Argentina
Argentina benefits from rich natural resources, a highly
literate population, an export-oriented agricultural sector, and a
diversified industrial base. Although one of the world's wealthiest
countries 100 years ago, Argentina suffered during most of the
twentieth century from recurring economic crises, persistent fiscal
and current account deficits, high inflation, mounting external
debt, and capital flight. Beginning in 1998, with external debt
equivalent to more than 400 percent of annual exports, economic
growth slowed and ultimately fell into a full-blown depression, as
investors' fears grew in the wake of Russia's debt default,
political discord caused by then-President Carlos MENEM's unpopular
efforts to run for a constitutionally prohibited third term, and
Brazil's devaluation. The government of Fernando DE LA RUA, elected
President in late 1999, tried several measures to cut the fiscal
deficit and instill confidence and received large IMF credit
facilities, but nothing worked to revive the economy. Depositors
began withdrawing money from the banks in late 2001, and the
government responded with strict limits on withdrawals. When street
protests turned deadly, DE LA RUA was forced to resign in December
2001. Interim President Adolfo Rodriguez SAA declared a default, the
largest in history, on Argentina's foreign debt, but he stepped down
only a few days later when he failed to garner political support
from the country's governors. Eduardo DUHALDE became President in
January 2002 and announced an end to the peso's decade-long 1-to-1
peg to the US dollar. When the peso depreciated and inflation rose,
DUHALDE's government froze utility tariffs indefinitely, curtailed
creditors' rights, and imposed high taxes on exports. The economy
rebounded strongly from the crisis, inflation started falling, and
DUHALDE called for special elections. Nestor KIRCHNER was elected
President, taking office in May 2003, and continued the restrictions
imposed by DUHALDE. With the reemergence of double-digit inflation
in 2005, the KIRCHNER administration pressured businesses into a
series of agreements to hold down prices. The government also
restructured its defaulted debt in 2005, convincing most bondholders
to accept a large cut on the value of their holdings, and paid off
its IMF obligations from reserves in full in early 2006, both of
which have reduced Argentina's external debt burden. Real GDP has
continued growing strongly, averaging 9 percent during the period
2003-2006, bolstering government revenues and keeping the fiscal
accounts-a key vulnerability in the past-in surplus.
Armenia
Under the old Soviet central planning system, Armenia had
developed a modern industrial sector, supplying machine tools,
textiles, and other manufactured goods to sister republics in
exchange for raw materials and energy. Since the implosion of the
USSR in December 1991, Armenia has switched to small-scale
agriculture away from the large agroindustrial complexes of the
Soviet era. The agricultural sector has long-term needs for more
investment and updated technology. The privatization of industry has
been at a slower pace, but has been given renewed emphasis by the
current administration. Armenia is a food importer, and its mineral
deposits (copper, gold, bauxite) are small. The ongoing conflict
with Azerbaijan over the ethnic Armenian-dominated region of
Nagorno-Karabakh and the breakup of the centrally directed economic
system of the former Soviet Union contributed to a severe economic
decline in the early 1990s. By 1994, however, the Armenian
Government had launched an ambitious IMF-sponsored economic
liberalization program that resulted in positive growth rates in
1995-2006. Armenia joined the WTO in January 2003. Armenia also has
managed to slash inflation, stabilize its currency, and privatize
most small- and medium-sized enterprises. Armenia's unemployment
rate, however, remains high, despite strong economic growth. The
chronic energy shortages Armenia suffered in the early and mid-1990s
have been offset by the energy supplied by one of its nuclear power
plants at Metsamor. Armenia is now a net energy exporter, although
it does not have sufficient generating capacity to replace Metsamor,
which is under international pressure to close. The electricity
distribution system was privatized in 2002 and bought by Russia's
RAO-UES in 2005. Armenia's severe trade imbalance has been offset
somewhat by international aid, remittances from Armenians working
abroad, and foreign direct investment. Economic ties with Russia
remain close, especially in the energy sector. The government made
some improvements in tax and customs administration in 2005, but
anti-corruption measures will be more difficult to implement.
Construction of a natural gas pipeline between Iran and Armenia has
been completed and it is scheduled to be commissioned by April 2007.
Investment in the construction and industrial sectors is expected to
continue in 2007 and will help to ensure annual average real GDP
growth of more than 10%.
Aruba
Tourism is the mainstay of the small, open Aruban economy,
with offshore banking and oil refining and storage also important.
The rapid growth of the tourism sector over the last decade has
resulted in a substantial expansion of other activities. Over 1.5
million tourists per year visit Aruba, with 75% of those from the
US. Construction continues to boom, with hotel capacity five times
the 1985 level. In addition, the reopening of the country's oil
refinery in 1993, a major source of employment and foreign exchange
earnings, has further spurred growth. Tourist arrivals have
rebounded strongly following a dip after the 11 September 2001
attacks. The island experiences only a brief low season, and hotel
occupancy in 2004 averaged 80%, compared to 68% throughout the rest
of the Caribbean. The government has made cutting the budget and
trade deficits a high priority.
Ashmore and Cartier Islands
no economic activity
Atlantic Ocean
The Atlantic Ocean provides some of the world's most
heavily trafficked sea routes, between and within the Eastern and
Western Hemispheres. Other economic activity includes the
exploitation of natural resources, e.g., fishing, dredging of
aragonite sands (The Bahamas), and production of crude oil and
natural gas (Caribbean Sea, Gulf of Mexico, and North Sea).
Australia
Australia has an enviable Western-style capitalist economy
with a per capita GDP on par with the four dominant West European
economies. Rising output in the domestic economy, robust business
and consumer confidence, and high export prices for raw materials
and agricultural products are fueling the economy. Australia's
emphasis on reforms, low inflation, and growing ties with China are
other key factors behind the economy's strength. The impact of
drought and strong import demand pushed the trade deficit up in
recent years, although the trade balance improved in 2006. Housing
prices probably peaked in 2005, diminishing the prospect that
interest rates would be raised to prevent a speculative bubble.
Conservative fiscal policies have kept Australia's budget in surplus
since 2002.
Austria
Austria, with its well-developed market economy and high
standard of living, is closely tied to other EU economies,
especially Germany's. The Austrian economy also benefits greatly
from strong commercial relations, especially in the banking and
insurance sectors, with central, eastern, and southeastern Europe.
The economy features a large service sector, a sound industrial
sector, and a small, but highly developed agricultural sector.
Membership in the EU has drawn an influx of foreign investors
attracted by Austria's access to the single European market and
proximity to the new EU economies. The outgoing government has
successfully pursued a comprehensive economic reform program, aimed
at streamlining government, creating a more competitive business
environment, further strengthening Austria's attractiveness as an
investment location, and implementing effective pension reforms;
however, lower taxes in 2005-2006 have lead to a small budget
deficit in 2006. Weak domestic consumption and slow growth in Europe
have held the economy to growth rates below 3% in 2002-05. Due to
higher growth across Europe, Austrian grew 3.3 percent in 2006. To
meet increased competition from both EU and Central European
countries, particularly the new EU members, Austria will need to
continue restructuring, emphasizing knowledge-based sectors of the
economy, and encouraging greater labor flexibility and greater labor
participation by its aging population.
Azerbaijan
Azerbaijan's number one export is oil. Azerbaijan's oil
production declined through 1997, but has registered an increase
every year since. Negotiation of production-sharing arrangements
(PSAs) with foreign firms, which have thus far committed $60 billion
to long-term oilfield development, should generate the funds needed
to spur future industrial development. Oil production under the
first of these PSAs, with the Azerbaijan International Operating
Company, began in November 1997. A consortium of Western oil
companies began pumping 1 million barrels a day from a large
offshore field in early 2006, through a $4 billion pipeline it built
from Baku to Turkey's Mediterranean port of Ceyhan. Economists
estimate that by 2010 revenues from this project will double the
country's current GDP. Azerbaijan shares all the formidable problems
of the former Soviet republics in making the transition from a
command to a market economy, but its considerable energy resources
brighten its long-term prospects. Baku has only recently begun
making progress on economic reform, and old economic ties and
structures are slowly being replaced. Several other obstacles impede
Azerbaijan's economic progress: the need for stepped up foreign
investment in the non-energy sector, the continuing conflict with
Armenia over the Nagorno-Karabakh region, and the pervasive
corruption. Trade with Russia and the other former Soviet republics
is declining in importance while trade is building with Turkey and
the nations of Europe. Long-term prospects will depend on world oil
prices, the location of new pipelines in the region, and
Azerbaijan's ability to manage its oil wealth.
Bahamas, The
The Bahamas is a stable, developing nation with an
economy heavily dependent on tourism and offshore banking. Tourism
together with tourism-driven construction and manufacturing accounts
for approximately 60% of GDP and directly or indirectly employs half
of the archipelago's labor force. Steady growth in tourism receipts
and a boom in construction of new hotels, resorts, and residences
had led to solid GDP growth in recent years, but the slowdown in the
US economy and the attacks of 11 September 2001 held back growth in
these sectors in 2001-03. The current government has presided over a
period of economic recovery and an upturn in large-scale private
sector investments in tourism. Financial services constitute the
second-most important sector of the Bahamian economy, accounting for
about 15% of GDP. However, since December 2000, when the government
enacted new regulations on the financial sector, many international
businesses have left The Bahamas. Manufacturing and agriculture
together contribute approximately a tenth of GDP and show little
growth, despite government incentives aimed at those sectors.
Overall growth prospects in the short run rest heavily on the
fortunes of the tourism sector, which depends on growth in the US,
the source of more than 80% of the visitors.
Bahrain
With its highly developed communication and transport
facilities, Bahrain is home to numerous multinational firms with
business in the Gulf. Petroleum production and refining account for
about 60% of Bahrain's export receipts, 70% of government revenues,
and 20% of GDP, underpinning Bahrain's strong economic growth in
recent years. The financial and construction sectors have also
bolstered GDP growth. Bahrain is actively pursuing the
diversification and privatization of its economy to reduce the
country's dependence on oil. As part of this effort, Bahrain and the
US in August 2006 implemented a Free Trade Agreement (FTA), the
first FTA between the US and a Gulf state. Unemployment, especially
among the young, and the depletion of oil and underground water
resources are major long-term economic problems.