After years of instability and various imbalances, Argentina is now going through a reorganization that represents a regime change in macroeconomic matters, although it remains fragile and complex. The deceleration of inflation, fiscal surpluses and the gradual correction of relative prices are achievements that should not be underestimated.
This first phase, which took a stabilization approach, allowed us to regain a certain degree of predictability in business decisions, a rare and valuable resource in the current environment. Stability is a necessary condition for growth. Growth is urgent, given the numbers witnessed in recent years.
If we assume that the economy will expand this year by 4.5%, the average growth since 2009 will be only 0.9%. When population growth is discounted, per capita GDP has seen almost no progress since then. Even more surprising is that, with the exception of 2021 and 2022 – when the economy initially rebounded after the pandemic – the last time the country achieved two consecutive years of growth was in 2010 and 2011, before the exchange rate.
However, stability alone may not be enough to ensure expansion. Argentine economic history provides numerous examples of periods of relative macroeconomic calm that did not lead to sustained growth.
A short-term boom may arise from a recovery in idle capacity, a normalization of expectations, or a reshaping of consumption.
Long-term growth requires deeper transformations linked to capital accumulation and increased productivity
Long-term growth requires more far-reaching transformations, linked to capital accumulation and increased productivity.
The drivers of sustainable growth have been clearly identified. Countries that manage to sustain paths of prolonged expansion do so because they create an environment where private investment finds incentives to innovate, generate employment, and expand production.
Productivity increases through technological integration – essential in the age of artificial intelligence – reducing informal employment, encouraging competition and efficient reallocation of resources.
“Calculation” in itself does not guarantee this process, but it generates predictability. In this context, improving investment and productivity becomes more likely. What is needed other than stability? Basically, structural reforms, i.e. adjustments to rules, institutions and regulations. Its purpose is to permanently modify the way resources are allocated to increase the country’s potential GDP.
Unlike stabilization policies – such as fiscal and exchange rate policies – these reforms constitute the framework within which consumption, investment, innovation, and employment decisions are made. In general, structural reforms focus on the areas of work, taxes and pensions.
After the elections scheduled for October 26, the government proposes to prioritize these changes, starting with the field of work. It’s a relevant move, for at least two reasons. First, due to the change in product structure, as some sectors, especially services, are gaining increasing weight.
Second, because technology is advancing globally at a pace that is transforming value chains and jobs. In order to integrate productively into the global economy, the country needs a business structure that accompanies creativity, not hinders it. The informal sector, which affects more than half of workers, reduces productivity, reduces the tax base and perpetuates inequality.
The rigidity of the current labor system does not encourage the integration of young people and workers with intermittent professions and technological profiles
In the absence of reforms that streamline hiring costs and modernize labor relations, the country will remain locked into a model that rewards survival and punishes growth. From this perspective, the strategic importance of the debate on labor market reform is understandable. The goal is not to erode rights or make conditions unstable, but to redesign the framework that favors formal and competitive job creation in an ever-changing global context.
The rigidity of the current labor system does not encourage the integration of young people and workers with intermittent professions and technological profiles.
Reform, ultimately, means adding the following: facilitating more people’s access to the productivity, training and social protection that only formalities provide. The ongoing stabilization process could usher in a new phase, as long as it can be complemented by productivity-focused structural reforms.
These changes are not discussed in isolation: they depend on the macroeconomic and political system. Stability saves time, and using it correctly is a very important challenge. Otherwise, the country risks repeating its traditional cycle: stability, then stagnation.
The task is to build consensus on redefining the incentives that govern development. Argentina has talent, productive capacity and a private sector that has demonstrated resilience in harsh conditions. In the absence of a framework that rewards creativity, formal employment, and long-term investment, this potential will continue to be limited.
Sustainable growth requires an institutional structure capable of unleashing national productive capacity. Opportunity presented. It remains to be seen whether it will be possible to benefit from it this time.
The author is Professor of Economics and Editor of the Economic Monthly Report (IEM) at the IAE Business School. This note was published in the October IEM issued by IAE, Austral University Business School