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2007年2月WTO对阿根廷贸易政策审议-阿根廷政府政策声明(英文)

World Trade

Organization

Note:    This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Argentina.

CONTENTS

                                                                                                                                                                                                Page

I.              introduction                                                                                                                                                        5

II.            ECONOMIC ENVIRONMENT                                                                                                                                   6

                (1)           Implementation of Convertibility and the Crisis                                                                 6

                (2)           Recovery                                                                                                                                                    7

                (3)           The Process of Restructuring the Public Debt                                                                        8

                (4)           Specific Issues                                                                                                                                         10

(a)           Economic activity                                                                                                                      10

(b)           Fiscal front                                                                                                                                  11

(c)           External front                                                                                                                              12

(d)           Social situation                                                                                                                          12

                (5)           Sectoral Trends                                                                                                                                   13

(a)           Industrial sector                                                                                                                         13

(b)           Agricultural sector                                                                                                                    18

                (6)           Trade and Employment                                                                                                                    22

(a)           The experience of the previous decade                                                                                 22

(b)           New growth model:  economic liberalization and job creation                                         24

(c)           The need to strengthen the growth model                                                                            26

III.           trade policy                                                                                                                                                        27

                (1)           Trends in Foreign Trade 2002-2005                                                                                                 27

                (2)           Trade Policy                                                                                                                                          29

(a)           Argentina and the WTO                                                                                                          30

(b)           Argentina and the Doha Round                                                                                              31

(c)           Argentina and regional integration                                                                                        33

                                (i)            Argentina and MERCOSUR                                                                                    34

                                (ii)           MERCOSUR and the LAIA                                                                                     36

                                (iii)          MERCOSUR and the FTAA                                                                                    37

                                (iv)          Extra-regional agreements in MERCOSUR                                                            37

                                (v)           MERCOSUR and the European Union                                                                   37

                                (vi)          Global system of trade preferences                                                                        38

                (3)           Trade Promotion                                                                                                                                 38

IV.           sustainability of trade policy                                                                                                               40

1.                   Since its previous Trade Policy Review in 1998, Argentina has experienced a deep recession caused by the economic and social crisis of 2001-2002, the most serious in its history, which placed its institutional framework at risk.  This situation necessitated a major policy overhaul and a substantive redesign of the economic model.  An economic programme characterized by fiscal solvency, monetary prudence, flexible exchange rates, social inclusion and export dynamism has been instituted and consolidated since mid-2002 and, more particularly, as from 2003, when the new constitutional Government took office, with the aim of reversing the disparities in economic development between different regions of the country.

2.                   The results of the above-mentioned policies, after nearly four years of implementation, are indicative of the correctness of the course of action adopted.  Strong economic growth has been achieved, with a 9 per cent average annual increase in GDP, while the rates of unemployment, poverty and destitution have been significantly reduced.  Private consumption, the engine of the economy, has shown a recovery, and there has also been a revival of investment, which is key to expanding Argentina's production capacity and preventing rising demand from stoking inflation.

3.                   At the same time, a trade policy based on WTO principles and disciplines has been introduced, which is characterized by pragmatism and an effort to expand Argentina's foreign trade on a sustainable basis, through a combination of multilateral, regional and bilateral approaches aimed at maximizing market access opportunities for exporters of goods and services.  Argentina's exports have thus practically doubled in less than four years, growing at an average annual rate of 16 per cent.  This non-stop growth during the period 2002-2006 is explained by the continuous expansion of trade flows in agriculture (boosted by the recovery of international prices) and agricultural and industrial manufactures (which have shown a strong increase in sales volumes).  As a result and despite the strong upsurge in imports in response to the demand for inputs, capital goods and components, Argentina has a healthy trade surplus, a novelty in terms of the country's economic growth cycles.

4.                   During this period, Argentina confirmed and extended its commitment to the liberalization of world trade, especially in the negotiations conducted within the World Trade Organization (WTO), without neglecting its strategy of improving trade links with the MERCOSUR countries and the rest of Latin America, as well as with other countries around the world.

5.                   After the recession that started at the end of 1998 and culminated in the economic and social crisis of 2001-2002, considered the most serious in its contemporary history, Argentina initiated a process of recovery which is currently producing strong and sustained economic growth.

6.                   A number of features distinguish this upturn from previous cycles of increased economic activity:  combined fiscal and external surpluses of unprecedented duration;  reduction of the debt burden;  monetary prudence reflected in the adjustment of the money supply to public demand;  vigorous growth and diversification of exports;  increased investment in production;  halting of capital flight;  creation of millions of genuine jobs;  recovery of wage purchasing power;  reduction of poverty and destitution; and reversal of the deterioration in income distribution.

7.                   Implementation of the convertibility model in the 1990s culminated in the 2001-2002 crisis.  The chain of events that led to that crisis is summarized below.  The starting point for the convertibility cycle was the adoption of a programme of privatization and deregulation at a time of increasing capital flows to emerging markets.  The launch of the programme was followed by massive inflows of capital, with an initial phase of reserve accumulation and high monetary and credit growth rates.  This resulted in a strong surge in domestic demand and bubble increases in the prices of real and financial assets, such as land, immovable property and shares.  The effects of this trend were far-reaching, given the increased flight of capital in relation to the local capital stock and the unsophisticated financial system.  This situation coincided with a phase in which governmental supervisory capacity was overstretched by a system that was expanding rapidly, in terms of both volume and the number of intermediaries.

8.                   With a fixed nominal exchange rate which initially enjoyed strong credibility, investment in local assets implied high dollar profitability, and this encouraged the adoption of positions that were financed with international currency indebtedness.  The real exchange rate, already high when it was fixed in 1991, appreciated even further in the period of expansion because inflation was higher than the sum of the devaluation rate (zero) plus international inflation.  As a result of exchange rate appreciation and expanding domestic demand, imports grew rapidly, leading to a substantial current account deficit in the balance of payments.  A further contributing factor to the external account situation was the interest burden resulting from the increased public indebtedness caused by the loss of revenues resulting from privatization of the pension system in 1994 and increased factorial transfers in payment of royalties and dividends due to the increased level of foreign capital in the economy.  Relative price changes in favour of non-tradeable sectors, as a result of exchange rate appreciation, slanted real investment towards those sectors, thereby having a negative impact on investment in production and exports of goods.

9.                   One general feature of the period of convertibility under the conditions described is that it leads to a continuous increase in the current account deficit that is not offset by capital flows at a particular point in time.  This leads to a contraction in reserves, money supply and credit and an increase in the interest rate.  The persistent increase in the current account deficit diminishes the credibility of the exchange rate regime and makes it more likely that the issued debt will not be honoured in a proper and timely fashion.  The maintenance of the exchange rate regime and the regular servicing of external obligations in such circumstances require enhanced capital inflows, with an attendant increase in risk.  Economic activity contracts and episodes of illiquidity and insolvency further contribute to reducing exchange rate credibility.  At the end of the process, interest rates are not high enough to sustain the demand for local financial assets.  There are runs against Central Bank reserves, which finally result in the collapse of the exchange rate system.

10.               There is no doubt as to the presence of an obvious public sector financial imbalance in the final stages of the convertibility regime.  However, that obvious fact does not by itself justify a causal inference.  Although the assessment of fiscal performance in the 1990s was obscured by the serious deficiencies in available data, the fiscal deterioration occurred not in the first decade cycle (from 1991-1995) but in the second, beginning in 1996, following the economic crisis in Mexico.  The appearance of the fiscal deficit can be traced to the social security system.  On the one hand, under the reform instituted at the end of 1994, a substantial proportion of social security revenues were transferred to the private pensions sub-system (the retirement and pension fund administrators), while public expenditure on social security remained intact.  On the other hand, the Government ordered a reduction in employers' contributions, in an attempt to improve competitiveness that had been weakened by the exchange rate appreciation.  As a result of the successive debt-financed budget deficits, the main component of public sector current expenditure in the second half of the 1990s became the sector's own interest payments on public debt.  The rise in interest rates that characterized the contractive phase of the cycle had a direct impact on rising indebtedness, contributing to a perverse dynamic of increased debt and increased risk.  In short, the crisis was a combination of the compound effect of external fragility caused by the convertibility regime, poor evaluation and organization of privatization processes, as in the case of the pension regime, lack of adequate regulatory frameworks for the capital market, the fiscal deficit and the contagious effect of the crises in Asia, Russia and Brazil.

11.               The Argentine economy is experiencing its fourth consecutive year of growth after the crisis of 2001-2002, having substantially exceeded the highest level of gross domestic product (GDP) prior to that crisis, which was recorded in 1998.  Current growth trends have significantly boosted employment and this, in conjunction with the gradual recovery of wage levels, has resulted in a substantial improvement in real income, contributing to the reduction of the still high indicators of poverty and destitution.  The revival of economic activity, the favourable reaction of exports and the restored confidence of the economic operators have enabled the economy to move towards a "long-term" equilibrium involving restoration of basic macroeconomic balances in the external and fiscal fields.  At the same time, despite the impact of the crisis on the financial sector, the latter has recorded substantial improvement.  After dealing with their critical liquidity situation, the banking institutions began gradually to restore their balance sheets, helped by the genuine reversal of losses thanks to the rapid recovery of deposits and loans.

12.               In the initial phase, simultaneously with the stabilization of the financial and exchange rate situation, the recovery of economic activity took advantage of the abundant availability of idle resources (capital and labour) generated by the prolonged recession and the channelling into domestic activities of the dollar liquidity generated by the high external surplus (a consequence of the depreciation of the peso and its effect on the improved competitiveness of exports and domestic production in relation to imports, on the one hand, and of the reversal of the process of capital flight, on the other).  Subsequently, while the process of cyclical recovery was beginning to spread to all sectors of activity, the investment rate started to react positively and gross fixed internal investment gradually rose above replenishment level, so that the capital stock began expanding again, paving the way for a process of sustained growth.

13.               The determinants of the recovery and the improved macroeconomic situation were predominantly internal factors associated with the consistency of economic policy decisions.  The commitment to fiscal discipline and a monetary policy which, in that first stage, supported the recovery of public demand for real balances, created suitable conditions for the reduced impact or "pass through" of exchange rate depreciation to domestic prices, in contrast with previous experiences, when local currency devaluations had given rise to an inflationary spiral.  The other noteworthy feature which distinguished the post-crisis scenario from previous experiences and which may have also contributed to reducing price rise pressures is the fact that there was no change in the policy of trade liberalization pursued by MERCOSUR, of which Argentina is a member State.  Thus, the low inflation environment that characterized the end of the crisis served to maximize the effectiveness of the incentives offered by the new relative price structure with respect to the increase in economic activity and employment.

14.               It should not be overlooked that the international economic climate, though not the determinant factor, helped to explain the speed and intensity of the recovery and growth of economic activity and the improvement in the external accounts.  For one thing, the recovery of internal activity coincided with the upturn in the global economic cycle, under a scenario characterized by high international prices for raw materials and by-products, as well as low interest rates and the return of capital flows to the emerging economies.  This latter aspect (the application of favourable conditions of external financing) had a relatively small direct impact, inasmuch as throughout the first phase the Argentine economy was relatively disconnected from the international capital markets.  Moreover, the local economic recovery developed side by side with recessive trends in the Brazilian economy up to the end of 2003.

15.               At the end of February 2005, with the closure of the six-week window for acceptance of the swap offer by holders of defaulted securities, the process of restructuring the public debt was successfully completed.  Of the holders of total eligible debt (US$81.2 billion), 76.15 per cent (US$62.318 billion) accepted the Government's proposal, enabling Argentina officially to emerge from default after an arduous process of negotiation which, due to its scale and complexity, ultimately took more than three years.  The high rate of acceptance was the result of a high rate of participation in all the jurisdictions, currencies and instruments involved.  By way of compensation, US$35.261 billion in new debt instruments were issued (par, quasi-par and discount bonds).  In this way, adding the securities exchanged to the unrestructured debt, Argentina had at that point normalized 86 per cent of its stock of public debt.

16.               The great success of the exchange operation can be seen even more clearly if the various features of the restructuring process undertaken are considered.  First of all, it involved an unprecedented restructuring on the international financial markets in terms of both its scale and the number of actors, jurisdictions, currencies and instruments concerned, which required the negotiating team to engage in a consultation process demanding more than 70 meetings with the different groups of creditors.  This consultation process made it possible to draw up a comprehensive, sustainable and viable offer.

17.               A second aspect has to do with the strategy adopted by the authorities.  Instead of repeating the pattern observed during much of the 1990s, which consisted in seeking a rapid "solution" to the problem, giving priority to the acceptability of the proposal to the market, but ignoring the restrictions imposed by the country's payment capacity, the approach adopted was to seek to align the restructured commitments with Argentina's real payment capacity.  It was thus possible to reconcile the notion of market acceptability with a viable proposal.  The approach adopted by the authorities entailed a cautious and realistic appraisal of the Argentine economy's growth potential and the capacity to generate fiscal surpluses over the period of approximately three decades required for the new issues to mature, thereby avoiding non-feasible proposals.  In this connection, and with the aim of sharing with the holders of the new restructured debt the benefits of any economic growth above the level provided for in the proposal, a financial instrument linked to trends in GDP was devised, under which payments are triggered only in the event that the country actually has the resources to cover them.

18.               It should also be pointed out that the process of restructuring the Argentine public debt coincided with verification of a substantial reduction in the country's net exposure to its multilateral creditors, without the benefit of fresh injections of resources from those bodies.  As is well known, from 2002 until the date for completion of the swap, the country had made net payments (capital plus interest) to the international financing institutions (IMF, World Bank and Inter-American Development Bank) of approximately US$11.5 billion.

19.               Taking all these factors into consideration, the process of restructuring and emergence from default marks a fundamental shift in the way in which the Argentine economy functions.  Looking to the future, it can be affirmed that Argentina faces a very heavy debt burden but, unlike in the past, has the capacity to meet it.  This can be clearly observed from Table 1, which shows the considerable improvement in a number of the common indicators of fragility and solvency after the debt swap.  Compared with December 2001 levels, interest payments fell from 8 per cent to 2 per cent of GDP and from 70 per cent to 15 per cent of international reserves.  The debt stock, meanwhile, fell from a level of 540 per cent of annual exports in December 2001 to 360 per cent;  at the same time, the debt/GDP ratio fell to 72 per cent, compared with 113 per cent before the restructuring.  One of the clearest indicators of systemic vulnerability, the currency squeeze caused by the gap between public sector liabilities and income, has reduced significantly as a result of the increase in the share of debt denominated in pesos from 3 per cent to the present 37 per cent.

Table 1:  Public Debt Before and After Restructuring

Source:  Ministry of the Economy

20.               When it was decided to restructure the debt, the Ministry of the Economy and Production concluded that, although debt servicing would require a sustained fiscal effort over a very long period, it would cease to be a factor generating systemic fragility and permanent uncertainty and thus inhibiting economic growth in the medium and long terms.  This should result in the strengthening of the macroeconomic framework and an improvement in the outlook for sustainable, balanced and socially inclusive growth.  More than two and a half years after that assertion was made, all the economic and social indicators confirm a trend swing in the direction indicated.

21.               Seventeen consecutive quarters of economic growth and a 40.2 per cent increase in GDP since the low point of the depression constitute an unparalleled event in the last 100 years of Argentina's economic history.  Economic activity for 2006 will mark a fourth consecutive year of growth, at an estimated rate of close to 9 per cent for the private sector, one of the highest rates in the world.  GDP has therefore already exceeded by nearly 12 per cent the maximum levels recorded in the pre-crisis period.  In per capita terms, following a contraction of more than 23.2 per cent from the beginning of the recession, the overhaul of the economic policy regime has already made it possible to achieve earlier levels within a short period of time, with an average per capita increase in output of nearly 7.8 per cent.  Once again, one has to go back to the early decades of the last century to find a similar performance.

22.               The vigorous growth of recent years was characterized by a marked recovery in activities that generate or conserve foreign currency, which are of crucial importance to an indebted country.  Thus, the share of these sectors in GDP (at current prices) rose from 23.5 per cent in 2001 to 36 per cent in 2005.  Within this group of activities, the industrial sector clearly led the recovery with growth of over 60 per cent and nearly a quarter of the total increase in GDP since the end of the crisis, exemplifying the emphasis placed by current policies on reconstruction of the industrial fabric.  The agricultural sector also showed considerable improvement, in response to favourable conditions of profitability generated by the combination of competitive parity and a favourable international price context.  The strong performance in this sector resulted in a substantial improvement of the situation in various regional economies, which were one of the engines of the recovery, so that today economic growth is much more evenly spread over the country's vast geographical territory.

23.               Unlike what happened during the previous decade, the growth process has tended to benefit the whole range of economic activities in a balanced manner, and has even spread to sectors producing goods and services that are not internationally tradeable.  The best performing among them were those more closely related to the sector producing tradeable goods.  Thus, there was an outstandingly strong recovery in construction activity, especially for reproductive purposes, which has doubled its output since the crisis, and in the areas of transport and communications and commercial activity, which grew by more than 45 per cent.  Moreover, and despite the scale of the financial crisis which led to the collapse of convertibility, the banking system rebounded strongly, with an accelerated recovery of liquidity.  Private sector credit began recovering from early 2004, and loans in this sector are now growing steadily at an annual rate of close to 30 per cent.

Gross Domestic Product.  Relative Contribution to Growth

Constant prices, seasonally adjusted

2002:I-2006:II

Source:  Ministry of the Economy

24.               The strong growth of employment, the recovery of real wages, increased consumer confidence and the reappearance of credit contributed to a significant rise in consumption, which has grown by 37 per cent since the end of the crisis.  The contribution of consumption to growth was nevertheless accompanied by that of other components of aggregate demand which are crucial to guaranteeing the process of sustainable growth under way.  In particular, a substantial improvement was observed in the rate of investment, following the 60 per cent fall of this variable, in real terms, during the crisis.  As a result of the subsequent recovery of roughly 173 per cent, capital formation has already equalled the highs of 1998.  The seriousness of the crisis and the subsequent strong recovery are put into perspective by the fact that the rate of investment in GDP terms rose from 11 per cent in 2002 (a rate not even high enough to replenish annual capital amortization) to somewhat more than 21.5 per cent during the second quarter of 2006.

25.               One of the main contributing factors to economic consolidation was the substantial improvement in the public accounts.  Thanks to a cautious expenditure policy, appropriate tax administration and the benefits of the economic recovery itself, the consolidated primary surplus for 2004 and 2005 reached a record high of an average 4.8 per cent of GDP.  Positive results of above 3 per cent of GDP for the national public sector are expected for the current year.  Taxpayer compliance was crucial to the improvement in the consolidated fiscal result:  VAT collection has tripled since the crisis, while current consumption has doubled.  The success achieved in restructuring the defaulted sovereign debt made it possible to begin re-establishing the long term solvency of public finances.  Additionally, action was taken on the decision for the early and complete write-off of around US$10 billion in liabilities with the IMF, leading to an additional reduction of roughly 5 GDP points in the consolidated gross debt.  The IMF payment resulted in a substantial reduction in short-term financing requirements, while at the same time enabling substantial savings to be made on interest payments.

26.               In the external sector, the current account surplus of over 3.5 per cent of GDP in 2006 has been achieved as a result of the strong growth in exports of goods and services, which will close the year at levels of more than US$46 billion and US$7.5 billion respectively.  Moreover, the profile of sales abroad has begun to change.  Argentina is selling more and more high value-added products and services:  the volume of manufactures exported today stands at double the average for the past decade.  For 2006, the year-on-year increase in exports of manufactures of agricultural and industrial origin was 10 per cent.  Export destinations are also being diversified.  Compared with an average of 160 export destination countries ten years ago, Argentina today exports to nearly 200 markets.  As regards industrial exports, the number of destinations has risen from 120 to 140.  Professional services account for a growing share of services exports.

27.               The increase in exports has helped to sustain the necessary import revival.  Here again, there is a qualitative change, inasmuch as the share of purchases of capital goods and inputs for production has grown by 140 per cent and 100 per cent, respectively, since the end of the crisis.  Imports of consumer goods, which accounted for almost 20 per cent of the total during the past decade, today represent 11 per cent of purchases from abroad.  Even with the sharp rise and dynamism of imports, Argentina has maintained a high trade surplus, averaging some US$13.5 billion over the last three years.

28.               The flight of capital, as mentioned earlier, has been reversed, and since 2004 there have been net inflows of funds from abroad.  However, the Government has introduced a set of policies to regulate capital flows, with the aim of maintaining external saving at a level compatible with its positive contribution to long-term growth, thereby discouraging the flow of speculative investment to Argentina.

29.               The economic recovery has been accompanied by a marked improvement in the social indicators.  The new macroeconomic environment, by promoting labour-intensive activities, has facilitated a considerable increase in employment.  The rate of unemployment (urban total) fell from 23.3 per cent in May 2002 to 11 per cent in the second quarter of 2005.  According to recent data, the unemployment rate stood at slightly over 10 per cent in the third quarter of 2006 and is expected to reach single digits, for the first time in 13 years, by the end of 2006.

30.               The sharp decline in unemployment is even more marked when it is considered that it is occurring in a climate of increased economic activity, namely, the inclusion in the ranks of job seekers of large numbers of people who were not registered as unemployed.  Thus, the economy has created 3.6 million genuine jobs since the beginning of the recovery, enabling more than 1.8 million persons to cease being unemployed and 1.3 million additional workers to enter the labour market.  As regards trends in government employment or social welfare schemes, the continuous creation of genuine employment since early 2003 has resulted in a reduction of 600,000 in the number of beneficiaries, reflecting the substantial improvement in employment opportunities, especially for those most in need.  In addition, for 2006, some 500,000 genuine jobs have been created.  Nine of every ten new wage earners are registered workers covered by pension and social welfare schemes.

31.               The minimum wage rose from Arg$250 during the crisis to Arg$800 in November 2006, representing a real increase, with adjustment for accumulated inflation, of 70 per cent.  The minimum pension has risen from Arg$150 to Arg$470 currently, a real increase of more than 60 per cent.  Meanwhile, the purchasing power of registered wage earners rose by 55.2 per cent from the low point of June 2002, and by 9.1 per cent in the first nine months of 2006.  The situation of non-registered workers and employees has also tended to improve.  Over the last year, according to available data (April 2006 versus April 2005), these wage earners have seen an improvement in their real wages of the order of 7.6 per cent.  The Government considers it essential to continue pursuing policies that stimulate formal employment, as a genuine way of reducing the continued high level of segmentation of the labour market.

32.               The increase in employment, the recovery of real wages in a context of accelerating labour productivity, and the Government's income policies have contributed to a significant decline in the levels of poverty and destitution, which had reached unprecedented highs for Argentina during the crisis.  Thus, from a poverty peak of 57.5 per cent and a destitution peak of 27.5 per cent of the population, the incidence rates have fallen to 31.4 per cent and 11.2 per cent respectively, which means that roughly 8.3 million people have succeeded in climbing out of poverty and 5,350,000 Argentines have ceased to be destitute.  These factors have been reflected in an improvement in the income distribution indicators.  The Gini coefficient, a standard measure of income distribution, has shown steady improvement, especially since the end of 2003, and the 5.4 percentage point decrease since that date represents a substantial shift for an indicator which measures structural characteristics of the economy and thus, by extension, measures minor movements over long periods of time.

33.               The industrial sector has been one of the main engines of the Argentine economy's sure-footed expansion in recent years, recording more than three years of sustained growth.  This is the result of the application of policies to improve the competitiveness of the tradeable sectors, which leads to a better distribution of income in society and recognizes industrial activity as a key factor in achieving that objective.  The construction of a competitive and integrated economic fabric and the development of small and medium-sized enterprises are key to advancing a model based on productive development and social inclusion.

34.               As mentioned before, the Argentine economy has been growing at an annual rate of 9 per cent over the past three years, and has achieved a record level of GDP.  Industry accounts for a substantial share of this growth, given high output and export levels, and the overall buoyancy of activity and employment in all industrial sectors.

Overall Economic Activity and Industrial Production

EMAE and EMI.  Seasonally adjusted series.  Base year 1997=100

Historical production peaks

                   Monthly Industrial Activity Estimator (EMI)

                   Monthly Economic Activity Estimator (EMAE)

Source:     Own compilation based on INDEC (National Statistics and Census Institute) data.

Overall Buoyancy of Production and Industrial Employment

Monthly Industrial Activity Estimator (EMI)

By subsector.  Change 2005 v. 2003

Index of Employed Workers

By subsector.  Change 2005 v. 2003

Source:    Own compilation based on INDEC data.

35.               This strong expansion is the result of the application of economic policies consistent with an active role for the State and the establishment of basic macroeconomic rules designed to foster corporate profitability and to generate high value-added growth.  The macroeconomic rules are supplemented by specific policies to promote sectoral, regional and small and medium business development, as well as the promotion of international negotiating strategies which pursue the same objectives.

36.               The aim is thus to build a long-term vision by sending clear signals that build investor confidence and promote a high level of growth in an integrated economic fabric.

37.               During the past decade, industrial activity was heavily concentrated in a few sectors and this was accompanied by the dismantling of the production framework of labour-intensive industries.  On the other hand, an analysis of industrial trends since 2003 reveals sustained growth with substantial job creation.

Comparative Trends in Production and Industrial Employment

Physical Volume of Production (IVF) and Employed Workers (IOO)

Year-on-Year Variation.  Period I 1993 / I 2006.

Source:    Own compilation based on INDEC data.

38.               With a wider spread among all subsectors, this new qualitative growth profile is essential to achieving a more equitable distribution of income.

Comparative Trends in Industrial Employment

Employment by Industrial Sector.  Thousands of Jobs.

Source:    Own compilation based on INDEC data.

39.               Small and medium-sized enterprises play a central role in the process, with differentiated high value-added production and strong job creation capacity.  In the context of a country that has recovered its fiscal health and a predictable macroeconomic environment, the State and private entities allocate institutional and capitalization resources for the improvement of infrastructure so as to guarantee the continuity of industrial development.

40.               Alongside the expansion and diversification of national industry, 2005 saw increased rates of activity which consolidated the commitment to growth.  Within this framework, various production sectors are making substantial investments with the aim of expanding their installed capacity, both by increasing existing capital and by creating new production units.  This becomes clear from an analysis of the behaviour of "capital formation" investments in a historical perspective.  Such investments have grown more dynamically over the past four years than the resources earmarked for "mergers and acquisitions", the comparative rates of increase for the period 2002-22005 being 666 per cent and 163 per cent, respectively.

Trends in Investment by National and Foreign Enterprises in Argentina

Source:    Compiled on the basis of data from the Ministry of the Economy

41.               The agricultural sector played a decisive role during the crisis and in the economic recovery, boosting and strengthening the return to a path of sustainable growth through foreign exchange earnings generated by the substantial increase in agricultural exports in recent years.  However, increased exports alone are no guarantee of growth.  Government action was crucial to enable the agricultural bonanza to translate into economic growth that is in turn socially sustainable.

42.               Active State involvement focuses on various objectives.  First, there is the establishment of clear macroeconomic rules to facilitate planning by producers.  Secondly, there are incentives for the technological development of the agri-food sector, including technical support, genetic improvement and health.  A further important aspect is the promotion of international negotiations and the establishment of quality standards to make possible the flow of more products to more destinations with higher value added.  Lastly, measures are being implemented to ensure that the sector's growth produces benefits for the entire economy and society, avoiding macroeconomic destabilization and facilitating long-term sustainable growth.

43.               The chart below shows the considerable increase in the share of agricultural activity in Argentina's production process.  Agricultural GDP grew by 12 per cent in 2005 compared with 2004.

Gross Value Added of Agriculture, Stockbreeding, Hunting and Forestry

Millions of 1993 pesos at producer prices

(*)           Preliminary estimates.

Source:    Compiled on the basis of DNCN (National Accounts Directorate) data.

44.               Below is a chart showing trends in the production of the three principal grains:  soyabeans, maize and wheat.  Particularly noteworthy is the marked upturn in soyabean production, which increased by 58 per cent between the 1998/99 and 2004/05 seasons.

Maize, Soyabean and Wheat Production (1998-2004)

Source:    Compiled on the basis of SAGPyA (Secretariat for Agriculture, Livestock, Fisheries and Food) data.

45.               The growth of the sector is reflected not only in primary products, as shown by the preceding chart, but also in manufactures of agricultural origin (MAOs).

Principal MAOs-Percentage Change in Production

Source:  Compiled on the basis of SAGPyA data.

46.               The recent agricultural upswing is correlated to the growth of investment in capital goods, which has driven the rise in productivity.  There has been strong growth in domestic production of agricultural machinery and equipment for the agricultural sector and subsidiary industries.  Related imports have also increased considerably.

Imports of Capital Goods for the Agricultural Sector (1995-2005)

Source:   Compiled on the basis of data from the Ministry of the Economy.

47.               Under the heading of the production and import of agricultural machinery, combine harvesters and tractors for agricultural use showed strong growth, especially in view of the fact that the devaluation pushed up the price of imports.  These data therefore demonstrate the sector's strong orientation towards exports and its capacity to sustain the growth of output.

Imports of Capital Goods for the Agricultural Sector

Source:    Compiled on the basis of data from the Ministry of the Economy.

48.               In the area of foreign trade, agro-industrial exports have shown strong and sustained growth since 2003, with rates of 22.5 per cent in 2003, 13.4 per cent in 2004 and 11.6 per cent in 2005.  According to the most recent data, a growth rate of 14 per cent was recorded in the first nine months of 2006, compared with the same period the previous year, which is evidence of sustained growth.

Trends in Argentine Agro-Industrial Exports (1998-2006)

Source:  Compiled on the basis of INDEC data.

49.               Three of the most important agro-industrial exports are wheat, maize and soyabean complex, the latter having recorded the highest growth in recent years.  They thus constitute a policy benchmark from the standpoint of both the overall economy and the development of rural areas.

Trends in Agro-Industrial Exports – Main Products (1998-2006)

Source:  Compiled on the basis of INDEC data.

50.               The economic crisis resulted in a continuous fall in agricultural imports between 1998 and 2002, followed by a recovery as from 2003, but without attaining pre-crisis levels.  These imports are highly diversified, although one of the most important is soyabeans from the main trading partners of Argentina, which accounted for 14 per cent of agro-industrial imports in 2005.  This product is imported mainly for the purpose of pressing, highlighting the importance of the production of soyabean oil and pellets in agro-industrial manufacturing in general.

51.               The Marrakesh Agreement begins with the recognition that trade should be conducted with a view to "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services" ... "in a manner consistent with their respective needs and concerns at different levels of economic development".

52.               It is therefore true to say that a fundamental WTO principle involves the affirmation that trade must be linked to full employment and a constant improvement in the living conditions of the population.  That principle is complemented by the idea that there is no single way of formalizing this relationship and that its implementation depends on each Member's level of economic development.

53.               This section will analyse the links concerned in the light of Argentina's recent experiences, contrasting the policies of the previous decade with those that have been implemented since the country emerged from the crisis of 2001-2002.

54.               In the 1990s, Argentina relied on the expectation that the opening up of trade and the liberalization of the labour market, alone and without appropriate economic policies, would lead to growing employment and economic growth through the exploitation of static comparative advantages.

55.               The opening up of the Argentine economy between 1991 and 1998, furthered inter alia by the Uruguay Round Agreements, was an important development that served to improve the country's integration into the global economy.  The increase in imports, given the lacklustre performance of exports in the second half of the 1990s, was financed basically by means of greater external debt.  This structural fragility made it foreseeable that the degree of liberalization and integration was unsustainable within that economic policy framework.  As of 1998, the economic recession halted those processes and led to a dramatic decline in Argentina's share of world trade.

56.               At the same time, labour market flexibility led to a progressive worsening of working conditions, falling employment and a consequent decline in effective demand.  The latter phenomenon in turn caused a drop in output.

57.               The policy of trade liberalization in a context of exchange rate appreciation imposed a growth rate on the Argentine economy that was based on capital-intensive but labour-extensive production, as well as specialization in sectors making intensive use of natural resources and with low job-creating potential.  The shift in production towards the tertiary sector, and investment in capital goods which placed emphasis on labour-saving technologies, resulted in a significant decline in employment in the manufacturing sector.  During the crisis, that decline led to a 28 per cent reduction in jobs in industry.

Trends in Sectoral Employment

Period 1991-2003 (Base Year 1997=100)

Source:   Ministry of Labour, Employment and Social Security (MTEySS) ­ Undersecretariat for Technical Planning and Labour Studies (SSPTyEL), ­ Directorate-General of Labour Studies and Statistics (DGEyEL).  On the basis of INDEC data and the user bases of the Permanent Household Survey (EPH), data for May.

58.               On top of this reduction in industrial employment, the low level of job creation in the rest of the economy was well below the increase in the available labour supply, and this resulted in unprecedentedly high unemployment rates.  Moreover, employment was more heavily concentrated in services sectors, especially those with higher levels of job insecurity and a multiplicity of atypical forms of labour contract.

Undeclared Employment Rate by Branch of Economic Activity

Total Urban Areas Surveyed

Source:    Ministry of Labour, Employment and Social Security (MTEySS), Undersecretariat for Technical Planning and Labour Studies (SSPTyEL), Directorate-General of Labour Studies and Statistics (DGEyEL), based on the INDEC's Permanent Household Survey (EPH).

59.               This situation of economic depression, persistently high unemployment rates and consequent deterioration in the social situation was compounded by a political crisis unprecedented in Argentine history (2001-2002).  It is not surprising, therefore, that one of the basic objectives of the current administration is to ensure that economic growth is equitable and includes all the different sectors of society.  Only this type of growth can promote greater social cohesion and the strengthening of democratic institutions.  Accordingly, the labour market and, in particular, the objective of decent work, constitute the central plank of public policy.

60.               The new growth model that has been in evidence since the crisis is based on the principle of creating quality employment and decent work.  Thus, in keeping with the founding principles of the WTO, the introduction of active labour market policies based on a renewed social dialogue has made possible a rapid economic recovery, a substantial reduction in unemployment, a higher rate of quality job creation, a fall in the levels of poverty and destitution, and a gradual improvement in income distribution.

61.               It should be emphasized that the domestic production of goods previously imported did not entail a decline in imports.  On the contrary, import volumes have been growing in tandem with economic growth.

62.               At the same time, the change in the growth model generated a substantial improvement in the employment/output ratio, and this helped speed up recovery from the 2001-2002 crisis.

63.               In this area also, firms in the industrial sector have played an outstanding role.  They have not only succeeded in restoring output to pre-crisis levels, but they have exceeded by 10 per cent the level of output recorded in the year of highest economic growth in the 1990s (1998).  This in turn has translated into a significant increase in industrial job creation as well as productivity levels.

Index of Employment in Industry

Year-on-Year Variation

* Most recent quarterly data available.

Source:    Monthly Industrial Survey, base years 1970, 1990, 1993 and 1997.

64.               The recovery in industrial employment has also been accompanied by a rise in employment in the other areas of economic activity and has done much to change the pattern of job creation from one based on undeclared labour to one in which the great majority of the jobs created are formal jobs.  It is very revealing, therefore, that between 1991 and 2001 undeclared employment grew by 52 per cent and declared employment by only 1 per cent, whereas between 2003 and 2005 the growth of declared employment was higher (32 per cent) and that of undeclared employment much lower (8 per cent).

Trends in the Level of Sectoral Employment

1st Quarter 2003 – 1st Quarter 2006 (Base year 2003=100)

Source:    MTEySS –  Undersecretariat for Technical Planning and Labour Studies – DGEyEL, based on the ongoing household survey (EPH) (INDEC).

65.               The continued buoyancy of job creation may be jeopardized if it is based exclusively on extensive economic growth.  The need to strengthen the current growth model, in accordance with the same principle of creation of quality employment and decent work, requires specific sectoral policies, including policies aimed at the industrial sector, as the increase in industrial activity favours the creation of highly productive jobs with higher incomes and the growth of effective demand which has beneficial effects on the rest of society.

66.               Argentina's experience during the previous decade shows that greater trade liberalization alone is no guarantee of either full employment or sustained growth.  On the other hand, post-crisis developments bear witness to the fact that appropriate economic policies and timely interventions in the labour market based on social dialogue may simultaneously generate steady improvements in the social indicators and a greater opening up of the economy.  Although the results achieved on both fronts are encouraging, the need for continued improvement in employment levels and other social indicators calls for the new growth model to be strengthened by means of specific policies, including policies targeting the industrial sector, which boost Argentina's participation in an increasingly open, transparent system of world trade that is sensitive to the specific needs of developing countries with respect to quality job creation and decent work.

67.               The change in economic policy introduced after the 2002 crisis had a significant impact on Argentina's foreign trade.  In the short term, the change administered a sharp correction to Argentina's external trade imbalance, which had persisted for some years, initially through a substantial decline in local imports (-57 per cent between 2001 and 2002).  In the medium term, and following the establishment of a stable and sustainable macroeconomy, the change in policy is having a specific impact on both agricultural and industrial export performance, maintaining the trade surplus in a context of strong recovery and import growth.

68.               Exports have almost doubled in less than four years, growing at an average annual rate of 16 per cent.  The uninterrupted growth during the period 2002-2006 is explained by the continuous expansion of agricultural trade flows (favoured by the recovery in international prices) and of agricultural and industrial manufactures (which recorded strong increases in sales volumes).

69.               The liberalization coefficient has grown substantially since the crisis (25 per cent since 2002), exceeding the high point of 5 per cent achieved in 1998.  Not only is the degree of liberalization higher than the peak figure recorded in the 1990s, but it is gathering momentum because it is self-sustainable and not dependent on external financing.

Degree of Liberalization in Argentina

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