Argentina has encountered unstable \"goods\" prices in the past and is currently

Question

Argentina has encountered unstable "goods" prices in the past and is currently adjusting to the economic sluggish recovery. The inflation rate in 2010 was at 22%, which was higher than in 2002. This has taken its toll on the Argentines' wallets, hitting them hard in the Grocery aisles. According to Damian Vasquez, a store owner in Buenos Aires, "Lately prices have been changing almost weekly, when prices stabilize a little, I write the new prices (in the window)." In the past year the entire world has had to deal with high prices in energy use, oil and food with limited income. For example in Mexico the inflation rate for 2010 was 4.1%. Argentina and Mexico have similar land mass and resources. The percentage difference could be because Argentina had given income increases to try and fight off inflation, but seems to have made it worse for them. Therefore, Argentina is struggling with inflation

Explanation / Answer

Presently, Argentina’s economy is experiencing moderate growth, but in the recent past it was characterized by unstable prices. In 2010, the inflation rate was 22%, much higher than what it was in 2002. The pockets of Argentines bore the brunt of such high level of inflation. But the inflation rate in Mexico was 4.1%. The difference between the rates of inflation of the two countries is substantial, despite the fact that Argentina and Mexico have roughly the same amount of resources.

Argentina’s labor force consists of people aged between 15 and 64. The median age in this work force is 30. That is, 50% of Argentina’s work force consists of people who are aged between 15 and 30. In 2010, the unemployment rate in Argentina was 7.9%.

According to the World Fact Book, Argentina GDP (PPP) in 2010 was $596 billion. This is quite low in comparison to other countries in the world. E.g., US’s GDP was $14.72 trillion, Japan’s GDP was $4.34 trillion, and Mexico’s was $1.56 trillion. But Argentina’s per capita GDP, which is $14,700, is quite high. So in terms of per capita GDP, Argentina is not faring that bad.

In 2001, the Economy Minister Domingo Cavallo proposed a fiscal policy that suggested heavy cuts in spending social security and health care spending on senior citizens. The reason why a budget cut became necessary is that America is dealing with a great amount of public, which it is not able to repay even after aid from the IMF.

For years, Argentina has been trying to overcome its problem of rising prices. To deal with this, the government placed heavy restrictions on withdrawal of money from banks. The government also converted people’s dollar savings into pesos. But later, Supreme Court declared this step as an unconstitutional infringement of property rights.

Top Export items of Argentina are petroleum, gas vehicles, soybean and corn. Argentina’s neighboring country, Brazil, is Argentina’s largest trading partner, amounting to about 18% of total exports of Argentina. Argentina’s second largest trading partner is China, and buys 9% of Argentina’s total exports. Third comes Chile, whose share in Argentina’s total exports is 7%.

After Argentina defaulted on its debt and peso devalued, the government of Argentina did very little to get the economy back on track. But rather it took steps that made the country’s economic situation even worse. The unemployment rate went above 20%, leading many people to emigrate to neighboring countries.

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