Poverty-hit Ar­gentina chases elu­sive economic re­cov­ery

Kuwait Times - - BUSINESS -

Debt

Mauri­cio Macri promised a free-mar­ket rev­o­lu­tion in Latin Amer­ica’s third-big­gest econ­omy when he took over as pres­i­dent of Ar­gentina. A year and half on, Macri is fac­ing midterm elec­tions in Oc­to­ber, and his peo­ple are still wait­ing-a third of them liv­ing in poverty.

The mil­lion­aire busi­ness­man and for­mer foot­ball ex­ec­u­tive vowed to achieve “zero poverty” by rolling back 12 years of left­ist poli­cies after he took of­fice in De­cem­ber 2015. But the great re­cov­ery is slow in com­ing. “You don’t get to par­adise from one day to the next,” Macri’s chief of staff Mar­cos Pena ad­mit­ted re­cently. “We still face enor­mous chal­lenges.”

Cuts

On tak­ing of­fice, Macri in­sisted that sta­bi­liz­ing the pub­lic fi­nances was the way back to growth and pros­per­ity. He launched un­pop­u­lar pub­lic bud­get cuts and set­tled debts to for­eign cred­i­tors whom his pre­de­ces­sor Cristina Kirch­ner had de­fi­antly branded “vul­tures.” He scrapped ex­port and cur­rency con­trols, de­valu­ing the peso to try to make Ar­gentina more com­pet­i­tive. And he tried to rein in in­fla­tion which at 40 per­cent last year was sorely hurt­ing Ar­gen­tines’ wal­lets.

Pena said in May that Ar­gentina had ex­ited re­ces­sion. But economists are not con­vinced of the strength of the re­cov­ery. “Eigh­teen months into the gov­ern­ment’s term, Ar­gentina has lifted ex­change-rate re­stric­tions and paid off its debts to the ‘vul­ture funds,’” econ­o­mist Pablo Tigani told AFP. “But the macroe­co­nomic sit­u­a­tion has got worse.”

Macri’s gov­ern­ment caused a stir last month by is­su­ing a 100-year sov­er­eign bond. In­vestors lapped it up. “The gov­ern­ment is tak­ing ad­van­tage of the low level of debt that the Kirch­n­ers left,” said Caru­gati. “But maintaining the deficit through debt only works as a tem­po­rary mea­sure.” The debt sale raised jit­ters among Ar­gen­tines with painful mem­o­ries of the coun­try’s cat­a­strophic de­fault in 2001. The econ­omy min­istry says Ar­gentina’s pub­lic debt, at 54 per­cent of gross do­mes­tic prod­uct, is cur­rently lower than that of var­i­ous emerg­ing economies such as Brazil. “We should stay calm,” said Ni­co­las Du­jovne, com­ment­ing on the debt sale. “We can use this mech­a­nism as a tran­si­tion mea­sure un­til we fin­ish low­er­ing the deficit and de­feat­ing in­fla­tion.”

De­spite the sale, US in­vest­ment bank Mor­gan Stan­ley the next day main­tained its rat­ing of Ar­gentina as a “fron­tier econ­omy.” “That is a real in­sult be­cause a fron­tier coun­try is like a crazy coun­try,” said Tigani. “It is not even an ‘emerg­ing’ one, which is a eu­phemism for ‘poor’.”

Poverty

A study by the Ar­gen­tine Catholic Univer­sity in­di­cated that a third of peo­ple in the coun­try are liv­ing in poverty. UNICEF es­ti­mates that half of all chil­dren in Ar­gentina are liv­ing in poverty. Unions say that 11,000 pub­lic- and 200,000 pri­vate­sec­tor em­ploy­ees have been laid off since Macri took over.

Some 6,000 small and medium-sized busi­nesses went bust last year, said Mar­i­ano Mayer, a ju­nior busi­ness min­is­ter. Multi­na­tional food and drink gi­ant Pep­sico last month closed a fac­tory in Buenos Aires. “Six hun­dred of us work­ers have ended up in the street,” a union del­e­gate for work­ers at the fac­tory, Camilo Montes, told AFP. “We do not want to be just paid off be­cause then a year from now we will have noth­ing to eat.”

— AFP

BUENOS AIRES: A man rum­mages through a garbage bin in Buenos Aires.

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