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 mission 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 is composed mostly of the descendants of European immigrants. The Argentine indigenous population is estimated at just below two per cent of the total population. Catholicism is the main religion and 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, known as 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

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 Cristina Fernández de Kirchner – the widow of former President Kirchner, who died in 2010 – 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 preserved its working majorities in the two houses of Congress, and Fernández subsequently saw a rebound in her approval ratings.  Her popularity slipped again in January 2015 with the unexplained death of a federal prosecutor who had accused the President and her Foreign Minister of conspiring to obstruct the prosecution of Iranian suspects of a 1994 terrorist bombing.

2015 is a major election year in Argentina, with open primaries scheduled for August and presidential and congressional elections due in October. With President Fernández barred from running for re-election, it is unclear to what extent her fluctuating standing in the polls will affect the government’s election chances.

Foreign policy

Like Australia, Argentina is a member of the G20 and was elected to a non-permanent seat on the United Nations Security Council for 2013-14 along with Australia.  Argentina is a member of the UN Economic and Social Council from 2015 to 31 December 2017 and on 1 January 2013, Argentina began its 3 year term as a member of the UN Human Rights Council.

Argentina is a key member in the regional grouping Mercosur (Argentina, Brazil, Paraguay, Uruguay, Venezuela). It is also a member of the Union of South American Nations (UNASUR), the Community of Latin American and Caribbean States (CELAC) and the Organisation of American States (OAS), that seek to advance a variety of regional political and economic interests.

Bilateral relations

Australia has a long-standing bilateral relationship with Argentina through trade, cooperation and people-to-people links, including student exchanges.

Australia and Argentina share membership of the G20, and in 2013-14 both countries held a non-permanent seat on the United Nations Security Council.

Argentina also shares interests in international peacekeeping, the prevention of WMD proliferation, disarmament, Antarctica, environmental issues, agricultural trade liberalisation and economic cooperation.

In November 2011 Argentina and Australia signed an MOU for a work and holiday visa arrangement between the two countries which came into effect on February 2012, with a quota of 500 visas per year.

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. From 2016 an Argentine team will play in the Super Rugby tournament which is currently contested between teams from South Africa, New Zealand and Australia.

Argentina and Australia also work together on issues relating to the Antarctic, especially in efforts to address illegal fishing through the Convention on the Conservation of Antarctic Marine Living Resources (CCAMLR).

Other examples of 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 (2011 census), 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 Argentine 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. This process was aided by favourable international prices for Argentina’s commodity exports. 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.

Early in second 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. In 2005 and 2010 Argentina successfully renegotiated its debt with the majority of private creditors (93 per cent), who agreed to receive partial repayment. Argentina also settled five arbitration awards at the World Bank’s International Centre for Settlement of Investment Disputes in November 2013, compensated Spanish company Repsol for the seizure of its controlling stake in oil giant YPF in February 2014, and signed an agreement to fully repay its debt arrears with the Paris Club group of creditors in May 2014.

However, following many years of bitter legal dispute with a group of creditors in New York who had not agreed to the 2005 and 2010 debt swap deals, in July 2014 Argentina entered into what has been described as a ‘selective default’ after a NY court ordered it to repay in full the amounts owed to the remaining seven per cent of ‘holdout’ creditors. The full implications and the duration of the default are not yet clear, but to compensate for its limited access to external credit, the government recently concluded currency swap deals with China and received increased investment from oil majors interested in partnering with Argentina’s YPF to explore the massive Vaca Muerta shale oil and gas field. 

Economic and trade policy directions

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

The enduring impact of the global financial instability, in particular weak demand and lower prices for Argentina's commodity exports, will likely dampen economic growth in 2015. To mitigate the effects of lower growth prospects, the government implemented a number of stimulatory measures, including increasing spending on public works, providing subsidised credit lines and agreeing to a tax break on workers’ 2014 end-of-year bonuses.

Argentina's most important trade agreement is Mercosur. Argentina, Brazil, Paraguay, 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 over 280 million people with an estimated combined GDP in 2014 of
US$3.1 trillion.

In 2013, Argentina’s principal export destinations were Brazil (21.2 per cent), China (7.2 per cent) and the United States (5.6 per cent). Its major exports include agricultural products, motor vehicles and parts, chemicals and related products, crude oil and fuels and base metals. In 2013, Argentina’s principal import sources were Brazil (26 per cent), China (15.4 per cent) and the United States (10.9 per cent). Major imports include motor vehicles and parts, fuels and telecommunications equipment. Argentina’s exports to the United States totalled US$4.3 billion in 2013, while imports from the United States were US$8.1 billion in 2013.

Economic outlook

Argentina's GDP in 2014 was estimated at US$536.2 billion, down from US$610.3 billion in 2013. The economy is not showing signs of picking up. Economic growth in 2015 is expected to be negligible or negative and inflation is high. 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 from the combination of economic issues and the Government’s interventionist policies (including nationalisation of major companies).

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 is estimated to have the world’s second largest shale gas resources and the fourth largest shale oil deposits.

More information can be found at the World Bank and International Monetary Fund websites.

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.

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 was $944 million in 2013-14. Australian exports to Argentina totalled $132 million in 2013-14, and included coal, medicaments and paper goods. Australian imports from Argentina totalled $812 million in 2013-14, and included animal feed, goods vehicles, soft vegetable fats and oils, and leather. Two-way trade in services totalled A$194 million, with A$40 million in travel services exports from Australia.

There is also strong two-way tourism trade between the two nations. Almost 14,000 Argentines visited Australia and over 13,000 Australians visited Argentina in the year ending June 2013.
Over 50 Australian companies operate in Argentina, including 10 ASX200 companies. Australian investment in Argentina is estimated at around A$667 million (2013). 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, oil & gas 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 enrolments in Australian institutions in 2014 are expected to exceed 355. Australian expertise in distance education, vocational training, tele-medicine, English as a second language and postgraduate studies could also find markets in Argentina. Over 7,800 Argentines have visited Australia each year since 2009 and tourism has the potential to be grown even further through appropriate marketing.

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, then-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.

November 2014: Argentine Finance Minister Kicillof and Foreign Minister Timerman both visited Australia for the G20 Leaders’ Summit in Brisbane.

January 2015: The Speaker of the House of Representatives, the Hon Bronwyn Bishop MP visited Argentina to further bilateral relations and to develop parliamentary links.


Last Updated: 1 August 2014