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- GDP (PPP):
- $947.6 billion
- 0.5% growth
- 4.4% 5-year compound annual growth
- $22,582 per capita
- Inflation (CPI):
- FDI Inflow:
Performing far below its potential, Argentina’s economy has been stifled by blatant disregard for both the rule of law and limited government. The private sector remains marginalized by structural and institutional impediments caused by ever-growing government encroachment into the marketplace.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 43.8 (down 0.3 point)
- Economic Freedom Status: Repressed
- Global Ranking: 169th
- Regional Ranking: 27th in the South and Central America/Caribbean Region
- Notable Successes: None
- Concerns: Rule of Law, Regulatory Efficiency, and Open Markets
- Overall Score Change since 2012: –4.2
In a presidential runoff election in late November 2015, center-right candidate Mauricio Macri defeated President Cristina Fernández de Kirchner’s hand-picked successor, Daniel Scioli, sending shock waves through the Peronist political establishment. Macri campaigned with promises to end abuses that have plagued Argentina’s political and economic environments, including fiscal profligacy, labor unrest, rising protectionism, corruption, and expropriations. Argentina, which is rich in natural resources and has an educated and sophisticated population, has performed far below its potential. Beyond the problems inherent in Peronist authoritarianism, the government has made a series of high-profile policy mistakes, including continued claims to the Falkland Islands and a failure to settle with a small number of remaining “hold-out” creditors that led to a default on its restructured debt in 2014. These mistakes have positioned Argentina outside the mainstream of the international community.
Corruption plagues Argentine society, and scandals are common. Drug-related violence has increased as international criminal organizations use the country as both an operational base and a transit route. The justice system is burdened by scores of tenured but incompetent and corrupt judges. The lower courts are highly politicized, although the Supreme Court maintains relative independence despite intense pressure from the government.
The top individual and corporate tax rates remain at 35 percent. Other taxes include a value-added tax, a wealth tax, and a tax on financial transactions. The overall tax burden now equals 30.6 percent of total domestic income. Government spending still equals over 40 percent of GDP. Public debt is close to 50 percent of domestic income. The budget deficit has been rising due to pension nationalization and increased subsidies.
Bureaucratic interference undercuts regulatory efficiency and productivity growth. The labor market remains rigidly controlled and severely impedes dynamic employment creation. Rebuffing IMF censure, the government underreported official inflation statistics and increased deficit spending on energy and other subsidies ahead of the 2015 presidential election.
Argentina has a 6.3 percent tariff rate. A wide range of non-tariff barriers and foreign investment restrictions give Argentina one of the world’s worst trade and investment climates. The financial system remains hobbled by state interference and uncertainty about the direction of economic policies. State-owned banks play a dominant role, reducing competition in the sector.