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Argentina Bail Out Plan
- 1. Argentina In Crisis Ana Barrera International Business Dr. Cassandra Theramene
- 3. Argentina’s Crisis Talking Points: Country Overview Global Presence Country Analysis Trend Analysis Bail Out Plan
- 4. Population 143.5 million Language: Spanish 8th Largest Country in the World Capital Buenos Aires
- 5. ARGENTINA HISTORY Argentina has a history of chronic monetary, economic and political problems In 1810, it declared independence from the Spanish Government No stable government ruled until 1862 Late 1800’s steady growth and a booming economy due to beef exports to Europe 1890 first large economic downturn due to budgetary problems by an incompetent government
- 6. ARGENTINA HISTORY Power traded between Presidents and military dictators In 1902, Argentina followed a Gold Standard that had a 100% reserve ratio In 1914, the gold standard was abandoned and brought back in 1927 to be abandoned again in 1929 In 1945, inflation became a big problem Unresolved political pressures resulted in the government spending more than it had taken in taxes, causing inflation
- 7. ARGENTINA HISTORY In the 70’s there was triple digit inflation Early 90’s President Menem stepped in with a reform He pegged the peso to the dollar Inflation quickly fell to below 4%
- 8. GLOBAL PRESENCE • Argentina is one of the largest economies in Latin America. • It is a leading food producer with large scale agricultural and livestock industries • World largest beef and soybean exporters • Leading producer of sunflower seeds, yerba mate, lemons & soybeans oil
- 9. ARGENTINA ANALYSIS • Republic Government • President and Vice President • Elected by popular vote for four year terms and can be reelected once. • Current president Mauricio Macri began 12/10/15 • 2015 Govt debt (pct. Of GDP): 49.5% • 2015 GDP per capita (PPP): $22,459 • Moody’s credit rating: Caa1 • 2015 exports $56.75 billion • 2015 imports $59.78 billion • Most Argentines are primarily of European descent • Believe in hierarchy • Roman Catholicism acts as the official state religion. • The EU is Argentina largest trade partner after Brazil • Brazil, China, United States, Chile, Venezuela, India, Spain, Canada , Algeria and Netherlands • Argentina entity is Mercosur Political Legal Economic Financial Socio-Culture Trading Partners/ Agreements
- 10. Gross Domestic Product 0 100,000,000,000 200,000,000,000 300,000,000,000 400,000,000,000 500,000,000,000 600,000,000,000 700,000,000,000 1960 1970 1980 1990 2000 2005 2010 2015 AxisTitle
- 11. Interest Rates 0.00% 200.00% 400.00% 600.00% 800.00% 1000.00% 1200.00% 1400.00% 1600.00% 1960 1970 1980 1990 2000 2005 2010 2015
- 12. Inflation Rate -5000.00% 0.00% 5000.00% 10000.00% 15000.00% 20000.00% 25000.00% 1960 1970 1980 1990 2000 2005 2010 2015
- 13. Currency Exchange Rates 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1960 1970 1980 1990 2000 2005 2010 2015
- 14. Bail Out Plan What could Argentina have done differently • Fiscal: cut taxes early, accept more drastic budget cuts to avoid inflation • Monetary: dollarize, allow banks to issue own notes, default on public debt early
- 15. Bail Out Plan What to do in the Short-Term • Dollarize Now • Implement tax cuts • Revamp banking system to promote confidence • Set floor price for default debt
- 16. Bail Out Plan What to do in the long term • Examine structure of law • Simplify tax strategy • Improve Federal-Province relationships • Reduce unnecessary government spending • More flexible labor laws • Improve health care
- 17. Bail Out Plan International Policy Implications • Determine comprehensive view on handling financial crisis • Examine US laws on foreign seizure • Improve IMF recommendations • Property rights as related to prosperity
- 18. REFERENCES • http://www.commisceo-global.com/country-guides/argentina-guide • http://www.indexmundi.com • http://www.worldbank.org/en/publication/global-economic- prospects#data • http://www.tradingeconomics.com/argentina/inflation-cpi • http://www.usatoday.com/story/money/business/2014/07/31/count ries-near-bankruptcy/13435097/
- 19. Questions?
Editor's Notes
- The heads of powerful families command widespread respect and responsible to care for others in terms of security, jobs and to maintain personal and family honor. Mercosur is an economic and political agreement between Argentina, Brazil, Paraguay, Uruguay and Venezuela. A full customs union, Mercosur's purpose is to promote free trade and the fluid movement of goods, people, and currency. Mercosur's primary interest has been eliminating obstacles to regional trade, such as high tariffs and income inequalities
- The Gross Domestic Product (GDP) in Argentina was worth 537.60 billion US dollars in 2014. The GDP value of Argentina represents 0.87 percent of the world economy. GDP in Argentina averaged 177.72 USD Billion from 1962 until 2014, reaching an all time high of 614.38 USD Billion in 2013 and a record low of 18.27 USD Billion in 1963. Bankruptcies reached record levels From 1998-2002: Real GDP fell 28% Inflation went from negative levels to 41% Exchange rate fell from 1 Peso/$ to 4 Pesos/$ Unemployment increased from 12.4% to 23.6% Poverty rate rose from 25.9% to 57.5% Real wages fell 23.7% in 2002 Real supermarket sales fell 26% in 2002
- Interest Rate The benchmark interest rate in Argentina was last recorded at 36.88 percent. Interest Rate in Argentina averaged 67.38 percent from 1979 until 2016, reaching an all time high of 1389.88 percent in March of 1990 and a record low of 1.20 percent in March of 2004. Bankruptcies reached record levels From 1998-2002: Real GDP fell 28% Inflation went from negative levels to 41% Exchange rate fell from 1 Peso/$ to 4 Pesos/$ Unemployment increased from 12.4% to 23.6% Poverty rate rose from 25.9% to 57.5% Real wages fell 23.7% in 2002 Real supermarket sales fell 26% in 2002
- Inflation Rate The inflation rate in Argentina was recorded at 40.50 percent in April of 2016. Inflation Rate in Argentina averaged 202.25 percent from 1944 until 2016, reaching an all time high of 20262.80 percent in March of 1990 and a record low of -7 percent in February of 1954 Bankruptcies reached record levels From 1998-2002: Real GDP fell 28% Inflation went from negative levels to 41% Exchange rate fell from 1 Peso/$ to 4 Pesos/$ Unemployment increased from 12.4% to 23.6% Poverty rate rose from 25.9% to 57.5% Real wages fell 23.7% in 2002 Real supermarket sales fell 26% in 2002
- the USDARS gained 4.89 or 54.23 percent during the last 12 months from 9.02 in June of 2015. Historically, the Argentinean Peso reached an all time high of 15.84 in February of 2016 and a record low of 0.98 in January of 1992. In recent times the official exchange rate hovered around 3 pesos per United States dollar from 2002 to 2008, was around 4 pesos from 2009 to 2011, surpassed 6 pesos in November 2013, sat at 6.5 pesos per dollar during December 2013. As of October 2014, the exchange rate was about 8 pesos per dollar, by February 2015, it was 10 per USD, and by December of the same year, 13 pesos per USD, after a record of 14 Bankruptcies reached record levels From 1998-2002: Real GDP fell 28% Inflation went from negative levels to 41% Exchange rate fell from 1 Peso/$ to 4 Pesos/$ Unemployment increased from 12.4% to 23.6% Poverty rate rose from 25.9% to 57.5% Real wages fell 23.7% in 2002 Real supermarket sales fell 26% in 2002