A New Growth Horizon for Argentina - Economic Memorandum

Blessed with abundant natural capital and a well-educated workforce, Argentina holds immense potential to achieve sustained and inclusive economic growth. The country boasts vast and diverse natural resources, including the world's second-largest lithium deposits, the second-largest gas reserves, and the fourth-largest petroleum reserves. Argentina’s is a major agricultural producer, ranking third in global soybean production.

Despite its promising potential, Argentina has struggled to achieve consistent growth. At the beginning of the 20th century, it stood as the world's seventh-wealthiest nation, fueled by an open economy and progressive immigration policies. However, the country has since experienced a gradual economic decline, transitioning from a high-income to a middle-high-income status. Economic instability has been a primary factor in this downturn, resulting in an average annual GDP growth rate of just 1.8 per cent over the past half-century, well below the Latin American average of 3.2 per cent. Had Argentina grown at the same pace as the rest of the region, its per capita GDP would be 60 per cent higher today.

The report highlights three critical areas for Argentina to overcome these development challenges and embark on a sustainable long-term economic growth path:

Argentina has the potential to reverse its degrowth and explore its productive potential. Here are some key strategies that could be implemented:

• Reducing fiscal procyclicality for a more predictable economic environment that will encourage investment.
• Deepening trade integration to generate more employment opportunities, and also increase the variety and availability of goods to consumers and businesses.
• Cultivating human capital and skills needed to compete in the global economy.

Over the past half-century, Argentina's average annual GDP growth rate has been only 1.8 percent, well below the regional average of 3.2 percent, due to persistent economic instability and economic policies that have hindered development.

To reignite growth, Argentina needs to diversify its economy beyond its reliance on raw materials, open up to international trade, and offer high-quality education and continuous training to ensure a highly skilled and relevant workforce capable of responding to the demands of a dynamic, technology-driven and knowledge-intensive global economy.