ARGENTINA-ECONOMY: Recovery Fails to Shrink Rich-Poor Gap

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Aug 26 1997 (IPS) - Argentina’s economy could growth eight percent this year, a sign that the country is really getting back on its feet after the crisis it suffered two years ago in the wake of the crash of the Mexican peso.

But income distribution today is even more unequal than at the height of the ‘tequila effect’.

Over the past year, the richest 10 percent of the population’s share of total income rose, while that of the poorest 30 percent remained steady, according to the latest available figures from a report released by Argentina’s National Institute of Statistics and Census in May. In absolute terms, the top 10 percent took in 37.1 percent of the income in May, while the bottom 30 percent earned 8.2 percent.

In 1980, the wealthiest took in 26.7 percent of income and the poorest 12.4 percent. And since 1991, the income of the richest grew three percent, while that of the poorest dropped one percent.

In other words, distribution of wealth in Argentina is becoming increasingly skewed, regardless of economic growth.

This year, the poor reached a limit from which it would be difficult to fall any lower. But that has not curbed growth at the top of the pyramid. Today the rich become richer at the expense of an increasingly anemic middle class.

Meanwhile, analysts are predicting seven to eight percent growth of the Gross Domestic Product (GDP) for 1997, similar to the level seen in 1994 before the Mexican crisis broke out.

Miguel Angel Broda, a prominent economic consultant, said “Argentina’s big unresolved problem is not unemployment, but an increasingly skewed distribution of income.

“Although per capita growth in Argentina was above four percent a year from 1991 to 1996, the 10 percent with lowest income has probably found itself in an increasingly difficult position.”

The latest United Nations Economic-Social Survey points out that “growth in and of itself cannot resolve all problems.”

According to the U.N. report, the gap between rich and poor “is unacceptably large” in Argentina and Mexico, the two countries that overcame the financial crisis that hit them in 1995, “but which must make even greater efforts to reduce their unemployment levels.”

Economist Claudio Lozano told IPS that the predominant economic vision cares only whether GDP rises or falls, while failing to pay attention to the productive structure, increasingly concentrated in a limited geographical region and sector of activity.

Three of Argentina’s 24 provinces — the central provinces of Buenos Aires, Cordoba and Santa Fe — account for 83 percent of all exports.

The privileged strata of those enjoying economic growth is made up of an elite linked to exports, privatised public services and a small sector of industry.

“The country’s top 200 companies earned 4.6 billion dollars in 1996, while the top 10 alone earned 2.6 billion. That is equivalent to 700,000 dollars of pure profit per day. In other words, the business elite earns one (minimum) salary per minute,” Lozano pointed out.

The Foundation of Latin American Economic Research reported this month that so far this year industry has grown 8.1 percent. But according to Lozano, that growth has been felt by assembly plants that import the most complex parts, which means expansion in the sector does not generate jobs.

In the case of privatised enterprises, the majority absorb services from foreign suppliers, while exports — mainly of primary commodities — do not generate employment either.

That panorama explains why Argentina’s unemployment rate remains steady at 16.4 percent of the economically active population.

Although the rate dropped slightly from 17.1 percent in 1996, it was the highest income earners who benefited. Among the poorest, the unemployment rate stands at 33.4 percent — without taking into account the under-employed — one percent higher than last year.

“Unemployment, like income, is also being distributed in a regressive manner,” said Lozano.

In Argentina, the ‘tequila effect’ led to a 4.6 shrinking of GDP in 1995. But in 1996, when the economy began to recover, the distribution of income became more regressive.

“Today, the incomes of the poorest are 17 percent lower than at the peak of the crisis,” Lozano underlined.