Argentina flag

Argentina country brief

Overview

Australia and Argentina have a mutually beneficial relationship based on many shared interests. We are both large Southern Hemisphere nations with relatively small populations and strong resource bases. Australia and Argentina agreed in principle to exchange diplomatic missions in December 1959, with Argentina opening its first embassy in Sydney in 1962 (moving to Canberra in 1963) and Australia sending its first ambassador to Buenos Aires in 1964. We currently maintain resident embassies in each other's capitals.

Australia's principal engagement with Argentina is through the Cairns Group, the WTO, the G20, the UN, the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR), the Antarctic Treaty and the International Whaling Commission (IWC). We share common interests in international peacekeeping, the prevention of WMD proliferation, disarmament, Antarctica international environment policy, agricultural trade liberalisation and economic cooperation policies.

The Argentine Republic is the eighth largest country in the world with a land area slightly larger than Western Australia.  It is dominated by the Andes mountain range in the west, the fertile Pampas region in the centre, the hot and dry Chaco in the north, the riverine provinces to the east and Patagonia to the south.  Argentina borders Chile to the West, Bolivia and Paraguay to the north and Brazil and Uruguay to the east.  The name Argentina derives from the Latin word for silver.  The capital of Argentina is Buenos Aires.

Argentina’s population is approximately 41.5 million (2013 est).  Argentina’s population comprises mostly of European immigrants and their descendants.  The Argentine indigenous population is estimated at just below two per cent of the total population.  Catholicism is the main religion and maintains a legal status in the Argentine Constitution.  Spanish is the official language of Argentina.

Political overview

Background

The Spanish established a permanent colony on the site of Buenos Aires in 1580 following sporadic settlement overland from Peru. Argentina declared independence from Spain in 1816.

Despite a prosperous start to the 20th Century, political and economic turmoil resulted in a military coup in 1943 led, among others, by Juan Domingo Peron. Elected President in 1946, Peron undertook radical industrial and labour reforms. Despite winning re-election in 1953, he was exiled by the military in 1955. This was followed by a period of political instability and diminished economic growth, paving the way for Peron's return to the Presidency in 1973. Peron died in 1974 and was succeeded by his third wife, Maria Estela Isabel Martinez de Peron, but she was ousted in another military coup in 1976. The ensuing period of repression under the military junta, commonly referred to as 'El Proceso' or the 'Dirty War', resulted in over 9,000 political murders and disappearances.

Argentina returned to civilian government in 1983 following the period of military rule. Since that time, the country's democratic institutions have been consolidated. This has not, however, been matched by similarly enduring financial and economic stability. In 2001, a profound economic crisis provoked serious civil unrest and resulted in the resignation of then President De la Rúa in December. After a period of transition under a caretaker administration, presidential elections were held in 2003 in which Néstor Kirchner came to power. With high public approval ratings, Kirchner's Government focused on restructuring Argentina's foreign debt and promoting economic growth.

System of government

Argentina is a presidential democracy, with universal suffrage and compulsory voting. Under the current constitution (last reformed in 1994), the President is the head of state and government and the Congress is bicameral.

Argentina is a federation of 23 provinces, plus Buenos Aires City, the self-governed capital. The system of government (at both the federal and provincial levels) is based on the separation of powers into the Executive branch, the Legislative branch and the Judiciary. The President and Vice-President are chosen by direct popular vote for a four-year presidential term, and may run for one consecutive re-election. The President appoints the ministers, who cannot simultaneously serve in Congress.

Recent Developments

In 2007, President Kirchner announced that he would not seek re-election and that his wife, Cristina Fernández de Kirchner, would take his place on the ballot in the presidential elections that year. Fernández was comfortably voted in as Argentina's first elected female president and took office in December 2007. President Fernández is supported by a large bloc of the Peronist Party (PJ), which has dominated the Argentine political scene since 1946. Former President Kirchner successfully sought to expand the PJ's power base beyond the traditional party structures by canvassing outside support, in particular from the centre-left. After Kirchner's sudden death from a heart attack in October 2010, public sympathy for the widowed President and ongoing strong consumer-led growth pushed her approval ratings – which had fallen early on in her presidency – to record high levels. Assisted by opposition disunity, President Fernández easily secured re-election in presidential elections held in October 2011, winning 54 per cent of the popular vote – a margin of nearly 40 per cent over the second-placed contender. The next presidential election is due in October 2015.

Early in its term, the Fernández Government used its record high popularity and majority in Congress to pass a number of controversial pieces of legislation. Some of these government initiatives have come under criticism, including the 2012 federal budget bill which further centralised power away from Congress and towards the executive. An expansion of import controls and media regulation has also drawn criticism from some circles. The Fernández Government controversially announced the re-nationalisation of Spanish-owned Repsol's share in oil company YPF in April 2012, which was met with widespread international criticism and concerns over sovereign risk for international investment in Argentina. Some of those concerns may be allayed by Repsol’s shareholders agreeing to a US$5 billion compensation settlement from Argentina in March 2014.

President Fernández’s popularity has waned significantly since mid-2013 as Argentina’s economy has worsened and social unrest has risen. Poor wheat crop yields and high bread prices in mid-2013 led the government to apply anti-hoarding laws in an attempt to secure wheat supplies for the domestic market. Tensions also arose between the government and key unions over income tax thresholds. President Fernández was largely absent from the political scene in late 2013 for health reasons, during which the country faced an outbreak of looting amid police strikes, protests due to electricity cuts, and economic insecurity due to slowing activity and the rapid weakening of the Argentine Peso. Her government fared poorly in mid-term legislative elections held in October 2013, losing in all the major districts and failing to gain the required two-thirds majority needed to amend the constitution to allow Fernández to run again in the 2015 presidential elections, Despite the result, the government should preserve slim working majorities in the two houses of Congress in the lead up to the next election.

Foreign policy

Like Australia, Argentina is a member of the G20 and was also voted to a non-permanent seat on the United Nations Security Council for 2013-14.  Argentina is a key member in the regional grouping Mercosur (Argentina, Brazil, Paraguay, Uruguay, Venezuela).

Bilateral relations

In 2012 Argentina’s national Rugby Union team was permanently included in the annual international rugby tournament formerly known as the Tri Nations. The tournament, renamed the Rugby Championship following Argentina’s inclusion, sees Australia and Argentina play each other twice a year, once at home and once away.  South Africa, New Zealand and Australia Rugby (SANZAR), have approved proposals to expand the Super Rugby tournament in 2016 to include an Argentine time.

Projects with Argentina included a Public Sector Linkages Program for Argentine scientists to participate in a CSIRO-managed workshop to make use of whey protein previously discarded by dairy manufacturers.

In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America.  For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

People to people links

Almost 12,000 Argentina-born persons live in Australia, many of whom migrated to Australia in the 1970s during a period of economic and political turmoil in Argentina. Australia's Argentine community also includes a network of second and third generation Argentine Australians. More information can be found at the Department of Social Services’ Community Information Summary page.

Development assistance

From 2010 to 2014, Australia provided $100 million in development assistance to Latin America, including 250 Australia Awards scholarships. 45 Australia Awards fellowships and 16 Australia Awards scholarships were awarded to Argentinian students under this program.  The regional program has now closed, though some activities which have already been funded will continue until 2017. 

Economic overview

At a glance

For latest economic data refer to Argentina Fact Sheet [PDF 35 KB].

Background

Argentina’s economy is based on an abundance of natural resources, a highly literate population and an export-oriented agricultural sector. Although Argentina is an industrialised country, its exports continue to be dominated by agricultural products. In the last decade, soybeans have become the country's main commodity export. Exports of industrial goods have, however, also grown strongly in recent years.

After decades of economic stagnation, economic reforms in the 1990s opened the market to foreign competition. Privatisation and economic deregulation saw foreign investment soar and GDP grow, with large domestic conglomerates and multinationals dominating the industrial base and utilities. For a decade, economic policy was based on the Convertibility Law of 1991, which sought to end hyperinflation and attract investment by establishing a currency board system that maintained parity between the Argentine peso and the US dollar. However, the law, together with a lack of fiscal discipline, ultimately reduced Argentina's flexibility to deal with external shocks and exacerbated problems such as unemployment. Argentine exports became uncompetitive, exacerbating chronic fiscal deficits and swelling public debt.

In December 2000, the De la Rúa Government resorted to a US$39 billion IMF bail-out to address concerns that the country would default on its debt. This package afforded Argentina only a short respite. Throughout 2001 subsequent government initiatives and fiscal changes failed to cap public spending.

In October 2001, the government was forced to restructure public debt (US$90b) through a voluntary bond swap once again to avoid default. This still failed to stem capital flight from the local financial system, obliging the government to place restrictions on cash withdrawals and transfers abroad. These measures eventually led to a default to private creditors of US$98 billion, political and social conflict, the collapse of the financial system and the fall of the government in December 2001. A transitional government, led by President Duhalde, applied emergency measures to devalue the peso and set a floating exchange-rate regime. After a long negotiation, Duhalde's Government obtained a transitional IMF aid package that prevented Argentina from defaulting on its debt commitments to the IMF.

After coming to power in May 2003, President Kirchner's Government made progress in stabilising inflation and maintaining the primary surplus, together with a strong trade surplus. The government introduced policies that put the economy back on a firm footing and laid the foundation for growth, falling unemployment and poverty reduction. However, little progress was made on structural reform, including restructuring the banking system, implementing tax reform, and establishing a new fiscal relationship between the central government and provinces.

Tension between Argentina and the IMF – particularly due to the unresolved issue of the debt renegotiation – led to the postponement of the stand-by agreement in August 2004. Negotiations with the IMF resumed following a successful debt swap in February 2005 and the US$9.5 billion owed to the IMF was repaid in January 2006.

Argentina successfully renegotiated its large debt with the majority of private creditors in 2005 and 2010 agreed a settlement for the debt with the Paris Club group of creditors in May 2014. It is still, however, grappling with US creditors who have refused to settle.

In order to support a managed float, with the objective of maintaining a low peso to stimulate exports and import replacement, Argentina recommenced issuing some debt to foreign creditors in 2006, with Venezuela becoming a major customer.

Economic and trade policy directions

President Fernández has adhered broadly to the economic policies pursued by her husband, including measures such as domestic price accords, export taxes and utility tariff freezes, and strong growth in public expenditure. The recent introduction of measures aimed at slowing the flow of manufactured imports have met with criticism inside Argentina as being protectionist, and caused tensions within Mercosur and with major trading partners.

In March 2008, the government introduced a sliding scale export tax scheme for grains and oilseeds. In response, the leading farmers' associations in Argentina organised nationwide protests and roadblocks against the new measures, halting operations in the grains, beef and dairy sectors, with the objective of having the new tax scheme removed or substantially adjusted. The government's proposed export tax measures for grains and oilseeds were narrowly rejected in the Senate in July 2008. However, this failed to resolve the conflict with farmers, who continue to seek a reduction of all export taxes on agricultural products.

The impact of the global financial instability, in particular weak demand and lower prices for Argentina's commodity exports, dampened economic growth in 2008 (+6.8 per cent) and 2009 (+0.7 per cent). In order to mitigate the effects of the crisis, the government announced a number of stimulatory measures, including increasing spending on public works, providing subsidised credit lines and extending a targeted taxation moratorium.

In late 2008, President Fernández secured congressional approval for the nationalisation of private pension funds. In early 2010, Fernández issued a decree to transfer US$6.5 billion in Central Bank reserves to the Treasury, in order to guarantee debt payments. This and other measures (such as the renationalisation of flag air carrier Aerolíneas Argentinas in September 2008, the introduction of strict foreign exchange controls in October 2011, the approval of legislation to limit the foreign ownership of land in December 2011, and the nationalisation of Repsol’s controlling stake in oil company YPF in April 2012) appear to presage a wider role for the state in the economy as the government grapples with multiple economic challenges.

Argentina's most important trade agreement is Mercosur. Argentina, Brazil, Paraguay (currently suspended) Uruguay and Venezuela are full members of Mercosur, the Southern Cone Common Market, which also comprises associate members Chile, Colombia, Ecuador, Guyana, Peru and Suriname. Mexico is an Observer and Bolivia is in the process of becoming a full member. Mercosur is an imperfect customs union, with a common external tariff applied on most products. Mercosur represents a potential market of almost 270 million people with a combined GDP in 2012 of more than US$3.3 trillion.

In 2012, Argentina’s principal export destinations were Brazil (20.4 per cent), Chile, (6.3 per cent) and China (6.2 per cent). Its major exports include agricultural products, motor vehicles and parts, chemicals and related products, crude oil and fuels and base metals and glassware. Argentina’s principal import sources were Brazil (26.1 per cent), China (14.5 per cent) and the United States (12.4 per cent). Major imports include intermediate goods, parts and accessories for capital goods, capital goods, fuels and lubricants and motor vehicles. Argentina’s exports to the United States totalled US$4.4 billion in 2012, while imports from the United States were US$10.0 billion in 2012. Exports to China totalled US$5.8 billion in 2010, up significantly from US$3.67 billion in 2009. Imports from China also increased markedly from US$4.82 billion in 2009 to US$7.65 billion in 2010.

Economic outlook

Argentina's GDP in 2012 was US$475.2 billion. Despite estimated GDP growth of 4.3 per cent in 2013, the outlook for 2014 is bleak, with some estimates forecasting a slight contraction in GDP. Consumer demand, which had benefited from expansionary fiscal policy and credit growth, has slowed amid growing inflation, weakening confidence and faltering industrial production. Since November 2013, the Argentine Peso has suffered sharp depreciation, increasing pressure on citizens to convert savings into US dollars and growing the already extensive US dollar black market.  Dwindling foreign reserves and high inflation are also impacting on the economy. While a record soy bean harvest and recent cuts to water and natural gas subsidies should alleviate some pressure, Argentina is expected to continue to suffer into the near future from the combination of economic issues and the Government’s interventionist policies (including nationalisation of major companies).

The issue of energy security is a key long-term economic and policy challenge. Oil and gas production has stagnated in the face of artificially low domestic consumer prices. Similarly, electricity demand has increased due to strong economic growth, but generation capacity has been flat for several years, exacerbated by the virtual freeze on rates since the 2001 devaluation. The government has announced several measures on both the demand and supply sides, including the removal of subsidies to allow for a gradual correction of industry and consumer incentives. In July 2013 the state-run YPF and Chevron agreed to a $US1.5 billion joint venture to develop Argentina’s vast shale oil and gas deposits in Neuquén Province. Argentina, with an estimated 27 billion barrels, has the fourth largest shale oil deposits in the world.

Bilateral economic and trade relationship

Australia and Argentina play an active role in the G20 forum in addressing the global financial crisis and in identifying reforms to the global financial system. Argentina's role as an interlocutor on the WTO Doha Round negotiations and in the Cairns Group is important to Australia. As major wine-producing nations, Australia and Argentina work together through the World Wine Trade Group to advance favourable international trade conditions in relation to wine.

Australia also participates in the CER-Mercosur Dialogue, bringing together Australia, New Zealand and the Mercosur member countries. The dialogue was established in 1996 as a mechanism to strengthen cooperation on global trade policy issues and to promote inter-regional trade and investment. Australia was represented by the then Foreign Minister Rudd at the December 2010 Mercosur Ministerial Leaders' meeting in Iguaçu, Brazil, and by the then Parliamentary Secretary Marles at the December 2011 Mercosur Ministerial and Leaders' meeting in Montevideo, Uruguay.

Australia and Argentina are both members of the Forum for East Asia-Latin America Cooperation (FEALAC), which aims to increase and improve mutual understanding, political dialogue and cooperation among member states of East Asia and Latin America.

In 2007 the Argentine company INVAP, together with the Australian firms John Holland and Evans Deakin, built and commissioned a 20MW replacement nuclear research reactor at Lucas Heights in Sydney. The project is a good example of the potential for increased business links between Australia and Argentina.

Argentina and Australia have signed an investment protection agreement, which provides additional security to Australian investors by protecting against the possibility of expropriation of Australian investments and providing for an international dispute settlement mechanism. A double taxation agreement entered into force in 2000. An agreement on cooperation in the peaceful uses of nuclear energy entered into force in January 2005. In November 2003, Australia signed a bilateral Memorandum of Understanding (MOU) on scientific and technological cooperation with Argentina. Australia and Argentina also have bilateral MOUs on air services, education and training and cooperation in the development of rail infrastructure in Argentina, and in November 2011 signed an MOU on Work and Holiday visas.

Trade with Argentina is modest, with the balance in trade generally favouring Argentina since the onset of its economic crisis in 2001. Two-way merchandise trade exceeded the half-billion dollar mark for the first time in 2008, and reached $991 million in 2013. Australian exports to Argentina totalled $178 million in 2013, and included coal, medicaments and civil engineering equipment. Australian imports from Argentina totalled $812.5 million in 2013, and included animal feed, goods vehicles, soft vegetable fats and oils, and leather. Two-way trade in travel services totalled $63 million, with $19 million in travel services exports from Australia.

There is also strong two-way tourism trade between the two nations. Over 17,000 Argentines visited Australia and over 13,000 Australians visited Argentina in the year ending June 2013.

39 Australian companies operate in Argentina, including 11 ASX200 companies. Australian investment in Argentina is estimated at around A$842million (2012). Sectors of interest include mining, agribusiness, entertainment, port management, freight equipment and workers' compensation insurance.

Trade and Investment

Export and, in particular, investment opportunities for Australia can be found in mining and most areas of primary production and agribusiness sectors. Opportunities also exist for Australia in the revitalisation of Argentine industry and in the communications, transport and public utilities sectors. Other sectors with promise are environmental management, wine, construction and building materials and high-tech machinery. Argentine student enrollments in Australian institutions in 2012 numbered 280. Further engagement between Australian and Argentine education institutions could see further growth in these numbers. Australian expertise in distance education, vocational training, tele-medicine, English as a second language and postgraduate studies could also find markets in Argentina. Over 13,000 Argentines have visited Australia each year since 2009. With appropriate marketing, tourism has the potential to be grown even further.

For information on doing business and opportunities in Argentina please see the Austrade website: Argentina Market Profile.

High level visits

April 2010: Then Minister for Trade, the Hon Simon Crean visited Argentina for meetings with senior government members. The visit was successful in promoting the bilateral trade and investment relationship, as well as our cooperation in multilateral forums such as the WTO and G20.

October 2010: a Congressional delegation from Argentina visited Australia and met with key government officials, academics and representatives from the business sector.

October 2012: The Hon John Hogg, President of the Senate, visited Argentina and an Australian Parliamentary delegation visited in October 2012.

September 2013: an Argentine delegation including provincial and national government and business representatives, led by the Governor of San Luis, Claudio Poggi, visited Australia for meetings in relation to agriculture, sport and water management.