Argentina: Inequality Grows as Economy Sputters and Poverty Rises Under Macri

Photo: Ricardo Mazalan / Associated Press

BUENOS AIRES, Argentina – Amid an economy heavily slowed by a drop in industrial production and rising inflation, an increase in joblessness and a rise in poverty, statistics now show that the rich became richer and the poor became poorer in Argentina during the first year of conservative President Mauricio Macri’s presidency.

Macri has endured a difficult opening period to his administration; his repeated calls to the citizens for restraint in waiting for his economic policies to bear fruit have earned him some time but amid deep public cuts, rising inflation and a shrinking economic output, patience is starting to wear thin.

Throughout the latter half of 2016, the General Confederation of Labor of the Republic of Argentina (CGT), the largest and most historically important labor union in the country, had warned of massive 24-hour general strikes to place pressure on Macri as conditions continued deteriorating.

Although the CGT has not announced a definitive date for a nationwide strike, several other strikes have taken place in recent months, including those of the unions in the education and health care sectors.

The Union of Argentine Educators (UDA) and the Confederation of Education Workers (CTERA), two of the largest teachers’ unions in the country, went on strike in September and forced Macri to negotiate with them concerning an improvement in wages.

More strikes are a possibility in March when the school year begins as the UDA says that they are against the “Macri government’s cutting of education budgets and the freeze in salaries of education workers in the face of a full-on economic crisis.”

“It cannot be that this government is giving all sorts of tax breaks and financial loopholes for the wealthiest and most powerful companies and sectors of Argentina while the workers suffer from salary reductions as part of a plan of harsh economic austerity and massive rate hikes in vital services,” said Roberto Baradel, the head of the Unified Education Workers of Buenos Aires (SUTEBA), in September.

Indeed, Baradel’s assertion was backed this week as statistics revealed that the poor became poorer and the richer became richer during Macri’s first year in office.

According to the Institute of Statistics and Censuses (INDEC), the average income of the most wealthy 10 percent of the population was 25.6 times that of the average income of the poorest 10 percent in the final four months of 2016. Just three months prior, that rate was 23 times.

In specific figures, the average monthly income of the poorest 10 percent in said period was 1.370 pesos or about $85 while the average monthly income of the wealthiest 10 percent was 34,998 pesos or about $2,175.

What has further worsened conditions significantly for the poor are the actions taken by Macri’s government since he assumed the presidency in December of 2015.

Macri has removed the subsidies instituted by his predecessor, Cristina Fernández de Kirchner (2007-2015), and went a step further by adding higher taxes on vital services like public transport fares, electricity and water. The costs of these services increased between 200 percent and 700 percent and Macri has warned of even higher price hikes in 2017.

In August, Macri’s government sought to raise the price of gas by 1,000 percent in the middle of a severe cold snap in the austral winter but a series of protests against the measure led to an initial halt to the increase by a federal court. Weeks later, Macri said that a more “moderate” and revised raise of “only” 700 percent was being instituted.

The wealthy businessman-turned-politico born to an Italian billionaire construction tycoon who arrived in Argentina in 1949 has also removed currency regulation (which has led to a 30 percent depreciation in the Argentine Peso), laid off over 150,000 public workers (and warned of more layoffs) and agreed to pay the New York-based vulture funds that have refused to accept restructured loan payments.

An oft-repeated slogan of Macri’s has been to reach “zero-level poverty,” the catchphrase description of his plans for economic growth and security in Argentina.

Statistically speaking, however, his plans have done just the opposite as all economic indicators (including GDP growth, inflation and unemployment) have worsened significantly since his term began.

In September, the respected Observatory on Social Debt at the Pontifical Catholic University of Argentina outlined that 1.4 million Argentines have slipped under the poverty level since Macri took office and that unemployment rose sharply from 5.9 to 9.3 percent.

That same month, Indec released a report that showed that 32 percent of Argentines fell into the “poor category” at the time. In addition, Indec also reported a 3.4 percent drop in the GDP from April to August brought about by a drop in consumption (1.2 percent), exports (1.9 percent) and foreign investment (4.9 percent), along with drops in many other categories.

This week’s Indec release outlining the August-December period showed a further decline with a 3.8 percent drop in the GDP, a 4.1 percent drop in industrial output and a high inflation rate of 40 percent.

Inflation, considered one of the scourges of the Fernández de Kirchner administration and a sensitive subject in Argentina, was designated by Macri as one of his primary targets for reform with an eye on lowering the rate.

However, his measures have done the opposite yet again as Indec reports show that inflation continues to rise. In fact, the Central Bank of Argentina said that inflation in April had reached its highest month-to-month increase (6.7 percent from March to April) since 2002 when the country was in the midst of a full blown economic meltdown that ended in a catastrophic default.

Indec reported that inflation had risen by 19.4 percent in 2016 from January to May. In comparison, during the same period in 2015 under Fernández de Kirchner, the figure was 8.0 percent. In December of 2016, months after Macri promised inflation would not only stop rising but decrease, there was still a 1.2 percent month-on-month rise in inflation.

Macri has repeatedly said that the measures he has taken would be painful initially, but the situation would improve. He said foreign investment should start flowing in, inflation and unemployment would go down and salaries would rise by April. Then, he said that these positive developments would happen in June and then in the latter half of 2016. Now, his government is saying that the situation will improve in 2017.

All of these economic issues, however, have dealt the worst hand to the poor and vulnerable. Indec’s newest report showed that just under half of all Argentines earn less than 8,000 pesos ($500) monthly, a figure that covers a basic food basket (CBA – $325) for a typical family but does not cover the basic total basket (CBT – $745), which includes food and vital services.

Nicolás Dujovne, the new Economic Minister in Macri’s reshuffled cabinet, is predicting a highly dubious 3.5 to 4 percent GDP growth rate in 2017.

Even if a rate approaching his predicted figure is reached, simple growth does not mean an automatic improvement in the inequality rate that has grown under Macri’s watch, especially given that the president’s neoliberal economic policies inherently favor the wealthy.

Macri has not divulged any information on how he plans to deal with this growing problem, apart from repeatedly blaming the last administration for his “inherited economic issues,” but political opponents are not skeptical that Macri will make a priority of closing the rising inequality gap, a development that is relatively new in a nation that has traditionally been one of the most egalitarian countries in Latin America.

1 COMMENT

  1. It will get worse before it gets worse. How many times will people buy that same bs that the economy and everything else will flourish by giving more to the rich – who are already rich – and taking from the working people and poor? That neo-liberal fair tale about foreign investors bringing economic wellbeing is already worn out from use in the second and third-world countries, yet never worked. Btw it should say that Macri’s opponents *are* skeptical of him making sanation of the widening social gap anything remotely close to his priority.

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