2001-2002: Argentine Economy on the Brink, or in Freefall?

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Dec 14 2001 (IPS) - Argentine President Fernando de la Rúa, whose approval ratings have plummeted to below 10 percent, is the democratically elected leader whose popularity has taken the fastest plunge in the history of the country, due to a social and economic crisis that shows no signs of letting up.

De la Rúa took office two years ago, after garnering nearly half of the vote. His main campaign pledges were to jump-start the economy and generate jobs. But the economy shrank, unemployment grew and the imbalance in public finances has gotten out of hand.

Political analyst Rosendo Fraga, with the Centre of Studies for the New Majority, a local think-tank, said a president with less than 20 percent popular support faces governance problems, according to international criteria, and pointed out that De la Rúa was only halfway through his four-year term.

The swift deterioration of the president’s image has no precedent in the history of Argentina’s constitutional governments, said Fraga. One of the causes, he added, was the government’s failure to achieve a sustainable restructuring of Argentina’s foreign debt and to restore investor confidence, an increasingly sought-after asset.

The year that is coming to an end is the third consecutive year of economic recession. Gross Domestic Product (GDP) has fallen steadily since the third quarter of 1998, and the magnitude of the crisis and the uncertainty make it difficult if not impossible to accept the government’s more optimistic forecasts for 2002.

The government had projected five percent GDP growth for 2001. But the economy contracted over the past year, during which the country saw three different economy ministers.

For the coming year, the official projection is a slight 1.4 percent recovery of GDP. But economists and multilateral lenders doubt that will occur.

The state is on the verge of default and faces a growing risk of a disorderly devaluation, which has kept tension running high for months. Even the most seasoned observers are unable to clearly predict the immediate future of Latin America’s third-largest economy.

Argentina’s public foreign debt stands at more than 140 billion dollars, with around 12 billion falling due annually. A debt swap to reduce servicing costs is being negotiated for 2002, but the fiscal imbalance is growing because the weakening of the economy is hurting the collection of tax revenues.

Restrictions on cash withdrawals announced in early December to curb the run on banks led to a further contraction in domestic consumption and commercial activity, in a month during which many hoped movement would pick up slightly.

“I can’t even talk, because of my anxiety. I’m selling 40 percent less,” Adriana López, the owner of a kiosk that sells magazines and candy, told IPS.

Unemployment is on the rise, and affected 18 percent of the economically active population this year according to official figures. However, many believe the true proportion is over 20 percent, without even counting those who have given up on finding work.

Official unemployment statistics take into account only those who are unsuccessfully looking for a job.

“This year we held just one single convention,” José María Martínez, the head of a media and public relations firm, told IPS.

The “office” of Martínez’s company has shrunk to a desk and a telephone in the living room of the house he began to rent last year after he was forced to sell his own home to get by.

“At my age, I can no longer even go out and look for work,” said the 52-year-old small businessman.

“My wife, who has a degree in communications and who almost completed her law studies, applied for a post as press secretary for the judiciary in the province of Neuquen and was hired, but they told her not to start working until they could begin to pay her,” he added.

Around 14 million of Argentina’s 36 million people live below the poverty line, according to official statistics. Many of them have slid into poverty from the middle class after they lost their jobs.

Among the long-term poor and the “new poor”, there are retirees who receive pensions of 140 dollars a month, far below Argentina’s 475-dollar poverty line.

“We are not on the edge of the abyss. We have already fallen,” Rodolfo Seggiaro, a 69-year-old pensioner, told IPS.

“What they have done to us is incredible. We are disposable people. We’re alone, and it looks like our fate is to disappear without anyone even noticing,” he added with resignation.

The poorest pensioners would die of starvation if their families did not help them out. But the younger generations are not always in a position to help their parents.

“I have 33 hours of class in three different high schools, and I earn 900 dollars a month. But over 500 dollars of that goes to the monthly installment on the apartment where I live with my mother, which I’m buying,” social sciences teacher Luis La Scaleia, 28, told IPS.

“The bank says the amount is variable, and increases the installment every month the crisis drags on,” he added.

La Scaleia’s income is not even low for the education sector, since primary schoolteachers earn less than 400 dollars a month.

The problem is that La Scaleia’s mother earns a pension of just 140 dollars a month, and must pay a private health service, because she is no longer attended by her health provider, which went bankrupt and has not paid its suppliers for six months.

Stories of primary schoolteachers in trouble are a dime a dozen in this Southern Cone country. “We had one week without classes in October and 10 days in November, because the teachers applied the principle of ‘retention of services’,” Gabriel Scklair, the vice-principal of the Virrey del Pino de La Matanza school in the province of Buenos Aires, told IPS.

“Retention of services” means teachers who have not received their paychecks and are thus unable to afford transportation to school simply do not show up for work. In some districts, the provincial government owes teachers three months of back salaries.

Schoolchildren are one of the weakest links in the social chain. Many of them live in homes where unemployment is the most pressing concern, and not knowing whether they have class on any given day only aggravates the sense of uncertainty.

In these conditions, and with nearly all sectors of society affected by the crisis, Argentines are preparing for the end of a year that was perhaps the worst in the country’s economic history – while they get ready to usher in a new year, which might be even worse.