The contraction in imports and loss of export markets resulting from the years following the Depression and World War II facilitate the adoption of an import substitution policy. Perón erects a system of almost complete protection against imports. At the same time, output of beef and grain, the country's main export goods, stagnates. Argentina is largely cut off from the international market.
The market opens slightly to international trade as Perón's second economic plan seeks to capitalize on the country's comparative advantage in agriculture. Argentina signs trade agreements with Britain, the Soviet Union, and Chile. A trickle of foreign commercial transactions produces a favorable balance of trade. Argentina participates in the Latin American Free Trade Association (LAFTA).
A gradual reversal in trade policy culminates in the military's announcing import substitution as a failed experiment. The government lifts protectionist barriers and opens the economy to the world market. This open competition program boosts some exports, but an overvalued currency means certain imports are so cheap that local industry declines, and many exports are priced out of the market.
High and rising inflation affects production costs, and the industrial sector is hard hit by the recession. Agricultural exports, too, become prohibitively expensive. Trade flows dwindle. By 1982, exports fall to 2 percent of their record level, while imports also decline. The Latin American Integration Association replaces LAFTA with the limited goal of encouraging free trade in the region.
Argentina signs a number of integration treaties to reduce trade barriers among Latin American countries. President Menem abolishes all quantitative restrictions, including quotas, on imports and exports. The average tariff undergoes further cuts. The Secretariat of Agriculture obtains financing from the Inter-American Development Bank to help boost nontraditional agricultural exports.
Trade liberalization measures and financial stabilization help foreign trade double. The privatization of transportation and handling infrastructure contributes to increasing Argentina's export capacity. The Mercosur agreement enters into force in 1995 with the goal of creating a free-trade zone comprising Argentina, Brazil, Paraguay, and Uruguay.
Grain output reaches a record of more than 60 million tons as trade picks up and productivity increases as a result of the adoption of new technology. Argentine beef is exported to the U.S. market for the first time in more than 50 years, and other export prospects improve as well. But just as foreign trade reaches its peak, domestic and foreign events begin to slow it down.
Lower world prices for agricultural products cause a sharp slowdown in export growth. The Brazilian devaluation reduces demand from Argentina's largest trade partner and triggers an exodus of industries to Brazil. Domestic recession lowers the demand for imports. But the 70 percent loss of value of the peso after its 2002 devaluation improves the competitiveness of Argentine exports.
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