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Quick Facts
- Population:
- GDP (PPP):
- $874.1 billion
- 1.2% growth
- -0.2% 5-year compound annual growth
- $20,048 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Argentina’s economic freedom score is 52.3, making its economy the 144th freest in the 2018 Index. Its overall score has increased by 1.9 points, led by improvements in the indicators for judicial effectiveness, tax burden, and government spending. Argentina is ranked 26th among 32 countries in the Americas region, and its overall score remains below the regional and world averages.
Mauricio Macri’s government has taken numerous steps to improve the regulatory framework to facilitate business creation and increase competition. Other helpful liberalization measures have included lifting capital controls, floating the peso, removing export controls on some agricultural commodities, cutting some energy subsidies, reforming the official statistics agency, and securing a final exit from the country’s 2001 sovereign debt default. The economy has been placed on a sounder footing, but many more institutional and structural reforms are needed to restore Argentina to its former levels of economic freedom.
Background
Argentina is South America’s second-largest country. Once one of the world’s wealthiest nations, it has vast agricultural and mineral resources and a highly educated population, but it also has a long history of political and economic instability. Former two-term Peronist President Cristina Fernández de Kirchner was preceded in office by her late husband Néstor. Argentina’s investment profile was badly damaged during the Kirchner years by policies that isolated the country and caused economic stagnation. Overcoming that legacy has been the greatest challenge facing center-right President Mauricio Macri, who began his four-year term in 2015. Macri is pursuing a reformist agenda at home and has managed to reintegrate Argentina internationally, but he faces roadblocks from the opposition-controlled Congress.
The opposition party’s large majority in Congress has obstructed passage of President Macri’s comprehensive package of reforms to improve bureaucracy and enhance the judiciary’s effectiveness and independence. Secured interests in property are recognized and enforced, but weaknesses remain in patent and regulatory data protection regimes. The global Brazilian Odebrecht public corruption scandal has ensnared numerous Kirchner-era government officials.
The top individual and corporate tax rates remain at 35 percent. Other taxes include value-added, wealth, and financial transactions taxes. The overall tax burden equals 31.3 percent of total domestic income. Over the past three years, government spending has amounted to 38.5 percent of total output (GDP), and budget deficits have averaged 5.1 percent of GDP. Public debt is equivalent to 51.3 percent of GDP.
Access to financing remains a challenge for private businesses. Labor laws are considered highly protective of workers. In 2016, the president vetoed a labor law that would have kept firms from dismissing workers, arguing that it would deter investment. The government dramatically reduced fiscally unsustainable subsidies on electricity and raised gas and water prices to market levels but maintained other price controls amid high inflation.
Trade is moderately important to Argentina’s economy; the combined value of exports and imports equals 26 percent of GDP. The average applied tariff rate is 7.4 percent. Nontariff barriers impede trade. Government openness to foreign investment is below average. The financial sector remains subject to government interference. Twelve state-owned banks account for over 40 percent of total assets, and the presence of foreign banks has declined.