3.3 3.0 3.1 2.9 3.1 2.9 3.0 3.1 
       Wages 2.3 2.5 2.4 2.4 2.2 2.3 2.1 2.1 2.3 
       Goods and services 0.8 0.8 0.7 0.7 0.7 0.8 0.8 0.9 0.8 
B. Property income  2.2 2.9 3.4 3.8 2.2 1.8 1.3 1.9 1.9 
       Interest 2.2 2.9 3.4 3.8 2.2 1.8 1.3 1.9 1.9 
       Other income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
C. Social security benefits 5.8 6.1 6.1 6.2 5.3 5.2 5.1 4.6 4.4 
D. Other current expenditure 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
E. Current transfers 7.9 8.4 8.4 8.0 8.0 9.0 10.2 10.4 10.4 
    To the private sector 2.0 2.3 2.2 2.2 2.8 3.0 2.8 2.8 3.2 
    To the public sector 5.9 6.2 6.2 5.8 5.2 6.0 7.4 7.6 7.1 
      a.  Provinces and municipality of the City of  
 Buenos Aires 5.3 5.5 5.6 5.2 4.7 5.5 6.8 7.1 6.5 
      b.  Universities 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.6 
(3) Economic result:  Saving/Dissaving (1-2) -0.3 -1.5 -1.5 -2.3 -0.8 1.3 3.9 3.6 4.1 
(4) Capital resources 0.2 1.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 
(5) Capital expenditure 1.3 1.1 1.0 1.0 0.7 0.8 1.3 1.9 2.5 
(6) Primary expenditure (2, excl. B+5) 18.0 19.0 18.6 18.2 16.9 18.2 19.6 20.1 20.4 
(7) Total revenues including miscellaneous 
central government contributions 22.2 24.2 23.2 22.6 21.2 24.5 26.5 26.9 27.3 
(8) Primary expenditure including miscellaneous 
central government expenditure 21.3 22.9 22.2 22.1 20.5 22.2 22.6 23.2 23.9 
(9) Total primary surplus (7-8) 0.9 1.2 1.0 0.5 0.7 2.3 3.9 3.7 3.5 
(10) Total expenditure 23.6 25.8 25.5 25.8 22.7 24.0 23.9 25.1 25.7 
(11) Financial result (7-11) -1.4 -1.7 -2.4 -3.2 -1.5 0.5 2.6 1.8 1.6 
Total public debt (US$ billion) 112. 4 121.9 128.0 144.4 137. 3 178.8 191.3 128.6 .. 
Total public debt (percentage of GDP) 38.0 43.0 45.0 57.0 127.7 139.6 125.7 70.6 .. 
.. Not available. 
a Estimated for the first quarter. 
Source:  Ministry of the Economy and Production.  Consulted at:  http://www.mecon.gov.ar. 
20. One of the main sources of pressure on the public finances has been the structural problem of 
transfers from the national government to the pr ovinces.  The revenue-sharing system makes the 
national government responsible for collecting most of the taxes but more than half of the expenditure 
takes place in the provinces.  To remedy this situa tion, the Federal Government has been negotiating 
annually with the provinces.  Moreover, the La w on the Federal Fiscal Responsibility Regime ( Ley de 
Régimen Federal de Responsabilidad Fiscal ) (Law No. 25.917, promulgated on 24 August 2004) has 
                                                      
11 IMF (2005a). Argentina WT/TPR/S/176 
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been introduced. Among other things this Law stipul ates that the rate of increase of primary public 
expenditure in the national and provincial budgets may not exceed the nominal rate of increase of 
GDP, sets limits on provincial debt and requires provincial a nd local governments to obtain 
authorization from the MEP before taking on furt her debt.  The regime entered into force on 
1 January 2005 and by May 2006 it had been adopt ed by 19 jurisdictions (including the national 
government).12  The authorities have pointed out that even the provinces which have not adopted the 
regime are generating surpluses. 
21. The public debt ratio increased considerably during the period under review (Table I.3), 
mainly as a result of the growing fiscal deficits (fina ncial result) and the steep depreciation of the peso 
in 2002-2003.  Argentina stopped repaying the princi pal and interest on its debt in December 2001;  
this suspension lasted for more than three years.   
22. In January 2005, the Argentine authorities ma de a global offer to exchange a total of 
US$82 billion in 152 different eligible claims for th ree new types of bonds at the rate of 32 centavos 
to the US dollar.  The debt exchange closed in Febr uary 2005 with a participa tion rate of slightly over 
76 per cent.  Some US$24 billion was refinanced in ternally, while about US $38 billion was tendered 
from abroad, leaving principal in default totalling 20 billion still to be resolved.  As a result of the 
conclusion of the agreements with its creditors, th ere was a substantial cont raction in Argentina's 
public debt as a percentage of GDP.  Moreover, th e percentage of the Federal Government's debt 
stock denominated in pesos rose from 3 per cent to 37 per cent.13  At the beginning of 2006, the 
Government paid off all its US$9.6 billion debt with  the IMF.  This reduced the debt/GDP ratio to 
under 65 per cent. 
(iii) Monetary and exchange rate policy 
23. Argentina's monetary and exchange rate po licy is managed by the Central Bank of the 
Argentine Republic – BCRA ( Banco Central de la República Argentina ).  Between 1991 and 2001, 
Argentine monetary policy was completely defined by  the efforts to maintain a fixed exchange rate 
that linked the peso with the dollar at an exchange rate of one peso to the dollar, as established by the 
Law on Convertibility No. 23.928 of 27 March 1991.14 
24. The fixed exchange rate regime led to a multilatera l appreciation of the currency in real terms.  
At the same time, there was an increase in payments  in the services balance, which contributed to a 
larger deficit on current account, and a rise in the le vel of external debt.  This was accompanied by a 
heightened perception of country risk among depos itors and investors, which in 2000-2001 led to 
severe capital flight.15  During the course of 2001, the Government adopted measures aimed at 
restoring some degree of exchange rate competitiveness.16  However, these were insufficient to 
prevent its continuing erosion and it was decide d that more drastic me asures were required. 
25. Emergency Law No. 25.561 of 6 January 200 2 amended various aspects of the Law on 
Convertibility and put an end to convertibility properly  so-called.  A flexible exchange rate system 
                                                      
 12 See http://www2.mecon.gov.ar/cfrf /integrantes/integrantes.htm. 
 13 IMF (2005a). 
 14 Under the Law on Convertibility, the Argentine monetary base c ould not exceed its international 
reserves, with a certain margin of flexibility.  The BCRA controlled the money supply, by buying and selling 
US dollars at a fixed exchange rate.  There were no re strictions on access to foreign currencies and no exchange 
controls were applied. 
 15 Bustelo, Pablo (2002), pp 9-14.  
16 For example, Law No. 25.445 of 22 June 2001 provided for the exchange rate for foreign trade transactions to 
be fixed with respect to the dollar and the euro at a ratio of 50/50.   WT/TPR/S/176 Trade Policy Review 
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was introduced and that led to a sharp initial deprecia tion of the peso followed by a partial correction.  
Since 2002, monetary policy has been based on two main pillars:  the setting of quantitative money 
aggregate targets, as an intermediate target for price stability; and the accumulation of reserves, as 
reinsurance against external shocks.  The BCRA sets targets for the evolution of an objective 
monetary variable:  between 2002 and the end of 20 05, this variable was the monetary base, which 
remained within the established range for 10 consecu tive quarters.  Since 2006, the objective variable 
has been M2 (see below).  The target setting must be consistent with an indicative range of inflation;  
for 2006, the BCRA agreed with the MEP a range of 8-11 per cent.  The reserve accumulation policy 
has led to a considerable increase in reserves. 
26. The exchange rate correction since the introductio n of the floating regime at the beginning of 
2002 has been greater than that in the neighb ouring countries and has been accompanied by 
interventions by the BCRA in the foreign exchange market designed  to reinforce a prudential policy 
of accumulation of international reserves.  To prevent these interventions from affecting the 
achievement of the broad monetary base target, the BCRA has used various monetary regulation 
techniques which have made it possible to compensa te for the monetary creation associated with the 
purchase of currencies.17    
27. Starting with the 2006 Monetary Programme, and taking into account the resurgence in 
domestic credit which increased secondary money creation, the BCRA decided to use M2 as the objective monetary variable.
18  The BCRA sets quarterly ranges for M2, which still leaves it sufficient 
flexibility in monetary policy to manage other variables in order to influence the liquidity of the 
economy ("fine tuning"), such as control of the short- term interest rate through daily intervention in 
the swap market, security trading operations , and intervention in the exchange market.19   
28. The margin between lending and borrowing inte rest rates in national currency increased 
considerably during the financial crisis, with much of the increase reflecting the scarcity of domestic 
credit and the increased perception of risk.  Since 2003 the gap has closed, but in 2005, coinciding 
with an acceleration in inflation, there was an in crease in the margin betw een the rates on loans and 
deposits in the savings and loan associations, a lthough the margin between the rates on loans and 
fixed-term deposits continue d to narrow (Table I.4). 
29. Between 1999 and 2001 Argentina experienced a pe riod of deflation (Table I.4) induced by 
recession and the fixing of the exchange rate.  Later,  inflation increased considerably.  As a result of 
the skewed monetary policy and severe recession, pr ices rose more slowly in 2003-2004.  Since 2005 
there has been a rebound in inflation due to st rong domestic demand and high international raw 
material prices.  The BCRA considers that the rebo und in inflation is linked with a restructuring of 
relative prices between tradeables and non-tradeables.20   
                                                      
17 The early cancellation of rediscounts (through th e "matching" programme and advance payments), 
swap operations, and the placement of Central Bank bills and notes, with a maturity of from one month to two 
years, have been factors in the absorption of the monetary base. 
18 Sum of the currency in circulation, private and public sector current account deposits in pesos and 
private and public sector savings deposits in pesos. 
19 In the swap market (short-term bank transactio ns), the BCRA establishes a short-term reference 
interest rate "corridor", which in 2005 was 5-6 per cent. 
20 Redrado, Martín (2005). Argentina WT/TPR/S/176 
 Page 9 
 
 
Table I.4 
Main monetary indicators, 1998-2006 
(Percentage) 
 1998 1999 2000 2001 2002 2003 2004 2005 2006a 
Money and credit supply (rate of variation over 12 months) 
Broad monetary base 11.0 6.5 -7.3 -16.8 80.4 26.3 12.4 4.3 26.9 
M1 2.6 -2.7 -4.2 -2.9 76.5 27.2 29.7 27.8 5.9 
M2 5.0 -2.4 -3.3 13.7 17.6 35.8 39.7 22.4 7.3 
M3 11.2 2.4 2.9 -18.9 18.2 31.5 26.1 20.3 15.4 
As a percentage of GDP          
Broad monetary base/GDP 8.6 9.2 8.6 8.1 10.6 11.4 11.0 9.5 10.5 
M1/GDP (percentage of GDP) 8.5 8.3 8.1 9.0 11.5 12.4 13.7 14.3 13.3 
M2/GDP (percentage of GDP) 13.2 13.1 12.8 16.7 14.3 16.4 19.5 19.4 18.3 
M3/GDP (percentage of GDP) 30.4 31.5 32.8 30.5 26.2 29.1 31.3 30.7 31.1 
Deposits (percentage of GDP) 25.7 26.4 27.9 25.3 19.4 22.1 23.8 23.2 23.9 
   in pesos  11.9 11.2 11.1 7.3 18.6 20.6 21.4 21.0 21.4 
   in foreign currencies 13.8 15.2 16.8 18.0 0.8 1.4 2.5 2.1 2.5 
Total private sector lo ans (percentage of GDP) 23.1 22.5 21.5 19.8 10.0 7.5 8.1 9.2 10.5 
Interest rates (end of period)           
Lending rate call (up to 15 days) 7.5 8.2 12.1 .. 6.6 1.7 4.5 8.4 8.4 
Lending rate pesos (Prime) 10.7 13.8 14.8 .. 33.1 10.1 5.6 7.1 9.1 
Deposits in pesos (savings banks) 2.9 3.1 2.5 1.8 2.1 0.8 0.7 0.9 0.8 
Deposits in pesos (fixed term 30-59 days) 8.4 10.2 11.1 6.6 23.0 3.9 2.5 4.3 7.0 
Deposits in dollars (savings banks) 2.4 3.0 3.2 1.9 1.8 0.2 0.1 0.1 0.1 
Interest margin (lending-savings banks) 7.8 10.7 12.3 .. 31.0 9.3 4.9 6.2 8.4 
Interest margin (lending-fixed term) 2.3 3.6 3.7 .. 10.1 6.2 3.1 2.8 2.2 
Inflation (percentage variation at end of period)           
Consumer price index (retail prices) 0.7 -1.8 -0.7 -1.5 41.0 3.7 6.1 12.3 11.0c 
Wholesale price index  -6.3 1.2 2.4 -5.3 118.0 2.0 7.9 10.7 12.0c 
Exchange rate          
Exchange rate (average for period Arg$/US $) 1.0 1.0 1.0 1.0 3.1 2.9 2.9 3.0 3.1c 
Multilateral real exchange rate variationb (Dec.-Dec.) 1.9 -10.8 0.4 -5.7 135.0 -10.9 5.2 1.0 .. 
Real effective exchange rate to the US$b (Dec.-Dec.) 0.6 3.4 4.3 4.0 147.8 -14.9 -0.9 -6.2 -0.8c 
Real effective exchange rate to the UR$ (Dec.-Dec.) -2.3 -31.9 6.8 -15.7 115.4 -10.5 8.0 16.7 7.1c 
.. Not available. 
a As at 30 September 2006. 
b A minus sign indicates apprecia tion, a plus sign depreciation. 
c 12 months to June. 
Note: The data on deposits, loans and interest rates correspond to  the information in the Statistical Bulletin, which is availa ble on the 
BCRA website.  The broad monetary base corresponds to the ite m "Monetary liabilities" up to the end of 2001, and includes 
quasi-monies up to March 2004, the redemption date.  The money aggregates include pesos plus US dollars from the private and 
public sectors.  M1 includes money in circ ulation and public- and private-sector curr ent account deposits.  M2 includes M1 plus  
private and public sector savings bank deposits. M3 includes M2 an d private- and public-sector time and other deposits.  Only 
the end-of-period balances are considered. 
Source:  BCRA and MEP. 
(iv) Balance of payments 
30. The current account of Argentina's balance of payments was heavily in deficit between 1998 
and 2000.  Because of the dramatic decline in im ports resulting from the crisis of 2001 this account 
returned to surplus in 2002, although as economic growth has picked up ag ain the surplus has been 
eroding (Table I.5).  The passage from deficit to  surplus on current account corresponded with the 
suspension of external debt payments in 2001, an d the subsequent external debt reduction through 
renegotiation.  This also helped domestic savings  to increase and exceed investment as a percentage WT/TPR/S/176 Trade Policy Review 
Page 10 
 
 
of GDP.  Economic recovery was accompanied by a contraction of the surplus on current account 
from 8.1 per cent of GDP in 2002 to 2.8 per cent in 2005. 
31. Since 2002, the goods and services trade balance has been in surplus, although in 2003 the 
surplus began to shrink (Table I.5).  The merc handise balance has been in surplus since 2001, 
reaching a record level in 2002, mainly as a result of  increased exports.  Initially, there was a fall in 
imports, but since 2003 they have picked up as domes tic demand has recovered, although they have 
not yet returned to their 1998 levels.  Argentina' s services balance is still in deficit.  Between 1999 
and 2001, Argentine exports of goods and services were affected by a loss of competitiveness, but 
following the exchange rate correction they resumed th e path of more dynamic growth.  Their share of 
GDP rose to 27.7 per cent in 2002, but then fell back to 24.6 per cent in 2005  
Table I.5 
Balance of payments, 1998-2006 
(US$ million) 
 1998 1999 2000 2001 2002 2003 2004 2005 2006a 
I. Current account -14,482  -11,944  -8,981  -3,291  8,668  7,982 3,278  5,407 1,179 
 A. Trade account -7,541 -4,906 -1,832 3,522 15,589 15,410 11,595 11,048 2,338 
 Exports 31,288 28,028 31,277 31,170 28,946 34,163 39,404 46,356 11,560 
 Goods (f.o.b.) 26,434  23,309  26,341  26,543  25,651  29,939  34,550  40,013 9,755 
 Services 4,854  4,719  4,936  4,627  3,295  4,224  4,854  6,343 1,805 
 Imports 38,829 32,933 33,108 27,648 13,357 18,753 28,177 35,308 9,223 
 Goods (f.o.b.) 29,531  24,103  23,889  19,158  8,473  13,134  21,311  27,300 7,042 
 Services 9,298  8,830  9,219  8,490  4,884  5,619  6,866  8,008 2,181 
 Goods balance -3,097  -795 2,452  7,385  17,178  16,805  13,239  12,714 2,714 
 Services balance -4,444  -4,111  -4,284  -3,863  -1,589  -1,395  -1,644  -1,666 -376 
 B. Income -7,405  -7,491  -7,548  -7,237  -7,484  -7,970  -8,922  -4,986 -1,321 
 Investment income -7,400  -7,502  -7,556  -7,241  -7,466  -7,952  -8,896  -4,961 -1,314 
 Loans 6,109 6,040 7,383 5,816 3,003 3,064 3,445 4,003 1,164 
 Interest  5,240  5,442  6,405  5,179  2,653  2,613  2,818  3,168 878 
 Profits/Dividends 869  598 978 635 350 451 627 835 286 
 Liabilities 13,509 13,542 14,940 13, 055 10,469 10,016 12, 341 10,283 2,477 
 Interest 10,347  11,329  12,352  12,162  10,349  9,932  9,774  6,637 1,257 
 Profits 3,162  2,213  2,588  893 120 1,084  2,567  3,646 1,220 
 Other income -5  11 8 4 -18 -18 -27 -32 -7 
 C. Current transfers  464  453 399 424 564 545 627 671 163 
II. Capital and financial 
account 18,354  13,772  8,737  -5,439  -11,404  -3,176  1,782  2,765 -8,134 
 A. Capital account 73  149 106 157 406 70 43 90 11 
 B. Financial account 18,281  13,623  8,631  -5,595  -11,810  -3,246  1,739  2,674 -8,145 
 Banking sector 3,505  1,330  67 11,588  -2,573  -3,001  -3,097  -4,332 -9,704 
 Non-financial public sector 9,361  10,886  8,258  -3,385  3,618  4,637  4,952  3,509 949 
 Non-financial private sector 5,414  1,407  305 -13,798  -12,856  -4,882  -116 3,498 610 
III. Errors and omissions -434  -628 -196 -3,354  -1,780  -1,225  259 686 321 
IV. Variation in int. reserves 3,438  1,201  -439 -12,083  -4,516  3,581  5,319  8,857 -6,633 
M e m o r a n d u m  i t e m s :             
Gross official reserves  26,524 27,831 26,491 19,425 10,476 14,119 19,646 28,077 25,530 
Gross external debt  147,634 152,563 155,015 166,722 156,748 164,918 171,115 124,230 .. 
Current account/GDP (%) -4.9 -4.2 -3.2 -1.2 8.1 6.0 2.2 2.8 .. 
Total external debt/GDP (%) 49.4 53.8 54.5 62.1 145.7 128.6 112.5 64.3 .. 
.. Not available. 
a First quarter. 
Source:  MEP. Argentina WT/TPR/S/176 
 Page 11 
 
 
32. The financial account, which showed a surplu s between 1998 and 2000, went sharply into 
deficit in 2001-2002, mainly on account of the massive outflow of private capital during those years.  However, starting in 2003, a net inflow of short-te rm capital was again observed.  Gross international 
reserves, which fell dramatically during the fina ncial crisis, began rec overing in 2003 and in 2005 
stood just above 1999 levels.  Argentina's total external debt continued increasing up to 2004, a 
situation aggravated by the accumulation of unpaid  balances.  When the debt was renegotiated in 
January 2005, the balance was reduced, falling from 112. 5 per cent of GDP in 2004 to 64.3 per cent in 
2005.  
(3) T
RADE AND INVESTMENT FLOWS  
(i) Evolution of merchandise trade 
33. After contracting in 2002, expor ts began to recover in 2003 and this trend continued in 
2004-2005.  Between 1998 and 2005, exports expanded at an average annual rate of 6.1 per cent, 
reaching a record level of US$40.106 billion in 2005 (Tables AI.1 and AI.3).  Imports contracted, but 
then began to recover in 2003 (Tables AI.2 and AI.4).   The initial contraction was attributable in part 
to the recession that gripped the Argentine econom y during the period 1999-2 002, and subsequently 
to an import substitution process partly induced by exchange rate policy but also encouraged by 
certain trade policies.  Total Argentine trade (expor ts plus imports) increased its share of GDP from 
23.3 per cent in 1998 al 42.9 per cent in 2005.  
34. One of the factors responsible for the recovery in exports was an improvement in Argentina's 
terms of trade, with increases in the prices of some  of its main export products, together with the 
restoration of exchange rate competitiveness following the introduction of the floating regime early in 
2002.  Exports responded positively to the change in relative prices, despite a sustained increase in 
domestic demand, supply problems, difficulties in obtaining credit, and the use of export taxes 
(Chapter III(3)). 
(a) Composition of merchandise trade 
35. Argentina is a major exporter of agricultural pr oducts and manufactures of agricultural origin, 
which continue to be the main export item with 47. 8 per cent of the total in 2005.  Soya bean, grain 
oils, wheat, maize (corn) and bovine meat are the chie f export products (Table AI.1).  Exports of soya 
bean and oils have grown rapidly, as have expor ts of mineral products, particularly petroleum. 
36. On the other hand, the share of manufactured goods in total exports, those of agricultural 
origin excluded, fell from 34.9 per cent in 1998 to 30.6 per cent in 2005 (Table AI.1), partly owing to 
an increase in domestic demand.21  It should be noted that the share of manufactures in total exports 
increased between 2003 and 2005.  The authorities have  observed that, although they did not benefit 
from the high prices enjoyed by agricultural products,  exports of industrial products performed well 
following the implementation of the competitive exch ange rate policy.  Duri ng the period 1998-2005, 
the trend in exports of chemical, plastic, aluminiu m, and iron and steel indus try products was positive, 
whereas exports of automotive products declined.   
37. As a major exporter of agricultural products  and increasingly of manufactured products, 
Argentina would benefit considerably from the su ccess of the Doha Round.  Estimates based on a 
                                                      
21 The result is different if the ISIC classification is  used.  In this case, exports of manufactured goods 
increased, from 71.8 per cent of the total in 2002 to 73.7 per cent in 2005, while primary products declined slightly. WT/TPR/S/176 Trade Policy Review 
Page 12 
 
 
World Bank study indicate that total liberalizati on of the agricultural sector at global level would 
increase the rate of growth of Argentina's GDP by two percentage points a year.22 
38. The composition of Argentina's imports remained relatively stable between  
1998 and 2005 (Table AI.2).  In the latter year, 86. 3 per cent of imports were manufactured products.  
The share of fuel (mainly coal) and electrical energy imports increased to 5 per cent in 2005, 
reflecting the stronger demand following from the r esumption of economic growth, together with 
higher international market prices. 
(b) Trends in merchandise trade 
39. Despite a loss of share during the period under review, the countries of the American 
continent continue to be the main destination fo r Argentine exports, accounting for 52.5 per cent of 
the total exported in 2005 (Table AI.3).  The reduced share of the American continent is primarily 
attributable to the decline in the value of Argentine exports to other MERCOSUR countries 
(especially Brazil), which in 2005 was lower than th e confirmed figure for 1998.  After the European 
Union, treated as a group, and Brazil, the main des tinations for Argentine exports were Chile and the 
United States.  Asia's share of exports rose, largel y as a result of increased exports to China, which 
has become the largest market for Arge ntine exports to the Asian continent. 
40. Imports from the American continent increased  from 52 per cent in 1998 to 63.4 per cent of 
the total in 2005 (Table AI.4).  Imports fro m other MERCOSUR countries (especially Brazil) 
increased their share to 40.5 per cent in 2005.  This  reflects their preferential access to the Argentine 
market, which partly offset the effect of the de preciation of the Argentine peso on exports from the 
other MERCOSUR countries to Argentina.  The shar es of the United States and the European Union 
declined, while that of Ch ina increased substantially. 
(ii) Trade in services 
41. Traditionally, Argentina runs a deficit in servi ces trade, although in recent years that deficit 
has been receding from the levels reached in 1998-20 01 (Table I.6).  Argentina shows a deficit in all 
branches of its services trade, with the excepti on of construction and co mputer and information 
services. 
42. The most important items on both sides of the ba lance sheet are travel and transport, which 
represent about 75 per cent of services exports and more than two thirds of imports.  Both exports and 
imports of services were considerably affected by the financial crisis of 2001-2002 but have since 
recovered, especially exports.  Imports in 2004 and 2005 were still somewh at below 2001 levels.  
Table I.6  
Trade in services, 1998-2005 
(US$ million) 
  1998 1999 2000 2001 2002 2003 2004 2005 
Balance -4,444 -4,111 -4,283 -3,863 -1,590 -1,397 -1,666 -1,666 
Inflows 4,854 4,719 4,936 4,627 3,295 4,224 5,214 6,343 
Transport 1,155 1,092 1,145 893 760 939 1,152 1,306 
Travel 3,025 2,898 2,904 2,642 1,535 2,006 2,563 3,336 
Communication services 193 169 175 187 151 149 185 212 
Construction services 22 28 7 0 16 41 61 46 
Insurance services 0 0 12 0 0 0 0 0 
Table I.6 (cont'd) 
                                                      
22 Guadagni, Gustavo (2005).  Argentina WT/TPR/S/176 
 Page 13 
 
 
  1998 1999 2000 2001 2002 2003 2004 2005 
Financial services 6 5 6 4 1 1 2 3 
Computer and information services 83 93 147 189 115 153 178 200 
Royalties 26 25 37 47 30 49 59 52 
Business, professional and techni cal services 180 229 324 471 537 695 802 922 
Personal, cultural and recreational services 11 16 18 38 83 111 126 154 
Government services 153 161 160 158 67 81 86 112 
Outflows 9,298 8,830 9,219 8,490 4,885 5,622 6,880 8,008 
Transport 2,784 2,419 2,413 2,104 949 1,146 1,622 1,958 
Travel 4,230 4,195 4,425 3,893 2,328 2,511 2,964 3,341 
Communication services 173 140 205 239 223 231 234 268 
Construction services 4 6 0 0 8 37 31 2 
Insurance services 296 271 200 219 52 149 158 218 
Financial services 203 189 170 185 49 112 102 198 
Computer and information services 90 99 149 191 115 122 143 168 
Royalties 590 582 580 564 330 374 492 586 
Business, professional and techni cal services 553 584 648 639 561 603 757 852 
Personal, cultural and recreational services 155 114 171 228 91 106 131 155 
Government services 220 231 260 228 180 231 246 262 
Source : MEP and National Dire ctorate of International Accounts – DNCI ( Dirección Nacional de Cuentas 
Internacionales ). 
(iii) Foreign investment 
43. Argentina is a net recipient of foreign direct i nvestment (FDI) flows.  The main investors in 
Argentina are (in order of importance): Spain, United States, Netherlands, France, Chile, Germany, 
United Kingdom, and Italy (Table I.7).  By activity, the sectors that have received most foreign 
investment are oil, the manufacturing industry (especially the chemical, food and beverages, and automotive industries), electricity, telecommunications, trade and banking.  
Table I.7 
Foreign investment position, by investor and by activity, 1998-2004 
(US$ million)  
  1998 1999 2000 2001 2002 2003 2004 
1. By investor        
Europe 20,056 31,263 36,873 44,029 23,714 26,234  27,482 
Germany 1,773 1,897 2,090 1,876 1,166  1,472  1,619 
Spain 3,602 12,308 16,612 18,413 10,063  11,786  11,210 
France 3,288 4,441 4,971 6,734 2,685  2,888  3,213 
Italy 1,614 2,513 2,729 3,107 1,215  1,248  1,313 
Netherlands 4,819 5,090 5,470 6,426 3,151  3,230  4,386 
United Kingdom 2,877 2,630 2,359 2,239 1,543  1,619  1,346 
Other 2,084 2,385 2,642 5,234 3,891  3,991  4,395 
North America 16,206 17,402 17,641 21,777 12,321  12,232  12,491 
United States 14,720 15,418 15,864 19,392 10,888  10,858  10,986 
Other  1,485 1,983 1,777 2,385 1,433  1,374  1,505 
Central America and Caribbean 5,043 7,170 6,388 5,014 1,267  3,607  3,324 
South America 5,629 5,056 5,113 6,638 4,899  5,391  6,141 
Chile 3,128 2,992 3,445 3,616 2090  2,118  2,236 
Other  2,501 2,064 1,667 3,022 2,809  3,273  3,905 
Other regions 864 1,036 586 2,046 945  833  1,146 
Total 47,797 61,926 67,601 79,504 43,146  48,298  50,583 
2. By activity        
Oil 6,294 14,813 16,888 18,104 11,749  12,951  13,976 
Mining 1,091 1,083 769 938 356  421  743 
Table I.7 (cont'd) WT/TPR/S/176 Trade Policy Review 
Page 14 
 
 
  1998 1999 2000 2001 2002 2003 2004 
Manufacturing industry 17,345 18,610 19,919 22,562 13,721  14,818  16,497 
 Food, beverages, and tobacco 4,574 5,277 5,805 6,751 3,958  3,904  4,453 
 Textiles and tanned leather 256 226 262 305 175  168  135 
 Paper 1,358 1,271 1,517 1,460 832  913  1,059 
 Chemicals, rubber and plastics 4,642 5,302 5,740 7,340 4,230  4,638  4,922 
 Cement and ceramics 837 774 750 839 524  618  616 
 Metals and metal articles 1,404 1,336 1,402 1,392 1,115  1,785  1,900 
 Machinery and equipment 1,016 1,415 1,280 1,329 845  585  615 
 Automotive industry  3,259 3,010 3,162 3,146 2,042  2,207  2,798 
Electricity, gas and water 7,346 8,306 7,951 9,043 3,969  4,876  5,053 
Commerce 1,970 3,002 2,938 5,253 3,086  2,958  2,645 
Transport and communications 4,062 5,196 6,997 9,473 4,785  4,349  3,992 
Banking 5,671 6,403 7,206 7,012 2,610  2,934  2,436 
Other 4,019 4,513 4,933 7,119 2,870  4,991  5,241 
Total 47,797 61,926 67,601 79,504 43,146  48,298  50,583 
  Financial sector 5,671 6,403 7,205 7,012 2,610 2,934 2,436 
  Non-financial sector 42, 126 55,523 60,396 72,491 40,536 45,364 48,147 
    Debt between affiliated ente rprises 5,705 7,274 8, 354 19,938 24,490 30,558 32,627 
    Capital 36,421 48,249 52,041 52,553 16,046 14,806 15,520 
Foreign investment flows (net) 7,291 23,988 10,418 2,166 2,149 1,652 4,274 
Note: As from 2001 there is a change of series.  As the invest ment position is estimated at book value, it differs from an esti mate based 
on adding up the flows. 
Source:  National Statistics and Census Ins titute of the Argentine Republic, DNCI. 
44. The years 1999 and 2000 were marked by consid erable foreign investment inflows connected 
with privatizations.  The flows into the oil sector and some services areas, such as financial services 
and telecommunications, were particularly signifi cant.  The flow of FDI into Argentina fell 
substantially between 2001 and 2003, but subsequently strengthened. In 2004, the stock of foreign 
investment in Argentina totalled US$50.583 billion.  There has been a change in the main component 
of investment, namely debt between affiliated  enterprises in place of new capital injections. 
(4) OUTLOOK  
45. At the beginning of the year, the Argentine au thorities were forecasting that GDP would grow 
at a rate of 4 per cent in 2006, and between  3 and 4 per cent during the period 2007-2010.23  
According to the survey of expectations carried out  by the BCRA, the market is expecting output to 
increase by somewhat less than 8 percentage points in  2006 and by almost 6 per cent in 2007.  This 
growth would be accompanied by a gradual appreciati on of the real exchange rate, and a slow decline 
in the trade surplus.  The aut horities consider that inflation w ill oscillate around 12 per cent in 2006 
and 200724 and estimate the potential economic growth rate at about 4 per cent.  For its part, the IMF 
was forecasting that GDP would grow by 7.6 per cent in 2006 and by 4 per cent in 2007, while 
consumer prices would increase by 12.9 and 15 per cent, respectively.25 
46. Although the international context looks favour able for Argentina, the outlook for the 
economy is not entirely free of risk, especially the risk of inflation.  A substantial increase in 
international interest rates could put pressure on economic growth and government finance.  The 
authorities consider that the exposure risk has declin ed with progress in the economic situation, which 
is characterized by a primary and financial surplus in the public accounts, a surplus in the current 
                                                      
23 See MEP (2006c) and BCRA, Relevamiento de Expectativas de Mercado  (REM). 
24 BCRA, Relevamiento de Expectativas de Mercado  (REM). 
25 See http://www.imf.org/exter nal/country/ARG/index.htm. Argentina WT/TPR/S/176 
 Page 15 
 
 
account of the balance of payments, and a high rate  of economic growth.  This improvement in the 
economic situation has translated into a substantial reduction in country risk.  However, many of the 
policies applied are of an emergency or short-term nature:  the challenge will be to find sustainable 
ways of overcoming the market deficiencies and price and supply distortions that still persist.