The economy recovered strongly from the 2001-02 crisis, and remained the 22nd-largest in purchasing power parity terms in 2010.
Some observers have questioned whether the country should still have a place in the G20, however, considering that since the first G20 summit in 1999 it has slipped from being the world’s 16th-largest economy to the 28th largest in 2010 (in nominal terms). A lobby representing US creditors who refused to accept Argentina’s debt-swap programmes has campaigned to have the country expelled from the G20.
These holdouts include numerous vulture funds which had rejected the 2005 offer, and had instead resorted to the courts in a bid for higher returns on their defaulted bonds. These disputes had led to a number of liens against central bank accounts in New York and, indirectly, to reduced Argentine access to international credit markets.
Data Reliability
The executive branch began meddling in the INDEC in 2007, and official figures now are considered to carry little credibility. They show a GDP growth of 0.8% for 2009, but private-sector economists have said the economy actually contracted by 2-2.5%.
Most economists consider the government’s economic data, particularly its inflation and poverty estimates, as tainted and unreliable. The manipulation of the statistics has drastically increased Argentina’s risk profile, driven away foreign investors and complicated the country’s efforts to return to the credit markets.
Official inflation data are widely regarded as unreliable, leading union leaders, even in the public sector, to disregard them when negotiating pay rises. Private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010.
Inflation estimates from Argentina’s provinces are also higher than the government’s figures. The government stands by the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.
The government threatens inflation analysts with fine of up to 500,000 pesos if they don’t report how they calculate their inflation estimates, which some economists consider an attempt to limit the availability of independent estimates.
Inflation
High inflation has been a weakness of the Argentine economy for decades. In December 2010, inflation was believed to be running at more than 25% annually, despite official statistics indicating less than half that figure, the highest level since the 2002 devaluation.
Food-price increases began to outstrip wage increases in 2010, leading Argentines to buy less food. President Kirchner insists inflation is not a problem.
Consumer prices for 2011 are expected to rise by 20 to 30%, leading the national mint to buy banknotes of its highest denomination (100 pesos) from Brazil at the end of 2010 to keep up with demand. The central bank is expected to pump at least 1 billion pesos into the economy in 2011.
Income Inequality
Argentina, in relation to other Latin American countries, has a moderate level of income inequality. Its Gini coefficient of 48.8 is below that of Brazil (55.0), Chile (52.0), Colombia (58.5), or Mexico (51.6); but it is above that of Uruguay (47.1) or Venezuela (43.4).
The social gap is worst in the suburbs of the capital, where beneficiaries of the economic rebound live in gated communities, and many of the poor (particularly illegal immigrants) live in slums called villas miserias.
In the mid-1970s, the most affluent 10% of Argentina’s population had an income 12 times that of the poorest 10%. That figure had grown to 18 times by the mid-1990s, and by 2002, the peak of the crisis, the income of the richest segment of the population was 43 times that of the poorest.
These heightened levels of inequality had improved to 26 times by 2006, and to 16 times at the end of 2010. Economic recovery after 2002 was thus accompanied by some improvement in income distribution: in 2002, the richest 10% absorbed 40% of all income, compared to 1.1% for the poorest 10%; by 2010, the former received 29% of income, and the latter, 1.8%.
Argentina has an inequality-adjusted human development index of 0.622, compared to 0.509 and 0.634 for neighbouring Brazil and Chile, respectively. Unofficially, three of every ten Argentines fall below the poverty line, and 7.3% subsist on less than US$2 per person per day.