Economic history of Argentina
The economic history of Argentina is one of the most studied, owing to the "Argentine paradox". As a country, it had achieved advanced development in the early 20th century but experienced a reversal relative to other developed economies, which inspired an enormous wealth of literature and diverse analysis on the causes of this relative decline. Since independence from Spain in 1816, the country has defaulted on its debt nine times. Inflation has often risen to the double digits, even as high as 5,000%, resulting in several large currency devaluations.
Argentina possesses definite comparative advantages in agriculture because the country is endowed with a vast amount of highly fertile land. Between 1860 and 1930, exploitation of the rich land of the pampas strongly pushed economic growth. During the first three decades of the 20th century, Argentina outgrew Canada and Australia in population, total income, and per capita income. By 1913, Argentina was among the world's ten wealthiest states per capita.
Beginning in the 1930s, the Argentine economy deteriorated notably. The single most important factor in this decline has been political instability since 1930 when a military junta took power, ending seven decades of civilian constitutional government. In macroeconomic terms, Argentina was one of the most stable and conservative countries until the Great Depression, after which it turned into one of the most unstable. Despite this, up until 1962, the Argentine per capita GDP was higher than that of Austria, Italy, Japan, and of its former colonial master, Spain. Successive governments from the 1930s to the 1970s pursued a strategy of import substitution to achieve industrial self-sufficiency, but the government's encouragement of industrial growth diverted investment from agricultural production, which fell dramatically.
The era of import substitution ended in 1976, but at the same time growing government spending, large wage increases, and inefficient production created a chronic inflation that rose through the 1980s. The measures enacted during the last dictatorship also contributed to the huge foreign debt by the late 1980s which became equivalent to three-fourths of the GNP.
In the early 1990s, the government reined in inflation by implementing a currency board system and introducing a new convertible peso equal in value to the U.S. dollar and privatized numerous state-run companies using part of the proceeds to reduce the national debt. However, a sustained recession at the turn of the 21st century culminated in a default, and the government again devalued the peso. By 2005 the economy had recovered, but the country again defaulted in 2014 and 2020.
Colonial economy
During the colonial period, present-day Argentina offered fewer economic advantages compared to other parts of the Spanish Empire, which caused it to assume a peripheral position within the Spanish colonial economy. It lacked deposits of gold or other precious metals and did not have established native civilizations to subject to the encomienda.Only two-thirds of its present territory were occupied during the colonial period, while the remaining third consisted of the Patagonian Plateau which remains sparsely populated to this day. The agricultural and livestock sector's output was principally consumed by the producers themselves and by the small local market. They only became associated with foreign trade towards the end of the 18th century.
The period between the 16th and the end of the 18th century was characterized by self-sufficient regional economies separated by considerable distances, a lack of road, maritime or river communications, and the hazards of land transport. By the end of the 18th century, a significant national economy came into being as Argentina developed a market in which reciprocal flows of capital, labor, and goods could take place on a significant scale between its regions.
In the colonial period, the territories that now make up Argentina were subject, like the rest of the Spanish territories in the Americas, to legal restrictions regarding how and with whom trade could be conducted. Throughout the 17th and 18th centuries, trade directly through the port of Buenos Aires, rather than via the official system of fleets out of the port of Lima in modern Perú, was forbidden except through special permission from the Crown. In practice, however, this did not mean that the colonial economy of what is now Argentina was closed to trade.
In addition to trade with Brazil and Guinea, which was legalized in the early seventeenth century, colonial Buenos Aires also conducted trade directly with Spain and other European powers through the so-called navíos de registro— ships with royal permission to sail outside the official fleet or Spanish treasure fleet system to conduct specific services, such as transport soldiers. Dutch and Basque merchants in particular played an important role, in partnership, in managing the system of navíos de registro to conduct trans-Atlantic trade with Buenos Aires. Even more important than the navíos was a system of contraband trade into which the navíos were inserted. Thus, in the second half of the seventeenth century an estimated 200 ships entered the port of Buenos Aires without any permission at all, as opposed to 34 navíos de registro. On top of this system of largely technically illegal transatlantic trade was the situado system of funding from the royal treasury in Potosí, in Upper Peru, which supplied the military garrison in Buenos Aires. In practice, the situado funded, through a system of credit, a local economy in Buenos Aires which was itself inserted into the contraband economy.
Argentinian historian Zacarías Moutoukias argues that this system of trade, in which Buenos Aires was linked with the mining economy of the Andes through the situado and to cross-Atlantic trade through contraband and the navíos de registro, created an integrated political and commercial elite in Buenos Aires, made up of military officers, Crown officials and local merchants, and a political economy in which "corruption"—that is, the violation of royal laws regarding trade—was not an aberration but rather a defining characteristic. For Moutoukias, "corruption" was simply "the violation of a fixed set of norms that limited the integration of the crown’s representatives with the local oligarchy"—a violation that was tacitly tolerated by the Crown because it was lucrative.
Historians like Milcíades Peña consider this historical period of the Americas as pre-capitalist, as most production of the coastal cities was destined to overseas markets. Rodolfo Puiggrós consider it instead a feudalist society, based on work relations such as the encomienda or slavery. Norberto Galasso and Enrique Rivera consider that it was neither capitalist nor feudalist, but a hybrid system result of the interaction of the Spanish civilization, on the transition from feudalism to capitalism, and the natives, still living in prehistory.
The Argentine territories, held back by their closed economies, the lack of any activity closely linked to foreign trade, and the scant amounts of labor and capital they consequently received, fell far behind those of other areas of the colonial world that participated in foreign trade. Only activities associated with a dynamic exporting centre enjoyed some degree of prosperity, as occurred in Tucuman, where cloth was manufactured, and in Córdoba and the Litoral, where livestock was raised to supply the mines of Upper Peru.
This trade was legally limited to Spain: the Spanish Crown enforced a monopsony which limited supplies and enabled Spanish merchants to mark up prices and increase profits. British and Portuguese merchants broke this monopsony by resorting to contraband trade.
Other scholars reject the label of "feudal" to describe Argentine economy and society during the colonial period. Historian Jeremy Adelman, for example, describes an agrarian economy in the Argentinian interior in which both wage labor and production for the market were quite common during the colonial period. In the seventeenth century, this included the development of textile workshops, the raising of mules for transport and the hunting of feral cattle herds to produce meat, leather and tallow— all of these economic activities supplied the mining economy of Potosí in the Andes. In the 18th century, the depletion of feral cattle herds led to the development of settled livestock agriculture in the Argentine Littoral and inland regions. The relative lack of extra-economic coercion due to ample access to land on the agrarian frontier, the prevalence of wage labor, the variety of types of land tenure as well as a lack of a fixed and hegemonic landed elite all lead Adelman to reject the label of "feudalism" to describe the agrarian economy of what now makes up Argentina during the colonial period.
The British desire to trade with South America grew during the Industrial Revolution and the loss of their 13 colonies in North America during the American Revolution. To achieve their economic objectives, Britain initially launched the British invasions of the Río de la Plata to conquer key cities in Spanish America but they were defeated by the local forces of what is now Argentina and Uruguay not once but twice without the help of Spain. When they allied to Spain during the Napoleonic Wars, they requested the Spanish authorities to open commerce to Britain in return.
The first Argentine historians, such as Bartolomé Mitre, attributed the free trade to The Representation of the Hacendados economic report by Mariano Moreno, but is currently considered the result of a general negotiation between Britain and Spain, as reflected in the Apodaca-Canning treaty of 1809. The actions of Baltasar Hidalgo de Cisneros in Buenos Aires reflected similar outcomes emanating from the other Spanish cities of South America.
Compared to other parts of Latin America, slavery played a much lesser role in the development of the Argentine economy, mostly because of the absence of gold mines and sugar plantations, which would have demanded huge numbers of slave workers. Colonial Brazil, for example, imported as many as 2.5 million Africans in the 18th century. By contrast, an estimated 100,000 African slaves arrived at the port of Buenos Aires in the 17th and 18th centuries, and many were destined for Paraguay, Chile and Bolivia.
The colonial livestock ranches were established toward the middle of the 18th century. The pace of growth in the region increased dramatically with the establishment in 1776 of the new Viceroyalty of Rio de la Plata with Buenos Aires as its capital, and increased legal trading allowed by the Free Trade Act of 1778, which allowed for "free and protected" trade between Spain and its colonies. This trade system disintegrated during the Napoleonic era, and contraband became common again.