Argentina’s Economy: A death foretold again,or a surprise rescue?

Claudio M. LoserCentennial- Latin America

March 2014

4/3/20142

Argentine performance tended  to be ahead  the world and even the  Emerging Economies …according to Official Data

‐12

‐8

‐4

0

4

8

12

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Emerging market and developing economies Latin America and the Caribbean

Argentina (Official)

4/3/20143

…but not according to independent estimates

‐4

0

4

8

12

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Emerging market and developing economies Latin America and the Caribbean

Argentina Adjusted Argentina (Official)

4

Argentina has lost relative positions in total Latin American GDP

0

5

10

15

20

25

30

35

40

Brazil Mexico Argentina Colombia Venezuela Chile Peru Other

1993

2003

2013adj

How is Inflation doing?

5

‐10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2000 2001 2002 2003 2004 2005 2006 2007 20082009 2010 2011 2012 2013 2014

LA Argentina Official Argentina Alternative

Argentina has lagged , even as in recent years itpicked up (even with corrected data)

6

0.0

50.0

100.0

150.0

200.0

250.0

Argentina Adjusted

Argentina

Brazil

Chile

Mexico

Peru

7

United States

United Kingdom

Canada

FranceAustralia

GermanyJapan Korea

Mexico

China

IndiaIndonesia

BrazilRussia

South Africa

US, 1980

Argentina Chile

Peru

VenezuelaColombia

10

20

30

40

50

60

70

80

90

100

110

‐1.0 ‐0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

2012 TFP (U

S TF

P in 200

0 = 100)

Average Annual Change in TFP, 1990‐2012

TFP Growth vs. TFP Level, Major Economies,  1990‐2012

8

Where do countries stand

00.5

11.52

2.53

3.54

4.55

Infrastructure

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Chile Colombia Argentina Mexico Brazil Venezuela Peru

Quality of Education

00.5

11.52

2.53

3.54

4.55

Technology Readiness

020406080100120140160180200

Chile Peru Colombia Mexico Argentina Brazil Venezuela

Ease of Doing Business Rankings(higher number, worse)

Informality and Economic Development

Mean scores on PISA math test, 2009

Source: Ganimian and Solano (2011). PREAL

10

The education quality is low in spite of  high average spending

11Source: UNESCO (2011). Global Education Digest. Table 13.

Argentina’s science graduation is low

0

10

20

30

40

50

60H

ong

Kon

g

Kor

ea

Finl

and

Mex

ico

Spa

in

Col

ombi

a

Chi

le

Irela

nd

El S

alva

dor

Pan

ama

Sou

th A

frica

Uni

ted

Stat

es

Gua

tem

ala

Guy

ana

Arg

entin

a

Bra

zil

Cos

ta R

ica

Ecu

ador

Uru

guay

% o

f tot

al te

rtiar

y gr

adua

tes

Tertiary Graduates in Science and Engineering, 2009

% of Graduates in Science and Technology % of Graduates in Social Science, Business, and Law

Investment and Savings (10 year average)

0

5

10

15

20

25

30

35

40

HighIncome

Asia NICs DevelopingAfrica

LatinAmerica

Investment Savings

0

5

10

15

20

25

30

35

40

Investment Savings

85

90

95

100

105

110

115

Resilience score by country group

Advanced economies EMCs

All Latin America

13

14

Argentina is losing  its advantage: HDI

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1980 1985 1990 1995 2000 2005 2010 2011 2012

Argentina

Very High human development

High human development

Latin America and the Caribbean

World

A simple look at Reinhart and Rogoff “This time it  is different”

15

GDP Growth rates: Past and projected

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2002‐11

2012‐14

16

Gross Public Debt to GDP has declined, while that of the Advanced Countries Grows

17

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013

Adv. G‐20

Brazil

Venezuela

LATAM

Argentina

Mexico

Colombia

Peru

Chile

18‐60%

‐40%

‐20%

0%

20%

40%

60%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Net I

nves

tmen

t Pos

ition

/ GDP

Net Investment Position / GDP

Argentina

Brazil

Chile

Mexico

Venezuela

19

Real Exchange RateDepreciation (decline)

50.0

70.0

90.0

110.0

130.0

150.0

170.0

190.0

210.0

230.0

250.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Brazil Chile Mexico Venezuela RREER Argentina Argentina Corrected LATAM

Argentina: Fiscal and External Accounts

0

20

40

60

80

100

120

140

160

180

200

‐6.0

‐4.0

‐2.0

0.0

2.0

4.0

6.0

8.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Fiscal Outcome(percent of GDP) Fiscal  Primary Outcome (percent of GDP) Ext C/A(% GDP) REER

Argentina: External Accounts (U$S Million)

21

‐15,000

‐10,000

‐5,000

0

5,000

10,000

15,000

2008 2009 2010 2011 2012 2013e

External Current Account Total Financing plus e&o Reserves and related items

22

0

50

100

150

200

250

1998

M01

1998

M06

1998

M11

1999

M04

1999

M09

2000

M02

2000

M07

2000

M12

2001M05

2001M10

2002

M03

2002

M08

2003

M01

2003

M06

2003

M11

2004

M04

2004

M09

2005

M02

2005

M07

2005

M12

2006

M05

2006

M10

2007

M03

2007

M08

2008

M01

2008

M06

2008

M11

2009

M04

2009

M09

2010M02

2010M07

2010M12

2011M05

2011M10

2012M03

2012M08

2013M01

2013M06

2013M11

All Commodities Food and Beverages

Commodity Prices (1995=100)

90

100

110

120

130

140

150

160

170

180

90

95

100

105

110

115

120

125

130

135

140

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Terms of Trade Per capita Income

Qatar 1 103401 Argentina(adj) 63 16166Luxembourg 2 77935 Mexico 67 15608Singapore 3 62428 Turkey 68 15264Norway 4 55398 Venezuela 73 13586Brunei Darussalam 5 54809 Brazil 79 12118United States 6 52839 South Africa 82 11525Hong Kong SAR 7 52687 Peru 84 11149Switzerland 8 45999 Colombia 85 11088Canada 9 43146 Ecuador 89 10610Australia 10 43042 Thailand 91 9888Germany 18 39468 China 92 9828United Kingdom 21 37299 Dominican Republic 93 9698Japan 22 37135 Egypt 111 6553Barbados 40 25134 Morocco 121 5480Trinidad and Tobago 50 20336 Bolivia 122 5286Hungary 51 19836 Indonesia 124 5182Chile 53 19105 India 133 3991Russia 56 18083 Zimbabwe 185 571Uruguay 59 16588 DR Congo 186 382Panama 60 16540

Source: WEO October 2013 23

Income per Capita PPP US$ 2013

24

HDI Rank Country 2012

1 Norway 0.955

2 Australia 0.938

3 United States 0.937

4 Netherlands 0.921

5 Germany 0.92

11 Canada 0.911

12 South Korea 0.909

13 Hong Kong, China 0.906

40 Chile 0.819

45 Argentina 0.811

51 Uruguay 0.792

55 Russian Federation 0.788

61 Mexico 0.775

71 Venezuela  0.748

77 Peru 0.741

85 Brazil 0.73

91 Colombia 0.719

101 China 0.699

121 South Africa 0.629

121 Indonesia 0.629

136 India 0.554

186 DR Congo 0.304

1 Singapore

2 Hong Kong, China

3 New Zealand

4 United States

5 Denmark

7 Korea, Rep.

8 Georgia

11 Australia

34 Chile

41 South Africa

42 Peru

43 Colombia

53 Mexico

88 Uruguay

92 Russian Federation

96 China

116 Brazil

120 Indonesia

126 Argentina

134 India

181 Venezuela, RB

189 Chad

EconomyGCI 2013‐2014 

RankChange since 2012‐2013

Switzerland 1 0

Singapore 2 0

Finland 3 0

Germany 4 2

United States 5 2

Sweden 6 ‐2

Hong Kong SAR 72

Netherlands 8 ‐3

Japan 9 1

United Kingdom 10‐2

China 29 0

Chile 34 ‐1

Indonesia 38 12

South Africa 53 ‐1

Mexico 55 ‐2

Brazil 56 ‐8

India 60 ‐1

Peru 61 0

Russian Federation 643

Colombia 69 0

Uruguay 85 ‐11

Argentina 104 ‐10

Venezuela 134 ‐8

Chad 148 ‐9

Human Development  Index                  Doing Business WB    Global competitiv Index 

25

Country RankCountry / Territory

CPI 2013 Score

1 Denmark 91

1 New Zealand 91

3 Finland 89

3 Sweden 89

5 Norway 86

5 Singapore 86

7 Switzerland 85

8 Netherlands 83

9 Australia 81

9 Canada 81

19 Uruguay 73

22 Chile 71

72 Brazil 42

72 South Africa 42

80 China 40

83 Peru 38

94 Colombia 36

94 India 36

106 Argentina 34

106 Mexico 34

114 Indonesia 32

127 Russia 28

160 Venezuela 20

175 Somalia 8

Corruption                                                     Economic Freedom

Hong Kong SAR 1 90.1 0.8

Singapore 2 89.4 1.4

Australia 3 82.0 ‐0.6

Switzerland 4 81.6 0.6

New Zealand 5 81.2 ‐0.2

Canada 6 80.2 0.8

Chile 7 78.7 ‐0.3

Mauritius 8 76.5 ‐0.4

Ireland 9 76.2 0.5

United States 12 75.5 ‐0.5

Colombia 34 70.7 1.1

Uruguay 38 69.3 ‐0.4

Peru 47 67.4 ‐0.8

Mexico 55 66.8 ‐0.2

South Africa 75 62.5 0.7

Indonesia 100 58.5 1.6

Brazil 114 56.9 ‐0.8

India 120 55.7 0.5

China 137 52.5 0.6

Russia 140 51.9 0.8

Argentina 166 44.6 ‐2.1

Venezuela 175 36.3 0.2

Cuba 177 28.7 0.2

Korea, North  178 1.0 ‐0.5

26

CPI+RENT Restaurant Local PPBig Mac(U$S)

Zurich 118.9 163.9 119.4 7.10New York 100.0 100.0 100.0 4.62Caracas 92.2 109.9 16.3  7.15Washington, DC 85.6 95.4 106.2  4.62Tokyo, Japan 78.1 69.0 90.2  2.97Miami 70.9 77.2 106.9  4.62Rio de Janeiro 51.7 57.3 41.2  5.25Sao Paulo 50.2 57.8 44.3  5.25Panama 48.2 54.3 42.9  5.26Montevideo 48.2 61.4 41.2  4.91Buenos Aires 45.5 66.2 56.7  3.03Lima 39.9 41.1 34.8  3.56Santiago 39.7 48.9 52.7  3.69

Mexico City 38.7 41.6 56.5  2.78Bogota 37.0 38.0 29.9  4.34

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