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Argentina lives in a democracy since 1986. Before this year lived it under a military regime. In the nineties under the presidency of Menem the country experienced a great increase in the liberalization of trade. Argentina has a free market economic system. Due to the recent privatization program, the State now has a very limited role in the economy. According to the Competitiveness Report of the World Economic Forum Argentina is classified as one of the most open, least protectionist countries in the world. Its currency is convertible to the US dollars and there is total freedom for moving capital internationally.
Argentina has conducted one of the most intensive privatization programs in the world. The telephone company, airlines, most railroads, electric power production companies (including hydroelectric power plants), the Argentine oil company YPF (bought by the Spanish company Repsol) steel mills, ports, TV stations and most public services were transferred recently to the private sector. Consistent with Fundacion Invertir the combined value of privatized firms amounts more to more than US$ 30 billions. Many foreign firms have participated in this large-scale privatization program. Foreign investors do not need to seek any kind of prior approval and are free to repatriate full amount of their capital and earnings any time. Foreign and domestic companies are treated equally. Under the law, they have access to all economic sectors and are eligible for incentive program and state procurement.
II. TRADE PATTERN
It is hard to state the type of trade that exists between Argentina and Brazil in the automobile industry because both countries import and export cars of the same brand and very similar models. Volkswagen produces some of its model of cars in Argentina and some others model in Brazil. The reason for this is to achieve economies of scale; each country specializes in a certain model of car, by doing so they reduce the cost of each additional unit. Another reason for specialization of production in each country is that it might be cheaper to produce a certain model in either Argentina or Brazil.
Several companies as Volkswagen have invested in production facilities in Mercosur. Additionally, joint ventures between local and foreign parts manufacturers have improved quality. A report on Argentina auto parts/services announced that local production in Argentina was estimated at $1.9 billion in 1997. From 1996 to 1997 the import market for automobile parts and accessories grew by 30 percent to $2.2 billion. Imports from Brazil represent 35 percent of the local import market. The gains in imports with exports from Brazil boost employment in Argentina by a 30 percent and bilateral trade with Brazil as well as nine fold growth in investments. (States-USA). See AUTO PARTS/SERVECE table in appendix.
In the period of July 1997-June 1998 Argentina exported wheat to the following countries: Brazil, Turkey, Egypt, Iran, Peru, Indonesia, Sir Lanka, Jordan, Tunisia and Kenya. Argentina experiences inter trade with these countries because it has the comparative advantage of producing wheat at a cheap cost. Soils in Argentina are fertile and farmers do not need to use as much fertilizers as in the case of European farms. European farms have been harvested for years. As a consequence of this farms need to be fertilized or remain unused for a period of four years to produce crops.
Argentina engages in inter trade on the exports of corn to the following counties: Japan, Brazil, Egypt, Taiwan, Peru, Chile, Spain, Iran, Venezuela, and Colombia. Argentina exports corn to Brazil because it does not produce enough corn to supply its domestic demand. Argentina also produces Inter trade exports of sorghum with Japan, Mexico, Taiwan, Colombia, Norway, Spain, and Chile.
Argentina and Brazil benefit from trade among themselves because each country exports something in which it does not have the comparative advantage or in which its domestic production is not enough. Argentina imports coffee and sugar from Brazil. Argentina does not produce coffee while Brazil is the largest exporter in the world.
In 1997 was the first time in 67 years that Argentina exported beef to the United States of America. This country has been declared free of foot and mouth disease in May 1997. Beef is an example of Inter trade between Argentina and countries as Brazil because Argentinas ... more
Find essay on Currency Crisis
There are many speculations about the causes of the Asian Crisis. From my
research I found out that there is quite a number of reasons for the Asian
currency crisis. There is a book called; The East Asian Miracle, which was
published by the World Bank. This book expressed the relationship between
government, the private sector, and the market. (See Hoover Digest 1998 No.3.
William McGurn. What went wrong?) The book talks about the economic bloom in
Southeast Asia. The East Asian countries borrowed a lot of money from the IMF
and World Bank and used it to create a better economy for themselves. I found
out that the following countries due to their reoccurrence during my research
experienced the bloom. The countries are as listed: South Korea, Indonesia, Hong
Kong, Thailand, Malaysia, The Philippines, Singapore and Taiwan. These countries
experienced a lot of growth, growth that even doubled the growth in the rest of
East Asia, and almost tripled the growth in Latin America. The economic miracle
started in South Korea, Hong Kong, Taiwan and Singapore then Malaysia, Thailand,
Indonesia and the Philippines. These countries achieved very remarkable rates of
growth and development. They built high quality manufacturing industries from
clothes to computers. (What went wrong? Hoover Digest 1998 No.3 William McGurn)
In the paper written by William McGurn "What went wrong?", he
explained that the people's minds in Asia only understood the word miracle and
the banks failed to recognize the risks and credits of the bloom. The banks also
failed to realize that they were only being used as policy arms by the
government. The only word that stuck in people's minds in Asia was the word
miracle. They therefor forgot the fundamentals, which could be easily
understood. William McGurn said that the countries that suffered the most in the
Asian economic crash were the countries that were heavily engaged in the state
planning. 'This in turn lead to all manners of extravagant claims about
"Asian Values" and the idea that western concepts such as competition
really didn't apply" (William McGurn. What went wrong?) On February 19,
1998 a group of Hoover fellows and invited experts assembled in the Hoover
institution to discuss the likely causes for the crisis. The discussion pulled a
very large crowd in to the Hoover Stauffer Auditorium to hear what the
well-recognized economists, political scientists and historians had to say. The
panel came to an agreement that the crisis that started in Asia was due to
excessive short-term borrowing, risky investments by banks and flawed government
policies that permitted such investments. (See Hoover Institution Newsletter
Spring 1998) From the article; "Why did it happen?", on this web site:
www.megastories.com/seasia/why/why.htm, I found out that Asia had been
experiencing a miracle for the past 30 years, but they are now suffering a
crisis. These economies are now experiencing collapsing currencies and depleting
stock markets. The Asian countries at first borrowed a lot of money from the IMF
and the World Bank and used it to invest in certain unprofitable ordeals. "
The problem was bad in Thailand, where a succession of weak governments had
allowed money to flood into unwanted skyscrapers rather than investing in roads
and telecommunications, and education." (Directly from the article)
"The unwise spending was the worst in South Korea where the entire economic
system was based on governments encouraging banks to make cheap loans to big
conglomerates for continued expansion regardless of world demand."
(Directly from article) They borrowed the money in US dollars thinking that they
would have no problems paying the debts off, because their currency's exchange
rates were pegged to the US dollar. They borrowed money in dollars because their
own currency's interest rates were too small. In the middle of 1995, the US
dollar started to rise against most of the world's other currencies. Because the
Asian exchange rates of local currencies were pegged to the US dollar they rose
with the US dollar. The rise in value led to the Asian countries decrease in
exports. Their exports became less demanded and competitive in the worlds
market. For the economies to come out of the crisis and return to their normal
sale of exports, they had three options. They would have to let go of the dollar
value, wait for the dollar to depreciate against other currencies or buy local
currency from the moneylenders. They couldn't wait for the dollar to depreciate
because they were unsure of how long it might take. At first the Asian countries
borrowed money from the IMF and World Bank ... more
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