Argentina Vs Bolivia: Who's Poorer?

Argentina and Bolivia are two South American countries with a history of economic instability. Both countries have rich natural resources and export-oriented agricultural sectors, but they have experienced periods of economic growth and decline for various reasons.

Argentina, once one of the wealthiest countries in the world, has suffered from recurring economic crises, high inflation, and mounting external debt. The country has a highly literate population and a diversified industrial base. On the other hand, Bolivia, one of the least developed countries in Latin America, has faced challenges due to state-oriented policies that deter investment. However, Bolivia has strong growth attributed to captive markets for natural gas exports to Brazil and Argentina.

In recent years, Argentina's economy has been characterised by high inflation and currency devaluation, with a decline in foreign investment and a negative impact on its population's purchasing power. Bolivia, meanwhile, has struggled with high poverty rates, income inequality, and lack of access to education and healthcare.

Despite their economic challenges, both Argentina and Bolivia are working towards economic reforms and international reintegration. Argentina, under the leadership of President Mauricio Macri, has taken steps to liberalise its economy and negotiate debt payments. Bolivia, under the leadership of President Evo Morales, has implemented measures to attract international investment and boost energy production capacity.

Argentina's economic decline

Political Instability

Argentina's economy was relatively stable until the 1930s, when a military junta took power, ending seven decades of civilian constitutional rule. This marked the beginning of a period of political instability that contributed to the country's economic decline.

Import Substitution Policies

From the 1930s to the 1970s, successive governments pursued a strategy of import substitution to achieve industrial self-sufficiency. However, this diversion of investment from agriculture to industry led to a significant decline in agricultural production, which had been a key driver of economic growth.

Currency Devaluation

Argentina has a history of currency devaluations due to high inflation and economic crises. The country defaulted on its debt nine times since gaining independence from Spain in 1816, and the value of the Argentine peso has declined significantly over the years, impacting the country's economic stability.

Chronic Inflation

Chronic inflation has been a persistent issue in Argentina, often reaching double digits and even as high as 5,000%. This has led to multiple currency devaluations and has made it difficult for the country to attract foreign investment and maintain economic growth.

Bolivia's economic growth

Bolivia's economy is the 95th-largest in the world in nominal terms and the 87th-largest in purchasing power parity. Bolivia is classified as a lower-middle-income country. Bolivia's economy is largely driven by its natural resources, and the country has become a regional leader in economic growth, fiscal stability, and foreign reserves. Bolivia's export economy is dominated by the mining industry, particularly the extraction of natural gas and zinc.

Bolivia's economy grew rapidly between 1960 and 1977. However, persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977, causing Bolivia to lose most of its GDP gains from the previous decade. After 1986, the Bolivian economy began to grow again.

Between 2006 and 2019, during the presidency of Evo Morales, Bolivia's economy experienced significant growth. During this period, GDP per capita doubled, and the extreme poverty rate declined from 38% to 18%. The overall poverty rate also decreased from 22.23% in 2000 to 12.38% in 2010. The Gini coefficient, a measure of income inequality, improved from 0.60 to 0.446 during this period.

Bolivia has the second-largest natural gas reserves in South America, and its exports of natural gas, particularly to Brazil and Argentina, have been a key driver of economic growth. Bolivia also has significant mineral deposits, including silver, tin, zinc, and lithium.

The agricultural sector in Bolivia is important, with agriculture, forestry, and fishing contributing 14% of GDP in 2003. However, the sector has faced challenges due to the country's topography and climate, which make farming difficult. Bolivia's leading legal agricultural export is soybeans, while its most lucrative agricultural product is coca.

Bolivia has implemented economic reforms and structural adjustments to stabilize its economy, attract foreign investment, and promote growth. The government has also invested in infrastructure and industrialization, particularly in the natural gas and lithium sectors.

Despite its economic growth, Bolivia remains one of the least developed countries in Latin America due to state-oriented policies that deter investment. The country faces challenges such as political instability, racial tensions, and social conflicts, which have impacted economic growth and investment.

Argentina's political instability

Argentina has a long history of political and economic instability. The country's economy has historically been very uneven, with high economic growth alternating with severe recessions, particularly since the late twentieth century.

The single most important factor in this decline has been political instability since 1930 when a military junta took power, ending seven decades of civilian constitutional government. In macroeconomic terms, Argentina was one of the most stable and conservative countries until the Great Depression, after which it turned into one of the most unstable.

Since independence from Spain in 1816, the country has defaulted on its debt nine times. Inflation has often risen to the double digits, even as high as 5,000%, resulting in several large currency devaluations.

In recent years, the country has continued to experience significant growth fluctuations. After growing 5% in 2022, Argentina entered a recession in 2023, with GDP contracting an estimated 2.5%. The new government, led by Milei, who took office in December 2023, faces the imperative task of consolidating public finances to stabilize the economy.

Milei has implemented various changes, including extending the trial period for new employees and modifying compensation laws for dismissals without cause in favour of companies. He has also eliminated export restrictions and announced plans to liberalize the internet market, as well as expressing interest in privatizing some state-owned enterprises.

Bolivia's poverty reduction

Bolivia is a South American country that has been working to reduce its high poverty rate. From 2000 to 2018, the poverty rate in Bolivia decreased from 66% to 35%. The Bolivian government has taken direct action to develop its economy, reduce poverty and income inequality, and increase foreign investment. The government approved the National Economic and Social Development Plan 2016-2020 to bring about change in the country. This plan included objectives such as eliminating extreme poverty, granting basic services to the entire population, and diversifying the economy.

Bolivia's progress in poverty reduction can be attributed to a combination of economic growth and direct government involvement. Economic growth has been driven by an increase in exports, mainly of minerals and hydrocarbons, and a focus on labour income rather than non-labour income. The real minimum wage increased by 122% between 2000 and 2015, and the average labour income increased by 36% during the same period.

Bolivia's transition to a democratic society during the 1990s also played a role in reducing poverty. The country's income inequality has decreased, as demonstrated by the Gini coefficient, which went down from 0.62 in 2000 to 0.49 in 2014.

However, Bolivia still faces challenges such as high public debt, declining natural gas production, and vulnerability to climate-related disasters. To achieve sustainable growth and continue its progress in poverty reduction, Bolivia needs to address structural challenges, promote private sector development, and protect its vulnerable population.

Argentina's poverty increase

Argentina's poverty levels have been on an upward trajectory since the 1930s, barring a few periods of respite. The country's economy has historically been very uneven, with high economic growth alternating with severe recessions. Income maldistribution and poverty have increased since the late twentieth century.

In the early twentieth century, Argentina was one of the ten highest per capita GDP countries globally. However, the country's economy started to deteriorate in the 1930s, mainly due to political instability. A military junta took power in 1930, ending seven decades of civilian constitutional government. This marked the beginning of a series of economic crises, persistent fiscal and current account deficits, high inflation, mounting external debt, and capital flight.

The import substitution policy pursued by successive governments from the 1930s to the 1970s further exacerbated the situation. While it aimed to achieve industrial self-sufficiency, it diverted investment from agricultural production, which fell dramatically. By the 1950s, output of beef and grain, the country's main export goods, had stagnated.

The era of import substitution ended in 1976, but growing government spending, large wage increases, and inefficient production during the military dictatorship from 1976 to 1983 led to chronic inflation that rose through the 1980s. The external debt tripled in three years, and the increased debt burden interrupted industrial development and upward social mobility.

In the early 1990s, the government managed to rein in inflation by making the peso equal in value to the US dollar and privatizing numerous state-run companies. However, the country defaulted again in 2001 and 2020.

In recent years, Argentina's poverty levels have skyrocketed due to several factors. The country has one of the world's highest inflation rates, making it difficult for people to make ends meet. The devaluation of the peso currency carried out by President Javier Milei shortly after his inauguration in December 2023 also exacerbated poverty levels. The country's annual inflation rate surpassed 100% in 2023 for the first time since the early 1990s.

In January 2024, Argentina's poverty rate reached 57.4%, the highest in the country since 2004. About 27 million people in Argentina are poor, and 15% of those are mired in "destitution," meaning they cannot adequately cover their food needs. The increase in poverty levels has unleashed accusations between Argentina's former Vice President Cristina Fernández de Kirchner and the current government.

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