A variety of economic factors have driven Argentina toward a financial cliff. Prominent among these were changes in Argentina's trade position as regards soy and energy. Historically, Argentina had been a net exporter of both oil and natural gas. In 2010, amid declining production, it became a net importer of natural gas and became effectively neither a net exporter nor an importer for oil. Energy had formerly constituted a net inflow of currency, but now took U.S. dollars out of the country — $10 billion in 2012 and 2013. In a bid to halt declining oil and gas production, the government expropriated Spanish energy company Repsol YPF's energy assets. It then had to allocate $6.5 billion in new bonds to compensate for damages.
Additionally, after December 2013 agricultural revenue began to fall as soy prices dropped from $620 per ton to $300 per ton. With fluctuations of 45 percent to 90 percent between official and black market currency rates, plus a 50 percent drop in soy prices between December 2013 and June 2014, farmers hoarded their harvests for speculation, expecting the government to implement a currency devaluation as it had done in the past. Nearly half of the 55 million-ton harvest was estimated to have been hoarded, causing a sharp drop in the inflow of dollars from soy exports.
This confluence of higher energy spending and lower agricultural revenues eroded central bank finances and reserves dropped from $55 billion in 2011 to $28 billion in 2014. Government spending also now rose because of increased energy spending and higher inflation. The growth of public expenditures outpaced economic growth. The government deficit, at 5 percent of GDP, now nearly matches Argentina's international reserves, which are at a decade low of 6 percent of GDP.
