Exceptional Argentina Di Tella, Glaeser and Llach - Thomas Piketty

Transition Remarks
The previous essay argued that Argentine trade barriers may have played a major role in
explaining Argentina’s economic underperformance, which motivates the next two essays, which
both examine Argentine trade policy in greater detail. The next essay provides us with a detailed
picture of Argentina’s economic isolation and its economic effects. The essay that follows
further explores the causes and attempts to explain why Argentina experienced “60 years of
solitude.”
The next essay begins with an overview of Argentina’s trade flows during the 20 th century. As a
share of Gross Domestic Product, imports and exports decline from around 40 percent during the
years before the Great Depression to around 10 percent after 1960. The bulk of the decline
occurred during the 1930s, but there was a brief post-war trade surge that had disappeared by
1960. In recent decades, agriculture has become a smaller share of Argentina’s exports and has
been replaced by light manufacturing and other processed goods.
Even when Argentina was at its most global, before World War I, there were substantial import
tariffs typically slightly under 20 percent. Yet while these tariff rates seem high relative to our
current free trade era, many countries, including the United States, had higher tariff rates during
this period. After all, in the 19 th century, tariffs were a convenient means of raising revenues for
countries that lacked the legal or technical capacity to implement a widespread income tax.
When the world sank into depression in 1929, Argentina, like many of its trading partners, raised
its tariff barriers. Import taxes rose to almost 30 percent. The 1930s also saw a substantial
deterioration in Argentina’s terms of trade. While Argentina’s output was relatively cheap in
1910, it became relatively expensive a quarter century afterward.
Argentina also followed policies aimed at protecting local industries that further isolated the
country. Exchange rate manipulation made it more expensive for Argentines to purchase
imported goods. These exchange rate policies—the gap between buy and sell rate for
Argentinian currency—“worked as an implicit export tax or import tariff.” These policies seem
to have had a distinctly chilling impact of both imports and exports.
During the post-war period, agricultural policies in the west, such as the European Common
Market, further damaged Argentina’s agricultural exports. At home, Perón was following an
import substitution economic development strategy that invested in heavy industry and protected
them from global competition. These policies largely shut Argentina off from the increasingly
important global trade in manufactured goods.
After 1967, Argentina increasingly experimented with limited trade liberalization. This process
was not easy, because there are always losers, as well as winners, from free trade. Politically
powerful groups were able to keep protection, while politically weaker industries were more