Abstract
At the turn of the last century, the Argentine economy was on a path to prosperity that never fully developed. International trade and trade policies are often identified as a major culprit. In this paper, we review the history of Argentine trade policy to uncover its exceptional features and to explore its contribution to the Argentine debacle. Our analysis tells a story of bad trade policies, rooted in distributional conflict and shaped by changes in constraints, that favored industry over agriculture in a country with a fundamental comparative advantage in agriculture. While the anti-export bias impeded productivity growth in agriculture, the import substitution strategy was not successful in promoting an efficient industrialization. In the end, Argentine growth never took-off.
Highlights
We review the history of Argentine trade policy to uncover its exceptional features and to explore its contribution to the Argentine debacle
Our analysis tells a story of bad trade policies, rooted in distributional conflict and shaped by changes in constraints, that favored industry over agriculture in a country with a fundamental comparative advantage in agriculture
At the turn of the last century, the Argentine economy was on a promising path to prosperity, a prosperity which, in the end, never fully materialized
Summary
At the turn of the last century, the Argentine economy was on a promising path to prosperity, a prosperity which, in the end, never fully materialized. Our account is based on the interplay of endogenous domestic decisions and exogenous shocks, with roots in the inherent Argentine distributional conflict, that hindered the long-run economic growth of the country These ideas provide the stylized facts about trade policy that motivate the modeling framework of the chapter in the volume (by Sebastian Galiani and Paulo Somaini). The resulting anti-export bias and import substitution model had negative consequences for growth and economic performance We document this by first looking at the evolution of agricultural productivity in the country We show that the anti-agro bias impeded growth in agricultural productivity and the import substitution model failed at boosting productivity growth in industry These are major factors that help explain why Argentina was unable to grow and achieve its once-tangible prosperity. From the 1970s to the early 2000s, the ratio of exports and imports to GDP remained relatively stable (with fluctuations) and, strongly increased in recent years, especially after the 2001 crisis
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