Banking in Argentina
This article is about the banking system of Argentina, including an overview of the recent past. For details on the economy at large, see Economy of Argentina. During the 1990s, marked by President Carlos Menem's policies of liberalization, Argentina's financial system saw a significant consolidation and strengthening, in large part through foreign investment. In addition to high reserve and capital-adequacy requirements, the Central Bank of Argentina maintained a repurchase agreement with a consortium of international banks to provide a $6,000 million safety net in the event of a liquidity squeeze. Mergers and acquisitions, which decreased the number of Argentine banks from nearly 300 in 1990 to fewer than 100 at the end of 1999, were expected to continue and lead to improvements in management and efficiency; the foreign currency reserves of the Central Bank stood at nearly $25,000 million in December 1999, or over 9 months of imports. However, these reserves were used to back the monetary liabilities of the Central Bank and were not available for conducting monetary policy.
Despite the recession, bank deposits continued to grow until 2001, although at a much slower rate than in previous years. Total deposits in the banking system stood at nearly $80,000 million by mid-2001 — more than twice that of June 1995, when deposits hit a low of $37,000 million. Foreign-controlled banks held over 40% of total deposits, six of the top 10 commercial banks were in the hands of American and European financial institutions. Still, the level of bank utilization in Argentina remained low, bank intermediation represented only about 30% of the GDP — a much lower ratio than those of Chile, Mexico, or Brazil, for example; the banking system suffered a fatal flaw: it lent dollars and took deposits in Argentine pesos. By early 2001, deposits had reached $87,000 million, but when the economy took a second dip, capital started flowing out of Argentina, deposits started to move away from the weaker players of the financial system, namely provincial banks and large local banks; this led to a run on all banks in the system, a freeze in deposits, a currency devaluation, which included an asymmetric devaluation of loans and deposits.
Banks were forced to collect their dollar loans at a conversion rate much lower than the rate applied to its dollar deposits. This made many banks technically bankrupt and destroyed the confidence of the public in the financial system, held responsible for many of the economic ills of the country. Deposits fell to less than $40,000 million by the end of 2002. Foreign banks fled the country during 2002 and 2003, selling their operations to smaller local banks at a fraction of their original investments. Only a few large foreign banks decided to stay. In 2004, the government compensated the banks for the impact of the asymmetric devaluation of deposits and loans through a series of "compensation bonds". Banks are again gaining deposits, which amounted to more than $44,000 million by February 2006, have been increasing their lending portfolios, their operations are leaner, due to the massive layoffs of 2002, that reduced their working force by more than 30%. However, the public still remains wary of taking long term loans, rates are high in real terms given Argentina's low rates of inflation.
Banking penetration remains banking costs high. The Argentine banking sector is dominated by state-owned banks, with the largest being the Banco de la Nación Argentina. In 2005, for the first time since the 2001 collapse, the banking system made a profit, according to a Central Bank report released in February 2006; the total profits amounted to 1,958 million pesos. Argentine economic crisis Corralito / Central Bank official website
Economic history of Argentina
The economic history of Argentina is one of the most studied, owing to the "Argentine paradox", its unique condition as a country that had achieved advanced development in the early 20th century but experienced a reversal, which inspired an enormous wealth of literature and diverse analysis on the causes of this decline. Since independence from Spain in 1816, the country has defaulted on its debt eight times and inflation has been in the double digits as high as 5000%, resulting in several large currency devaluations. Argentina possesses definite comparative advantages in agriculture, as the country is endowed with a vast amount of fertile land. Between 1860 and 1930, exploitation of the rich land of the pampas pushed economic growth. During the first three decades of the 20th century, Argentina outgrew Canada and Australia in population, total income, per capita income. By 1913, Argentina was the world's 10th wealthiest state 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 of Austria, 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 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 making the peso equal in value to the U. S. dollar, privatised 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, the government again devalued the peso. By 2005 the economy had recovered, but a judicial ruling originating from the previous crisis led to a new default in 2014. During the colonial period, present-day Argentina offered fewer economic advantages compared to other parts of the Spanish Empire such as Mexico or Peru, which caused it to assume a peripheral position within the Spanish colonial economy, it lacked deposits of gold or other precious metals, nor did it have established native civilizations to subject to the encomienda. The sparse population was accompanied by a difficult numeracy development in the 17th century. Argentina overtook Peru, which enjoyed an early rapid development in numeracy through the contact with Indios, in the middle of the 18th century.
This numeracy development as a measure of early modern development demonstrates the rapid and remarkable development of Argentina in the period of colonial time. Only two-thirds of its present territory were occupied during the colonial period, as 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, 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 the existence of self-sufficient regional economies separated by considerable distances, a lack of road, maritime or river communications, the hazards and hardship 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 and goods could take place on a significant scale between its different regions, which it had hitherto lacked.
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, the natives, still living in prehistory; the Argentine territories, held back by their closed economies, the lack of any activity linked to foreign trade, the scant amounts of labour and capital they 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, in Córdoba and the Litoral, where livestock was raised to supply the mines of Upper Peru.
This trade was 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; 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 launched the British invasions of the Río de la Plata to conque
Buenos Aires Stock Exchange
The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina's primary stock exchange located at Buenos Aires CBD. Founded in 1854, is the successor of the Banco Mercantil, created in 1822 by Bernardino Rivadavia. Citing BCBA's self-definition: "It is a self-regulated non-profit civil association. At its Council sit representatives of all different sectors of Argentina's economy." The most important index of the Stock market is the MERVAL, which includes the most important papers. Other indicators are Burcap, Bolsa General and M. AR. and currency indicators Indol and Wholesale Indol. The Stock Exchange's current, Leandro Alem Avenue headquarters was designed by Norwegian-Argentine architect Alejandro Christophersen in 1913, completed in 1916. A modernist annex was designed by local architect Mario Roberto Álvarez in 1972, inaugurated in 1977. Economy of Argentina List of stock exchanges List of American stock exchanges Official website MERVAL official page Burcap Bolseros
1998–2002 Argentine great depression
The 1998–2002 Argentine Great Depression was an economic depression in Argentina, which began in the third quarter of 1998 and lasted until the second quarter of 2002. It immediately followed the 1974–1990 Great Depression after a brief period of rapid economic growth; the depression, which began after the Russian and Brazilian financial crises, caused widespread unemployment, the fall of the government, a default on the country's foreign debt, the rise of alternative currencies and the end of the peso's fixed exchange rate to the US dollar. The economy shrank by 28 percent from 1998 to 2002. In terms of income, over 50 percent of Argentines were poor and indigent. By the first half of 2003, however, GDP growth had returned, surprising economists and the business media, the economy grew by an average of 9% for five years. Argentina's GDP exceeded pre-crisis levels by 2005, Argentine debt restructuring that year were resumed payments on most of its defaulted bonds. Bondholders who participated in the restructuring have been paid punctually and have seen the value of their bonds rise.
Argentina repaid its International Monetary Fund loans in full in 2006, but had a long dispute with the 7% of bond-holders left. In April 2016 Argentina came out of the default when the new government decided to repay the country's debt, paying the full amount to the vulture/hedge funds. Argentina's many years of military dictatorship had caused significant economic problems prior to the 2001 crisis during the self-styled National Reorganization Process in power from 1976 to 1983. A right-wing executive, José Alfredo Martínez de Hoz, was appointed Economy Minister at the outset of the dictatorship, a neoliberal economic platform centered around anti-labor, monetarist policies of financial liberalization was introduced. Budget deficits jumped to 15% of GDP as the country went into debt for the state takeover of over $15 billion in private debts as well as unfinished projects, higher defense spending, the Falklands War. By the end of the military government in 1983, the foreign debt had ballooned from $8 billion to $45 billion, interest charges alone exceeded trade surpluses, industrial production had fallen by 20%, real wages had lost 36% of their purchasing power, unemployment, calculated at 18%, was at its highest point since the 1929 Great Depression.
Democracy was restored in 1983 with the election of President Raúl Alfonsín. The new government intended to stabilize the economy and in 1985 introduced austerity measures and a new currency, the Argentine austral, the first of its kind without peso in its name. Fresh loans were required to service the $5 billion in annual interest charges and when commodity prices collapsed in 1986, the state became unable to service this debt. During the Alfonsin administration, unemployment did not increase, but real wages fell by half to the lowest level in fifty years. Prices for state-run utilities, telephone service, gas increased substantially. Confidence in the plan, collapsed in late 1987, inflation, which had averaged 10% per month from 1975 to 1988, spiraled out of control. Inflation reached 200 % for the month in July 1989. Amid riots, Alfonsín resigned five months before the end of his term. After a second bout of hyperinflation, Domingo Cavallo was appointed Minister of the Economy in January 1991.
On 1 April, he fixed the value of the austral at 10,000 per US dollar. Australs could be converted to dollars at banks; the Central Bank of Argentina had to keep its US dollar foreign-exchange reserves at the same level as the cash in circulation. The initial aim of such measures was to ensure the acceptance of domestic currency because after the 1989 and 1990 hyperinflation, Argentines had started to demand payment in US dollars; this regime was modified by a law that restored the Argentine peso as the national currency. The convertibility law reduced inflation preserved the value of the currency; that raised the quality of life for many citizens, who could again afford to travel abroad, buy imported goods or ask for credit in dollars at traditional interest rates. The fixed exchange rate reduced the cost of imports, which produced a flight of dollars from the country and a massive loss of industrial infrastructure and employment in industry. Argentina, still had external public debt that it needed to roll over.
Government spending remained too high, corruption was rampant. Argentina's public debt grew enormously during the 1990s without showing that it could service the debt; the IMF kept extending its payment schedules. Massive tax evasion and money laundering contributed to the movement of funds toward offshore banks. A congressional committee started investigations in 2001 over accusations that Central Bank Governor Pedro Pou, a prominent advocate of dollarization, members of the board of directors had overlooked money laundering within Argentina's financial system. Clearstream was accused of being instrumental in this process. Other Latin American countries, including Mexico and Brazil faced economic crises of their own, leading to mistrust of the regional economy; the influx of foreign currency provided by the privatization of state companies had ended. After 1999, Argentine exports were harmed by the dev
Tourism in Argentina
Argentina is provided with a vast territory and a huge variety of climates and microclimates ranging from tundra and polar in the south to the tropical climate in the north, through a vast expanse of temperate climate and natural wonders like the Aconcagua, the highest mountain in the world outside the Himalayas, the widest river and estuary of the planet, the huge and mighty Iguazú Falls, some of the flattest and wide meadows-plains of planet Earth, culture and gastronomies famous internationally, a higher degree of development, good quality of life and people and well prepared infrastructure make this country one of the most visited of America. For its beautiful landscapes and for its cultural heritage, Argentina receives massive numbers of travelers; the Argentine territory stretches from the highest peaks of the Andes in the west to colita del norte rivers and extensive beaches and cliffs of Argentine Sea in the east. Through the warm landscapes of tropical climates contrasting, in a huge gradient microclimates, the polar climates or extensive and fertile grasslands with the World´s most flatter plains contrasting with the highest mountains outside Asia, contrasted with vast desert areas plethoric of geoforms for the annual running extensive and extreme Dakar rally race, the high mountain ranges, the pleasant Pampeanas mountains and the temperate Atlantic beaches and its extensive coastlines.
The huge distances require in most cases air travel. The Misiones rainforest, Argentine Yungas and areas of the Andean Patagonia are scientifically considered as biodiversity hotspots large areas worldwide; the great biodiversity and the large number of different landscapes and climates make Argentina a diverse country where appear to meet multiple countries together harmoniously. The country presents entire range of possible climates: temperate, dry warm, humid warm, cold dry, cold humid, semi-arid, subantarctic, snowy, cold mountain, a huge variety of microclimates. Argentina has been upgrading its worldwide presence as a tourism destination by increasing the investment on international tourism; the latest push can be seen by Aerolineas Argentinas, the country's national airline, adding international routes from the United States and Europe. There are rumors that they will join a major airline alliance soon. Argentina has enjoyed the visit of 5.80 million tourists in the year 2011 according to the World Tourism Organization, the first most visited country in South America and the second most visited of all of Latin America, after Mexico.
Foreign tourists come from Brazil, Uruguay, Bolivia, Ecuador, Venezuela, Costa Rica, Cuba, the Dominican Republic, United States, China, South Korea, Australia, Italy, Germany, the United Kingdom, Netherlands, Switzerland and Russia. City of Buenos Aires is in the midst of a tourism boom, according to the World Travel & Tourism Council, it reveals strong growth for Argentina Travel and Tourism in 2007 and in coming years, the prestigious travel and tourism publication. Buenos Aires, regarded as the “Paris of South America,” offers elegant architecture, exquisite cuisine, legendary nightlife, fashionable shopping; the most popular tourist sites are found in the historic city core, comprising Montserrat and San Telmo. The city was constructed around the Plaza de Mayo, the administrative center of the Spanish Empire. To the east of the square is the Casa Rosada, the official seat of the executive branch of the government of Argentina. To the north, the Catedral Metropolitana which has stood in the same location since colonial times, the Banco de la Nación Argentina building, a parcel of land owned by Juan de Garay.
Other important colonial institutions were Cabildo, to the west, renovated during the construction of Avenida de Mayo and Julio A. Roca. To the south is the Congreso de la Nación, which houses the Academia Nacional de la Historia. Lastly, to the northwest, is City Hall. Avenida de Mayo links the Casa Rosada with the Argentine National Congress. On this avenue there are several buildings of cultural and historical importance, such as Casa de la Cultura, the Palacio Barolo and Café Tortoni. Underneath the avenue, the first subte line in South America, was opened in 1913; the avenue ends at Plaza del Congreso, which features a number of monuments and sculptures, including one of Auguste Rodin's few surviving original casts of "The Thinker". The Manzana de las Luces area features the San Ignacio church, the Colegio Nacional Buenos Aires and the old city council building; this area features tunnels and catacombs, which crossed underneath the Plaza de Mayo during colonial times. In the neighbourhood of San Telmo, Plaza Dorrego hosts an antiques fair on Sundays, complete with tango shows.
They have tango shows daily at the famous plaza. On weekends they involve many tourists to learn. Frequent tours and activities are available at the Church of Nuestra
The Austral plan was an Argentine economic plan devised by minister Juan Vital Sourrouille during the presidency of Raúl Alfonsín. Raúl Alfonsín became president of Argentina in 1983 through democratic elections, receiving high inflation rates and a significant external debt taken on by the outgoing Military government, his first minister of economy, Bernardo Grinspun, attempted to negotiate regular increases in wages to keep up with inflation, which did not work. The country was close to a sovereign default in late 1984, prevented it with foreign funding. Grinspun resigned the following year, as the debt was higher and the IMF would block further credits. Alfonsín said that democracy had little to offer "unless the economic question is resolved"; the Austral plan was designed by Juan Vital Sourrouille. It froze prices and wages, stopped the printing of money to mitigate inflation and enacted spending cuts higher than those required by the IMF to enable its funding; this plan was similar to the 1975's Rodrigazo.
The Peso argentino currency was replaced by the Austral, according to a rate of 1000 pesos to 1 austral. The plan was an instant success; this caused a boost in Alfonsín's public image, leading to a victory of the Radical Civic Union in the 1985 midterm elections. The economy, took a turn for the worse. Export prices dropped, international debt increased, the government was opposed by both Peronism and the labor unions; the unions rejected the wage freeze, asked for increases. The government soon started to print money again to deal with the increasing debts; as a result, inflation became a problem again in 1986. The government was defeated in the 1987 midterm elections, inflation became hyperinflation in 1989. Alfonsín resigned that year, amid riots, was succeeded by elected president Carlos Menem six months before his due date; the Convertibility plan replaced the Austral with the Peso convertible, thus ending the Austral plan. Rock, David. Argentina, 1516–1987: From Spanish Colonization to Alfonsín.
United States: University of California Press. ISBN 0-520-06178-0
Beef is a key component of traditional Argentine cuisine. Cattle were first brought to Argentina in 1536 by Spanish conquistadors. Due to the geography of the Pampas and a small national market, the cattle multiplied rapidly. Railway building within Argentina and the invention of refrigerated trains and ships in the late 19th century made an export market and Argentina's beef export industry started to thrive; the flipped seasons between the Northern and Southern Hemispheres meant that Argentine beef came onto the market at a time of year when beef was less at hand in the Northern Hemisphere, which further lifted the potential export market in the United States and European markets. Following the rising demand for high-quality beef, new breeds and selective crossbreeding have been developed. Argentine beef and its production have played a major part in the culture of Argentina, from the asado to the history of the gauchos of the Pampas. Landowners became wealthy from beef production and export, estancia owners built large houses, important buildings in Buenos Aires and elsewhere, contributed to politics and society.
The agricultural show La Rural each winter in Buenos Aires became a major part of the social season since it started in 1886. In Chile, heightened taxes for the import of Argentine cattle in 1905 led to the meat riots, one of the first massive protests in Santiago; the price of meat was kept artificially high by the government, by means of the combination of a special tariff applied to cattle imports from Argentina, to protect the domestic producers, a runaway inflation. The riots lasted from October 22 until October 27, between 200 and 250 people were killed over this period, while more than 500 were injured; the financial losses were staggering. This revolt emphasized that the social problems were far more serious than what the authorities believed. Argentina has the world's second-highest consumption rate of beef, with yearly consumption at 55 kg per person. In 2006, livestock farmers kept between 50 and 55 million head of cattle in the fertile pastures of the Pampas; the country is the third-largest beef exporter in the world after Brazil and Australia.
The national government applies a 15% tax on beef exports and has applied further restrictions since March 2006 to keep domestic prices low. On 8 March 2006, after unsuccessfully trying to control the rising prices of beef in the internal market, the Argentine government banned beef exports for 180 days. On 26 May, the ban was replaced by a quota, to be in force between June and November, equivalent to 40% of the amount of beef exported in the same period of 2005; these measures met harsh criticism from livestock farmers, the meat processing industry, the export sector. Other analysts have said it is the only adequate measure that deals with inflation and that the industry is the only one in Argentina profitable enough to sustain such a policy. Argentina's cattle industry had become a key growth driver in the economy, with Argentina ranking fourth in cow meat exports. Thus, it was crushing news when new cases of foot-and-mouth disease were found in 2001, for the first time in 60 years. Although FMD is harmless to people, the virus is spread between animals, making the slaughter of sick animals necessary.
Argentine beef was banned by more than 60 countries, including Canada. After an aggressive vaccination programme, the Office International des Epizooties said in 2003 that Argentina had regained "foot-and-mouth free with vaccination" status. A few years new cases of FMD were discovered in a herd of cattle in a northern province of Argentina; as a result, Chile banned the import of Argentine meat. Food safety or quality labels are used in Argentina, a major initiative has been called for on this issue. There is no label certified by the government; the unsatisfactory situation concerning food safety becomes clear by looking at the fact that the Argentine National Inspection Services audited and approved only 35 slaughterhouses in 2003 on Good Manufacturing Practices and Hazard Analysis and Critical Control Point. However, farmers as well as the export industry started to realize that there is a increasing demand for safer and more reliable brands. To meet customer expectations, several initiatives have been taken.
There are certificates handed out by private organizations, such as breed associations. For instance, the Argentine Angus Association established a Carne Angus Certificada to ensure that only meat coming from an Angus is described as Angus. Furthermore, the association supports other certificates like the Ternero Angus Certificado. Besides the breed associations, different pilot projects have been initiated; the Pampas Del Salado project is an example of these. However, most of those projects have only scant participation. To increase sales in foreign countries and to improve the production and reliability of beef produced in Argentina, a public nongovernmental organization, the Instituto de Promoción de la Carne Vacuna Argentina— the Argentine Beef Promotion Institute was founded in December 2001. Furthermore, the IPCVA is concerned with promotional work in Argentina itself; the IPCVA is made up of a range of partners involved in Argentine beef production and export, from e