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U.S. DEPARTMENT OF STATE
ARGENTINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                            ARGENTINA

                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)


                                    1992      1993      1994 1/

Income, Production and Employment:

GDP (at current prices) 2/           229       257       279
Real GDP Growth (pct.)               8.7       6.0       6.5
GDP by Sector:  (pct./GDP)
  Agriculture                        7.8       7.3       7.0
  Manufacturing                     27.0      26.6      27.5
  Mining                             2.3       2.3       2.3
  Services                          55.4      55.9      56.0
GDP Per Capita (USD)               6,932     7,644     8,206
Labor Force (000s)                13,126    13,126    13,978
Unemployment Rate (pct.)             6.9       9.3      10.8

Money and Prices:

Money Supply (M1) Growth (pct.) 3/  48.9      31.0      10.0
Commercial Interest Rates
  on 180 Day Deposits 3/             8.0       7.8      8.9(Aug)
Savings Rate (pct. of GDP)          15.2      15.9      13.5
Investment Rate (pct. of GDP)       16.7      17.7      20.0
Wholesale Inflation 3/               3.3       0.1       3.9
CPI (pct. change) 3/                17.5       7.4       3.7
Exchange Rate (USD/peso) 4/
  Official                         .9910     .9990       1.0
  Parallel                         .9910     .9990       1.0

Balance of Payments and Trade:

Total Exports (FOB) 5/              12.2      13.1      14.7
  Exports to U.S. (FOB)              1.4       1.3       1.5
Total Imports (CIF)                 14.9      16.8      20.2
  Imports from U.S. (FAS) 6/         3.0       3.8       4.8
Aid from U.S. (USD/000s)             1.2       1.8       1.7
External Public Debt 7/             65.5      62.8      70.1
Debt Service Payments 8/             4.2       4.2       3.3
Gold and Foreign Exch. Reserves     12.5      15.0      15.5
Trade Balance                       -2.6      -3.7      -5.5
  Trade Balance with U.S. 6/        -1.8      -2.5      -3.3


1/ Figures for 1994 are U.S. Embassy estimates.
2/ Nominal GDP is virtually the same in dollars or pesos after
1991 when the Convertibility Plan took effect, linking the peso
and the dollar at the rate of one to one.
3/ End of period.
4/ Average for the period.
5/ Based on official Argentine Government data.
6/ Based on U.S. Department of Commerce data.
7/ Foreign currency debt.
8/ Includes net debt service paid by public sector to 
international financial institutions and on Government of
Argentina Foreign Currency Bonds.



1.  General Policy Framework

    President Carlos Menem's far-reaching reform program, which
began in earnest in 1991, has revitalized Argentina's economy. 
From 1991-1993 real GDP growth averaged eight percent annually,
and the government has forecast growth of nearly seven percent
in 1994.  By mid-1993 the inflation rate fell to virtually
zero--a major accomplishment given Argentina's bouts with
hyperinflation only a few years ago.  Meanwhile, a stable
exchange rate and the opening of the economy to international
competition, including large reductions in tariffs and other
trade barriers and elimination of all but one export tax, have
resulted in a boom in imports, particularly from the United
States.  During the first five months of 1994 Argentina's
deficit with the United States was $1.4 billion, 56 percent of
Argentina's overall trade deficit during that timeframe.  The
expanding deficit has raised eyebrows, but the government has
countered this by citing the high concentration (30 percent) of
vitally needed capital goods in the import bill.  

    The public sector budget has been in the black for the past
few years--a result of more efficient tax collection, increased
revenue from import tariffs (resulting from the import surge)
and large infusions of revenue from the sale of state
industries.  The government has also eased the tax burden on
businesses by eliminating charges on bank debt, freight,
shipping, and foreign currency transactions.  At the same time,
the burden on the consumer has grown, via increases in the
value added tax (VAT) and personal income tax rates.  However,
continued heavy expenditures have threatened to generate a
deficit (less than one percent of GDP) in 1994, prompting the
government to crack down on tax evaders and to turn to foreign
borrowing.

    The Central Bank of Argentina controls the money supply
through the buying and selling of dollars.  Under the
Convertibility Law of 1991, the exchange rate of the Argentine
peso is fixed to the dollar at par value.  Through the first
nine months of 1993, the Central Bank bought $2.2 billion,
selling an equal amount of pesos.


2.  Exchange Rate Policy

    Argentina has no exchange controls; customers may freely
buy and sell currency from banks and brokers at market prices. 
The Convertibility Law, however, requires the Central Bank to
sell dollars at a fixed rate of one peso to one dollar.  The
Bank buys dollars at a rate of .998 pesos per dollar.

    The fixed exchange rate, which some observers believe is
overvalued, and the release of pent-up demand stemming from the
overall economic recovery, have made imports increasingly
competitive for local buyers.  Accordingly, the value of U.S.
exports to Argentina nearly quadrupled from 1990 to 1993, with
further growth in 1994.


3.  Structural Policies

    The Menem Administration's reform program has made
significant progress in transforming Argentina from a closed,
highly regulated economy to one based on market forces and
exposed to international competition.  The government's role in
the economy has diminished markedly through the privatization
of most state firms, including the oil firm YPF.  Meanwhile,
the authorities have eliminated price controls on all but a few
goods in the marketplace.  Nevertheless, the expanded trade
deficit has occasionally compelled the government to implement
ad hoc protectionist measures.  For example, in 1993 the
authorities temporarily placed higher duties on various textile
imports which allegedly were being sold in Argentina below
cost.  These measures remain in effect until January 31, 1995
with a possible one-time extension of six months. 

    Argentina, Brazil, Paraguay and Uruguay formed a customs
union (MERCOSUR) on January 1, 1995 with a common external
tariff (CET) covering 85 percent of traded goods.  (Capital
goods, informatics and telecommunications will be excepted from
the CET until the turn of century).  Argentina strove to
maintain minimal tariffs during MERCOSUR negotiations in order
to facilitate renovation of its industrial plant, which
requires continued imports of capital equipment and other
inputs.  The CET will range from zero to 20 percent; many
non-MERCOSUR products entering Argentina will face higher
tariffs.  The Argentine government has indicated it will
compensate by lowering or eliminating the statistical tax.

    Argentina ratified the Uruguay Round Agreements and became
a founding member of the World Trade Organization (WTO) on
January 1, 1995.


4.  Debt Management Policies

    The government reduced Argentina's public debt by $10.4
billion in 1993 through privatizations, decline in net
disbursements, reduction in capital (Brady Plan),
capitalization of interest and adjustment of the value of
government assets.  From 1989 to 1993 Argentina's debt service
fell from 101 percent to under 50 percent of exports of goods
and non-factor services.  Total public sector foreign currency
external debt came to $62.9 billion at the end of 1993.

    The IMF, World Bank, and InterAmerican Development Bank
(IDB) have been major sources of funds to Argentina.  In
September 1994 the government terminated an IMF Extended Fund
Facility (EEF) arrangement, initiated in 1992, preferring to
forego Fund conditionality in favor of commercial borrowing. 
Both the World Bank and IDB obligated over $1 billion annually
in 1993-1994.


5.  Significant Barriers to U.S. Exports

    One of the key free market reforms of the Menem
Administration has been to open the Argentine economy to
foreign producers.  The government abolished the import 
licensing system in 1989 and since 1990 has slashed the average
tariff from nearly 29 percent to less than 10 percent, although
many imports must pay a higher surcharge (the "statistics
tax").  Tariffs are as low as zero on capital goods and 0.5
percent on raw materials.  American exports have capitalized on
this and risen dramatically over the past few years. 

    Barriers to U.S. Exports:  Despite the generally favorable
environment for imports, the authorities occasionally erect
protectionist barriers.  In September 1993, responding to what
it considered widespread "dumping" of apparel, particularly
from the far east, the government imposed temporary import
surcharges on an array of clothing, rugs and textiles. 
Restrictions apply to imports of a broad range of used and
manufactured equipment as well.  In October 1994, following
congressional passage of a law designed to promote the local
film industry, the government enacted new taxes on video sales
and rentals, which could curtail demand for U.S.-made films. 
(However, President Menem vetoed other sections of the bill,
including authority for the National Film Institute to regulate
the release of foreign films and establishment of a six month
minimum timeframe between opening of a film in the theater and
its video release).  On the other hand, in September 1994 the
government eliminated tariffs and duties on imports of computer
software, much of which is supplied by American firms.

    Argentina also protects the automobile assembly industry
through a combination of quotas and heavy tariffs. 
Nevertheless, the number of foreign-manufactured vehicles on
the roads is increasing through heavy demand that easily
outstrips local production.  The government claims it will
dismantle the protection scheme by the turn of the century.

    Service Barriers:  The government has progressively
eliminated restrictions on foreign-owned banks.  In January
1994 the authorities formally abolished the distinction between
foreign and domestic banks.  They allowed foreign banks to open
branches and began issuing new licenses.  However, lending and
other operational limits for foreign bank branches are based on
local, rather than global capital.  Government bodies and state
agencies must still direct their business to public banks, but
this stipulation's importance is declining, given the ongoing
privatization program.  U.S. banks are well represented in
Argentina and are some of the more dynamic players in the
financial market.  Furthermore, the privatization of pension
funds has attracted some American firms.

    Investment Barriers:  There are few barriers to foreign
investment.  Firms need not obtain permission to invest in
Argentina.  Foreign investors may wholly own a local company,
and investment in shares on the local stock exchange requires
no government approval.

    A U.S.-Argentina bilateral investment treaty came into
force on October 20, 1994.  Under the treaty U. S. investors
enjoy national treatment in all sectors except shipbuilding,
fishing, insurance and nuclear power generation.  An amendment
to the treaty removed mining, except uranium production, from
the list of exceptions.

    Government Procurement Practices:  "Buy Argentina"
practices have been virtually abolished.  Argentine sources
will normally be chosen only when all other factors (price,
quality, etc.) are equal.

    Customs Procedures:  Customs procedures are generally
extensive and time consuming, thus raising the costs for
importers, although installation of an automated system has
eased the burden somewhat.


6.  Export Subsidies Policies

    Argentina adheres to the GATT Subsidies Code and also has a
bilateral agreement with the United States to eliminate
remaining subsidies for industrial exports and to ports located
in the Patagonia region.  Nevertheless, the government retains
minimal supports, such as reimbursement of indirect tax
payments to exporters.


7.  Protection of U.S. Intellectual Property

    Argentina officially adheres to most treaties and
international agreements on intellectual property, including
the Paris Convention for the Protection of Industrial Property
(Lisbon Text and non-substantive portions of the Stockholm
Text), the Brussels and Paris Texts of the Berne Convention,
the Universal Copyright Convention, the Geneva Phonogram
Convention, the Treaty of Rome and the Treaty on the
International Registration of Audiovisual Works.  In addition,
Argentina is a member of the World Intellectual Property
Organization (WIPO) and a signatory to the Uruguay Round TRIPS
text.  However, USTR maintained Argentina on its "priority
watch list" in 1994 because of the lack of patent protection
for pharmaceuticals.

    Patents:  Argentina's patent law, enacted in 1864, is the
weakest component of the country's IPR regime.  The law
specifically excludes pharmaceutical "compositions" from patent
protection, which have cost U.S. drug firms hundreds of
millions of dollars in sales lost to pirates and has damaged
Argentina's ability to attract certain high-tech industries in
both production and research and development.  The law also
contains stringent working requirements and allows a maximum
patent term of only 15 years.  The Menem Administration
submitted a draft of a new patent law to Congress in 1991.  The
new law would improve patent protection and extend it to
pharmaceuticals, but as of October 1994, the bill was still not
passed by either house of the Argentine congress.

    Copyrights:  Argentina's copyright law, enacted in 1993, is
adequate by international standards.  Recent decrees provided
protection to computer software and extended the term of
protection for motion pictures from 30 to 50 years after the
death of the copyright holder.  As in many countries, however,
video piracy has become a serious problem.  Efforts are
underway to combat this, including arrests, seizure or pirated
material and introduction of security stickers for cassettes.   

    Trademarks:  Trademark laws and regulations in Argentina 
are generally good.  The key problem is a slow registration
process, which the government has striven to improve.

    Trade Secrets:  Argentina has no trade secrets law per se,
but the concept is recognized and encompassed by laws on
contract, labor and property.  Penalties exist under these
statutes for unauthorized revelation of trade secrets.

    Semiconductor Chip Layout Design:  Argentina has no law
dealing specifically with the protection of layout designs and
semiconductors.  This technology conceivably could be covered
by existing legislation on patents or copyrights, but this has
not been verified in practice.  Nevertheless, Argentina has
signed the WIPO Treaty on Integrated Circuits.


8.  Worker Rights

    a.  Right of Association

    The Argentine labor movement is undergoing a difficult
transition as the government privatizes inefficient state-owned
enterprises.  These changes have affected the composition of
the labor movement, but have not altered the worker's right to
form trade unions.  Most unions belong to the large, national
General Labor Confederation (CGT), which supports, with
reservations, the government's economic reforms.  However, a
militant faction within the CGT, the Movement of Argentine
Workers, and a separate organization, the Congress of Argentine
Workers, led by some government and teachers' unions, are
critical of the government's economic reform policies.

    Unions have the right to strike and members who participate
in strikes are protected by law.  In 1994 major strikes
occurred without government interference against the privatized
greater Buenos Aires electric power utility and the aluminum
smelting plant in the southern province of Chubut.  However,
the government declared illegal a proposed general strike by
trade union opponents of the government's economic policies, on
the grounds that the constitutional right to strike is intended
to protect workers' economic interests but not to be used as a
political weapon.

    Argentine unions are members of international labor
associations and secretariats and participate actively in their
programs.

    b.  The Right to Organize and Bargain Collectively

    Anti-union practices are prohibited by law and respected in
practice.  Argentine labor, the government and the private
sector reaffirmed these rights in a framework agreement signed
in July aimed at reforming labor-management relations in the
context of economic restructuring and increasing global
competitiveness.  The trend towards bargaining on a company
level in contrast to negotiating at the national level on a
sectoral basis continues, but the adjustment is difficult for
both sides.  For this reason, the agreement proposes to create
a national mediation service to promote more effective
collective bargaining.  

    The Committee of Experts on the Application of Conventions
and Recommendations of the International Labor Organization
(ILO) took note of a teacher's union complaint regarding
restrictions on collective bargaining in certain specified
sectors and asked the government to inform the ILO of measures
it may take or has taken to encourage voluntary negotiations
without impediments.

    The framework agreement also covers health and safety
issues, employment creation and training, work-related
injuries, grievance procedures, and the distribution of social
benefits.  It is expected to lead to the reform of a
significant body of the labor code, which many observers agree
needs urgent revision.  The framework agreement aims, in part,
to lower labor costs and give employers greater flexibility in
hiring, firing, and redistributing the workforce.  

    Workers may not be fired for participating in legal union
activities.  Those who prove they have been discriminated
against have the right to be reinstated.  

    There are no officially designated export processing zones.

    c.  Prohibition of Forced or Compulsory Labor

    Forced labor is not known to be practiced in Argentina.

    d.  Minimum Age for the Employment of Children

    Employment of children under 14, except within the family,
is prohibited by law.  Minors aged 14 to 18 may work in a
limited number of job categories, but not more than six hours a
day or 35 hours a week.  Notwithstanding these regulations, a
significant number of children between 10 and 14 years of age,
estimated at 200 thousand in a 1993 report by the Ministry of
Labor, UNICEF and the ILO, are illegally employed, primarily as
street vendors or household workers.

    e.  Acceptable Conditions of Work

    The national monthly minimum wage is $200.  Federal labor
law mandates acceptable working conditions in the areas of
health, safety and hours.  The maximum workday is eight hours,
and workweek 48 hours.  The framework agreement is designed to
produce legislation to modernize the accident compensation
process and occupational health and safety norms.  In
responding to a complaint from the Argentine Congress of
Workers that work-related illnesses were not covered under the
existing workmen's compensation system, the ILO's committee of
experts urged the government to provide information to the
Congress of Argentine Workers regarding the measures it plans
to take to fulfill its obligations under Convention 42,
Workmen's Compensation (occupational diseases) which Argentina
ratified in 1950.  

    Occupational health and safety standards in Argentina are
comparable to those in most industrialized countries, but
federal and provincial governments lack sufficient resources to
enforce them fully.  The most common victims of inhumane
working conditions generally are illegal immigrants with little
opportunity or knowledge to seek legal redress.

    f.  Rights in Sectors with U.S. Investment

    Argentine law does not distinguish between worker rights in
nationally-owned enterprises and those in sectors with U.S.
investment.  The rights enjoyed by Argentine employees of
U.S.-owned firms in Argentina equal or surpass Argentine legal
requirements.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                               566
Total Manufacturing                                   1,993
  Food & Kindred Products                   667
  Chemicals and Allied Products             443
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment            56
  Transportation Equipment                   23
  Other Manufacturing                       386
Wholesale Trade                                         135
Banking                                                 552
Finance/Insurance/Real Estate                           578
Services                                                 77
Other Industries                                        455
TOTAL ALL INDUSTRIES                                  4,355    

Source: U.S. Department of Commerce, Bureau of Economic
Analysis

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