Strengthening long-term growth in Argentina D. Artana, E. Bour, J.L. Bour y N. Susmel OECD Seminar Beyond the crisis – Returning to sustainable growth in Latin America Paris, November 24 th 2010

Labor regulation is also rigid in our estimate of the EPL3 Source: FIEL More rigidity

Source: Artana, D. & I. Templado Is the Argentine Revenue Effort Too High? And the tax burden is also high

Manufacturers pay on average US$ 3 per million BTU New Exploration Contracts between 3.5 & 5

Price controls of energy products are one factor that explains a declining stock of reserves and production of natural gas

There was a reduction in informality, but average is similar to Informality rates

Reallocation from low productivity to high productivity sectors was not very important Within-sector more consistent with some external force that drives labor productivity up in all economic sectors

And quality of education deteriorated in spite of some increase in public expenditures as % of GDP Quality worsened Quality improved

We estimated determinants of growth in Argentina in the period Stock of capital adjusted by utilization Labor adjusted by number of hours worked –We also opened for Formal and Informal Workers Country risk as separate variable Terms of trade (Kehoe and Ruhl, 2007; Becker and Mauro, 2003; Edwards, 2007; Cavalcanti Ferreira et al (2010) –Gain is similar to technological improvement

We can estimate how much the gain in terms of trade contributed to growth in –One third when informal employment is included –73% in our best estimate that takes into account lagged effects.

Conclusions Good luck made a substantial contribution to Argentinas growth since 2003 Fiscal challenges that were a key factor behind Argentinas dismal performance in the past are not such a big challenge (low debt, moderate deficit). But filling the gap with taxes will be costly given the already high tax rates on formal activities Evidence points to the need to improve the quality of micro policies and the investment climate … or to bet for permanent luck