Meanwhile on the Pampas....

Argentina is booming! The laggard of the Western Hemisphere has now become one of the world's high growth milagros! According to the World Bank, in 2011, Argentina's economy expanded by 8.9% --- in 2010 Argentina grew by 9.2%. Since 2003 average growth rates have ranged between 6.8 to 9.2% year after year. The global financial crisis did cause growth to dip to 0.9% in the annus horribulus of 2009, but for almost a decade Argentine growth rates have rivaled those of China and India.

Argentina's growth has been led by manufacturing, and Argentina is the most industrialized nation in the Western Hemisphere in terms of the share of manufacturing in the total size of the economy. As the chart below shows, after the dramatic economic crisis of 2001-2002, manufacturing rebounded sharply. Average annual growth in manufacturing value added since 2002 has been extremely robust. Of course, this begs the question: why has manufacturing in Argentina grown so fast?

A lot of credit is due old-fashioned mercantilism. As today's WTO complaint by the US makes clear, Buenos Aires has been bringing extraordinary pressure on foreign companies who sell to Argentina to also expand industrial production within the country. In addition, Argentina's currency has become much more competitive over the last decade. In the 1990's Argentina dollarized its economy, and committed itself to an exceedingly overvalued peso-dollar exchange rate of 1:1. Since this policy was abandoned in 2002, Argentina's currency has lost 75% of its value against the dollar. In 2011, one dollar bought roughly 4 pesos, compared to just 1 peso in 2001. To get a sense for the magnitude of this change, this is the equivalent of shifting from the current US dollar to Chinese yuan exchange rate of roughly $1 = 6.5 yuan to an exchange rate of $1 = 1.6 yuan. In the US case, were the US dollar to lose 75% of its value against the yuan, the price of Chinese imports to the US would quadruple overnight and the US would instantaneously become a much, much more competitive location for manufacturing.