Friday, March 30, 2012

Argentina Continues Its Decline

A rather depressing story from FerFal's blog on Argentina's continued economic decline, and its government's role in that decline. Basically, he indicates that the government has imposed import restrictions in order to encourage consumption of domestic products.

The general problem, of course, is that protectionism merely fosters poor quality and high prices for the local products. Also, the government has pegged its currency to the U.S. dollar. This works for a country like China, because it has artificially undervalued its currency, which encourages an inflow of capital. Argentina, on the other hand, has artificially overvalued its currency, making its products and goods overpriced in the international market. The result is a flight of capital.

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