Despite having faced a series of economic challenges, such as hyperinflation and political instability in recent years, Argentina still has some rates higher than those of Brazil. In 2023, the Gross National Income (GNI) per capita of Argentina was US$ 12.5 thousandcompared to US$ 9 thousand from Brazilaccording to information provided by the World Bank. Data from 2023, also provided by the World Bank itself, show that GDP (Gross Domestic Product) per capita Argentine was US$ 13,730.52while the Brazilian reached US$ 10,043.61.
This disparity may seem surprising, especially considering that Brazil is still the largest economy in South America. However, there are several factors that explain the reasons behind these numbers.
In an interview with People’s GazetteJoão Alfredo Nyegray, professor of the International Business course at the Pontifical Catholic University of Paraná (PUC-PR) and coordinator of the institution’s International Business Observatory, first explained the difference between GDP per capita and per capita income.
“Per capita income is a metric that represents the average income of each person in a given region, such as a country, state or city. It is calculated by dividing the total income of a population in a place by the number of people who make up that population,” he said.
While per capita income refers to the average income of the population of a region, Nyegray said that “GDP per capita refers to the total value of all goods and services produced in an economy [PIB] divided by the population”.
The professor noted that “per capita GDP does not take into account the distribution of income among individuals, only the average economic value generated.” He explains that a high per capita GDP generally indicates a “robust economy and potentially a higher standard of living in a country,” but does not necessarily reflect “equity in the distribution of income within the population.”
According to Nyegray, several factors explain the importance of knowing a nation’s per capita income. The first of these, he emphasized, is that per capita income “is an indicator of well-being, since it helps to measure the level of economic well-being of a population.”
Nyegray said that “a higher per capita income [em um país] generally reflects a higher standard of living” and can also influence the formulation of public policies, “such as fiscal and redistributive policies”.
The difference between countries
As Nyegray explained, the historical economic development and policies adopted by Brazil and Argentina over time explain the difference between the two countries in terms of GDP and per capita income.
“Historically, Argentina had an earlier and more diversified economic development compared to Brazil, especially in the 19th and 20th centuries. During the first half of the 20th century, Argentina was one of the richest economies in the world, benefiting from a highly profitable agro-export model based on the export of meat and grains.” This early development, the professor said, established a “relatively robust economic base” for Argentina, as well as a “productive structure” that, even with subsequent crises, “continues to positively influence the level of per capita income” of the country.
On the other hand, Nyegray emphasizes that “Brazil, until the mid-20th century, was predominantly agrarian and less integrated with international markets. Industrialization in Brazil occurred later and was intensified from the 1950s onwards. This industrialization was accompanied by import substitution policies that, despite momentarily accelerating economic growth, also created economic distortions based on protectionism and dependence on imported inputs, which affected national productivity – which is still very low today.”
The professor also highlighted the demographic factor as one of the reasons for this difference: “[…] Argentina’s population is significantly smaller than Brazil’s. With a population of approximately 47 million inhabitants [2024]compared to Brazil’s more than 220 million. Argentina’s smaller population contributes to a higher per capita income, given that the economic output generated is shared by a smaller number of people.”
Nyegray also explained to the report that, currently, “Argentina has a more urbanized population with greater access to basic services and quality education,” which favors “greater labor productivity.” And that the country’s demographic structure, “with a relatively smaller population and better access to educational and health resources,” contributes “to more qualified human capital and, therefore, a higher per capita income.”
Nyegray noted that although Argentina faces frequent economic crises, such as hyperinflation, debt crises and currency devaluations, “these crises have not been enough to completely erase the country’s structural and historical advantages in terms of per capita income.”
“The economic base established during periods of prosperity, economic diversification [especialmente no setor agroindustrial] and lower income inequality help to mitigate the impacts of crises,” said the professor.
Vladimir Maciel, coordinator of the Mackenzie Center for Economic Freedom (CMLE) at Mackenzie Presbyterian University (UPM), also spoke about the reasons behind this difference in per capita income between Argentina and Brazil. For the economist, this distinction can be explained by two main factors:
- Superior human capital in Argentina: In an interview with People’s GazetteMaciel stated that “the average level of education in Argentina is higher than in Brazil”, which results in a more qualified workforce.
- Greater capital intensity relative to labor: In Argentina, as Maciel said, there is a more intense capital relationship compared to Brazil, which increases productivity.
“Both factors imply greater productivity [maior PIB per capita] and consequently higher per capita income,” he said.
Furthermore, Maciel also highlighted that the Argentine export sector plays a relevant role in generating a higher per capita income in the country.
Although Brazil, according to Maciel, is “a world power in agricultural and mining exports and we have a diversified industry”, “Argentina has export sectors that contribute significantly to a higher per capita income, especially due to its productivity in the agricultural sector and in the food industry [voltada ao processamento destinado à exportação]”, he explained.
Renan Silva, professor of Economics at Ibmec Brasília, also said in an interview with People’s Gazette that Argentina’s export sector, especially that related to agribusiness, has been one of the main drivers of the country’s higher per capita income.
“Argentina’s export sector, especially agribusiness, has been a stro
ng contributor to the country’s per capita income. Products such as soybeans, meat and other grains are major revenue generators. Comparatively, Brazil also has a robust agricultural sector, but faces challenges such as logistics and infrastructure that can impact productivity,” Silva noted.
Lack of structural reforms could further widen the gap between the two countries
Silva noted that the lack of economic reforms and the increase in public spending in Brazil could limit the country’s economic growth “and, therefore, per capita income,” further increasing the gap with Argentina. He pointed out that, in order to try to change this scenario, Brazil could consider reforms “such as tax simplification, infrastructure improvements, and incentives for innovation and productivity.”
For Maciel, reforms that induce “increased productivity, increased competition and improved business environment” could be adopted by the current Brazilian government to try to get closer to Argentine income.
“A tax reform that really simplifies the process and does not increase the tax burden, an administrative and budgetary process reform that modernizes the management of the State, commercial openness, etc. In addition, of course, to improving the quality of education,” he said.
However, Maciel believes that the government led by President Luiz Inácio Lula da Silva has little interest in carrying out such actions.
“The current government is based on a diagnosis that prioritizes intervention and increased public spending, believing that the State should encourage economic activity. We have already experienced this and the result is an economic crisis and the loss of momentary gains and setbacks. I do not believe that in this government these reforms are priorities or even considered relevant,” he said.
Nyegray, in turn, recalled that “for decades there has been an urgent need for administrative and tax reforms and for limiting public spending” in Brazil.
“Without these reforms, the economy may continue to suffer from structural inefficiencies that limit economic growth and, consequently, the per capita income of all of us,” he said.
“Without reforms that encourage innovation, infrastructure modernization and quality education, labor productivity tends to remain stagnant. Low productivity means that the economy grows more slowly, resulting in lower per capita income,” he noted.
“The current government seems unaware that high public spending, without fiscal reforms that broaden the tax base or control expenditures, can result in chronic fiscal deficits and an increase in public debt. A growing public debt can lead to a greater need for financing, increasing interest costs and limiting the resources available for productive investments in infrastructure, education and health,” criticized Nyegray.
The professor explained that, just like in Argentina, where in the past “the lack of reforms and irresponsible economic policies undermined investor confidence and led to economic deterioration”, Brazil “may face similar challenges” if the Lula government continues to neglect fundamental reforms.
Nyegray warned that if markets perceive that the “Brazilian government is not committed to fiscal responsibility and structural reforms, the country could face capital flight and a drop in investment.” This, in turn, would negatively affect the economic growth rate and per capita income, deepening the disparity that already exists between Brazil and Argentina, the professor noted.
Milei Factor
Silva highlighted that Argentina, under the leadership of Javier Milei, has the potential to further expand the per capita income gap in relation to Brazil, if the libertarian president manages to implement his structural reforms.
“The reforms proposed by Javier Milei, if implemented, could potentially increase per capita income in the long term,” he explained. “Economic liberalization reforms, such as reducing trade barriers and deregulation, can increase economic efficiency. However, success depends on effective implementation and political stability,” said the Ibmec professor.
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