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Economic Contradictions: Argentina as a Model
Economic 10/17/2024
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What is the wisdom behind exposing yourself to global economic experiences?
Here at Al-Iqtisadiah Al-Sabah, we are accustomed to reviewing global economic experiences and investigating the reasons and means of success of some and failure of others, with the aim of benefiting from successful experiences and avoiding the reasons behind failed ones.
In this article, we chose the Argentine experience, which is unique in its failures and setbacks over 200 years, according to international studies.
Here, it is necessary to trace the reasons that led to this failure in order to overcome them in the Iraqi economic experience, which is what such topics target.
Argentina is the third largest economy in Latin America and has huge wealth, in addition to its strategic location on a large coast of the Pacific Ocean, fertile arable land and large areas, with a small population compared to its area.
Official reports indicate that it defaulted on its external debts 9 times and almost went bankrupt in 2022.
Economists attribute the annual decline to economic mismanagement, not to a lack of economic resources.
Argentina is an exporter of wheat, soybeans, meat and fish. Agriculture accounts for 7% of GDP, while agricultural manufacturing accounts for 25%. It relies on the agricultural economy, but the Argentine economy has been subject to fluctuations for years between growth and contraction, which has resulted in a decline in income, employment opportunities and the monetary value of goods and services. This fluctuation has led to a lack of confidence in the economy, as it suffers from a twin deficit.
The twin deficit is defined as a deficit in the state budget and another in the external balance, and that financing this deficit is the reason for the decline of the economy.. How?
The state resorts to external borrowing, which is accompanied by an increase in government spending and an increase in foreign imports, followed by an increase in inflation over the years.
Economists attribute the reason for this deficit to the increasing and false government spending for electoral purposes, which made the citizen depend on the state for everything and it became a continuing habit, and this continuous spending remained at the expense of the people’s wealth in the medium and long term.
To address this permanent deficit, Argentina resorts to printing money or inflation financing, which causes inflation to rise and Argentine goods to lose their global competitiveness.
To compare the Argentine economy with the South Korean economy, the ratio of exports to GDP in Korea is 80%, equivalent to two trillion dollars, of which 1.6 trillion is its exports, while Argentina's exports are 100 billion dollars.
With the huge difference in the wealth that Argentina possesses, its area and water bodies, as you find them only equal in population size between the two countries, this shows the importance of good management of the South Korean economy and bad management in Argentina, despite the difference in Argentina’s distance from the bloody events, its stability, the situation of South Korea and the threats of neighboring North Korea.
Therefore, in order to overcome wrong policies, we must always look at global experiences.
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