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ARGENTINA: Food Inflation Hits People Close to Poverty Line

Marcela Valente

BUENOS AIRES, May 7 2008 (IPS) - Poverty is once again growing in Argentina, reversing the downward trend recorded since 2003, as a result of price inflation mainly affecting basic food products, analysts say. But the government’s only response, according to its critics, has been to stop reporting poverty statistics.

New estimates indicate that poverty, driven in the 1990s by unemployment, is now being forced up by rising food prices. Although the labour market is recovering from the severe 2002-2003 economic crisis, the income of many workers, even those with formal sector jobs, is not enough to keep them above the poverty line.

“The falling poverty trend has been broken because of the increased cost of the basic food basket, and the trend reversal is continuing,” sociologist Ernesto Kritz of SEL Consultores, a local consultancy, told IPS.

According to the National Statistics and Census Institute (INDEC), 23.4 percent of Argentina’s population of 38 million was living below the poverty line in the first quarter of 2007, down from a peak of 54 percent in the first half of 2003, when former President Néstor Kirchner took office for a four-year term.

But since that figure was published, confirming the dramatic fall in the poverty index, there has been silence on the subject. INDEC was subjected to government intervention in early 2007, and since then there have been doubts about the accuracy of its consumer price index, used to determine the poverty line.

Publication of INDEC’s six-monthly reports has also been interrupted.

President Cristina Fernández, Kirchner’s wife, who succeeded him in the top job on Dec. 10, 2007, promised to institute a new method of measurement, but nothing further has been heard.

In response, private consultants and polling firms began monitoring prices themselves and estimating the proportion of the population below the poverty line.

SEL Consultores say that in the first half of 2007 their calculations already diverged from the last figure published by INDEC, as they estimated that 28.3 percent of the population was poor at that time.

In the second half of 2007, with no official figures for comparison, SEL Consultores estimated that 30.3 percent of Argentines were poor. According to their experts, this increase involved mainly the “vulnerable non-poor,” that is to say, people who were barely above the poverty line, and fell below it because of inflation.

“It is highly likely that poverty will remain above 30 percent in the first half of 2008,” Kritz said.

The polling firm Ibarómetro found that 36.9 percent of Argentines in a nationwide survey in late April said that inflation was their major concern, while consultants Hugo Haime & Associates, interviewing residents of greater Buenos Aires, found that 50 percent of respondents named it as their greatest worry.

Fighting poverty and unemployment were the pillars of the country’s robust economic recovery during the Kirchner administration. But price hikes, partly driven by international food prices, are now threatening the stability of the administration of President Fernández, who like her husband belongs to the centre-left faction of the Justicialista (Peronist) Party (PJ).

“The improvement in living standards from 2003 to 2006 was achieved in a context of low inflation, but since 2007, even though household incomes have risen considerably, the cost of basic food items has broken the falling trend in the poverty index,” said Kritz.

Other studies by Equis, a research consultancy, and by the Social Observatory of the private Catholic University of Argentina (UCA), reached similar conclusions. UCA put the number of Argentines living in poverty at 11 million in late 2007, up from 9.7 million in late 2006.

Sociologist Laura Golbert of the Centre for the Study of State and Society told IPS that although she is not performing measurements, she considers an increase in poverty in the country to be “very probable,” because while there is more employment, “wages are low and there is a great deal of job insecurity.” In these circumstances, the higher cost of foods has dire effects, she said.

INDEC maintains that overall inflation stood at 8.8 percent for the 12 months to March 2008. But private studies like that of Ecolatina, a firm founded by former economy minister Roberto Lavagna, put the figure as high as 26.6 percent.

For his part, sociologist Artemio López of Equis Research said that in the year to March 2008, the cost of the basic basket of consumer goods increased by 30 percent. He also pointed out that the richest households spend 23 percent of their income on food, compared to 55 percent for the poorest households.

“According to estimates, by the end of this year, 30 percent of the general population will be living in poverty,” said López. But even more worrying is the widening poverty gap, measured by the distance of the income levels of the poor below the poverty line, he said.

The poverty gap hit a record level in the first quarter of this year.

The difference between the cost of the basic food basket (equivalent to the poverty line) and the real incomes of the poorest population was 53 percent at the height of the economic crisis in 2002, but in the first quarter of this year, after five years of sustained economic growth, it reached 57 percent.

Meanwhile, economist Claudio Lozano, a centre-left lawmaker for the Buenos Aires For All party, told IPS that “the year 2007 was a point of inflexion, marking the beginning of a process of economic growth with increasing poverty, brought about by price inflation. This year, that process has worsened,” he said.

According to his estimates, general inflation in 2007 was between 20 and 25 percent, based “on the increased cost of foods, which rose by about 34 percent.” Given these circumstances, the proportion of people living in poverty increased to approximately 30 percent, of whom one-third are extremely poor, he said.

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