The development of the labor market

Immigration was central to Argentina's development. Prior to the 1860s, there was relatively little migration into the country; the population in 1869 was little more than 2.1 million and, due to the sparse population, vast tracts of land remained unutilized. Labour shortages became widespread, resulting in the growth of real wages and, consequently, an increasing gap between the wage rates of Argentina and Europe. This facilitated the mass immigration that was sustained every year until World War I (except in 1890, when the Argentine economy collapsed). While half the immigrants chose to stay in the city of Buenos Aires, their addition to the country's labour market as a whole helped alleviate the labor shortage. Subsequent internal migrations by both natives and foreigners helped to secure an efficient labor market.

This mending of the labor problem facilitated economic development. While real wages may have fallen for a time, immigrants, as an important factor of production, were able to help diversify the Argentine's commodity markets. Previously, the capital-intensive live-stock raising/pastoral sector had dominated production. Now, with the rise in labour supply, the arable sector saw development. As a result, Argentina's commodity market ceased to specialize in any one product. For the most part, this helped fortify the country against relatively minor world-market shocks (though certainly not internal, social or political disturbances), contributing to the overall, successful level of development the country experienced between 1870 and 1920.

The development of capital markets

Like immigration, foreign investment played a central role in Argentina's economic development. Prior to World War I, it could be said that Argentina's capital investment was foreign capital investment. Not only did foreign labor flock to the Argentina in droves, but foreign assets as well. In all considerations, Argentina was not a typical case for foreign investment, and hence it did not become a typical Latin American country. At the same time, however, it did not produce the characteristics of a typical developed country.

By far, Britain contributed the most funds of any foreign state to the Argentine economy, as it did for many other Latin American states. For Argentina's government, beginning in the 1870s, most investment was captured in foreign bonds. Private companies, however, collected most of their capital through direct foreign investment. Undoubtedly, Argentina stood alone in the absolute size of foreign fiscal contributions. Around 1914, its public external debt stood at $784 million, with a further $3.217 billion in direct foreign investment (DFI) (Bulmer-Thomas, 2003: 102). Much of the DFI from Great Britain flowed into Argentina's railways and the country's meat-packing industry, sectors of the economy in which local investment was severely limited relative due to the start-up costs of the firm. In contrast, the agricultural sector received virtually no foreign investment, and comparatively little domestic credit as well.

The most important aspect of foreign investment was its share in Argentina's capital stock relative to the size of domestic contributions. In the 1880s, foreign capital was pouring into the country; some estimates put Argentina's current account deficit at 30 percent of its GDP. It is important to note, though, that while foreign investment arrived in large amounts, its percentage of total investment and hence its influence on economic development was so great because domestic investment and savings were so small.

Other statistics

Investment (gross fixed): 22.7% of GDP (2007) [3]

Household income or consumption by percentage share:

* lowest 10%: NA%
* highest 10%: NA%

Agriculture - products: sunflower seeds, lemons, soybeans, grapes, corn, tobacco, peanuts, tea, wheat; livestock

Industrial production growth rate: 12% (2004 est.)

Electricity:

* production: 81.39 TWh (2002)
* consumption: 81.65 TWh (2002)
* exports: 2.818 TWh (2002)
* imports: 8.775 TWh (2002)

Electricity - production by source:

* fossil fuel: 52.2%
* hydro: 40.8%
* nuclear: 6.7%
* other: 0.2% (2001)

Oil:

* production: 755,000 barrel/day (2004 est.)
* consumption: 486,000 barrel/day (2001 est.)
* exports: NA
* imports: NA
* proved reserves: 2.9 billion barrel (2004 est.)

Natural gas:

* production: 37.15 billion m³ (2001 est.)
* consumption: 31.1 billion m³ (2001 est.)
* exports: 6.05 billion m³ (2001 est.)
* imports: 0 m³ (2001 est.)
* proved reserves: 768 billion m³ (2004)

Current account balance: $12.409 billion (2006)[4]

Exports - commodities: edible oils, fuels and energy, cereals, feed, motor vehicles

Imports - commodities: machinery and equipment, motor vehicles, chemicals, metal manufactures, plastics

Reserves of foreign exchange & gold: Dec 2006: $31 billion [5], March 2007: $35 billion [6], May 2007: $40 billion [7], March 2008: $50 billion [8]

Economic expansion

With a high rated dollar in comparison with the local currency that allowed to produce goods with competitive prices in the international market, some industries in Argentina started re-flourishing after the crisis, mainly the construction (40% increase in 2005), textiles, food and car parts. The increment in the volume of exportations and their assossiated taxes also provided the country a positive balance of trade, cash flow and reserves.

According to the Heritage Foundation, a Washington-based conservative think tank, the state's role in the economy has expanded since the start of the Kirchner administration, primarily through price fixing in some industries and the creation of a state-owned airline and a state-owned energy company. The Heritage Foundation assigns Argentina a score of 3.3 (mostly unfree) in economic freedom on a scale of 1 to 5 of, which places the country in the 109th position of the 157 evaluated at the Index of Economic Freedom.