The Republic of Argentina is located in South America, approximately between latitudes 23°S (Tropic of Capricorn) and 55°S (Cape Horn). The Andes separates the country from Chile in the west, and it borders Bolivia and Paraguay in the north and Brazil, Uruguay, and the South Atlantic Ocean to the east.
Argentina's population and culture were heavily shaped by immigrants from all over Europe, but particularly from Italy and Spain, which provided the largest percentage of newcomers from 1860 to 1930. The Republic of Argentina is made up of 23 provinces plus the Autonomous City of Buenos Aires, its capital. The official language of Argentina is Spanish, and the currency is the peso (ARS). Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base.
After the 2002 economic and social crisis, convertibility and the pegged exchange rate were abandoned and replaced with a controlled floating rate system.
The current government continues to combat the major macroeconomic imbalances inherited from the previous administration. As noted by President Macri in his inaugural speech in 2015, the reduction of inflation, the fiscal deficit, and poverty are the priorities and major objectives of his executive mandate. Success in achieving these three goals will lead to the country's growth and development.
Inflation in 2017 reached 24.7%, exceeding the initial 17% inflation target for the year, but significantly below the 41% inflation recorded in 2016. The government's inflationary goal for 2018, as expressed by Central Bank President Federico Sturzenegger, is 10% with a tolerance of ±2%, maintaining the downward trend since the present government took office, and close to the maximum one-digit target inflation rate for 2019.
As a result of the progressive normalisation of existing imbalances, the Argentine economy showed a recovery in 2017, according to data published by the INDEC (Statistics and Census Institute). The gross domestic product (GDP) grew 1.6% in the first semester compared with the same period of 2016, at a rate of 0.4% during the first quarter and 2.7% during the second. In September, the Monthly Economic Activity Evolution index (EMAE) reported growth for a seventh consecutive month, compared with the same month of the previous year. This indicator, which showed a cumulative growth of 2.5% for the first nine months of the year, continued its upward trend, reflecting a consolidated recovery of the local economy. This change has taken momentum in the second and third quarter when some sectors started to show stronger performances. In this way, agriculture and construction sectors are the leading ones and have been promoting different industrial blocks. Thus, manufacturing activity as a whole has been growing since May on a year-over-year basis and increased 1.5% in the first nine months of the year after having fallen for 15 consecutive months, in its year-over-year comparison.
Additionally, employment is beginning to show a recovery, in line with the upturn in economic activity. Unemployment fell to 8.7% in the second semester of 2017, versus 9.3% for the same period of the previous year, which means that within one year 57,000 people obtained employment.
When looking at foreign trade, exports are starting to recover after having been affected mainly by poor economic performance of Brazil, Argentina's main trade partner, together with lower international commodity prices. On the other hand, economic activity rebounds led to imports growing at a higher speed. This led to a negative trade balance for 2017 and is a variable to monitor in the years to come as the exports need to gain competitiveness through means other than the exchange rate.
On the fiscal side, the government met its primary deficit target, 4.2% for the whole 2017, as well as it did during the prior year. In this sense, the public sector has significantly modified its pattern of financing. Up to 2015, its main source was financing through the Central Bank; whereas, from 2016, funding has come mainly through borrowing in the capital markets. The current administration still faces the challenge of meeting the fiscal deficit reduction target, to reach 2.2% of the GDP in 2019.
PwC Argentina has a staff of over 1,600 professionals, made up of accountants, lawyers, graduates in economics, and international trade management. PwC provides a multidisciplinary and coordinated approach to create integrated solutions tailored to the client’s needs.