ARGENTINA: Proposed Budget Heavy on the Social Side

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Sep 17 2003 (IPS) - Argentina’s president, Néstor Kirchner, showed his economic hand Wednesday, sending to Congress a 2004 budget that calls for increased spending on social programmes, education and public works, but also maintaining fiscal solvency.

Economy minister Ricardo Lavagna forecasts revenues of 37 billion dollars and expenditures of 32.75 billion dollars. The surplus 4.25 billion dollars would be earmarked to pay interest on the debt held with the multilateral lending institutions.

As a result of agreement reached earlier this month with the International Monetary Fund, the debt payments slated for 2004 will be 241 million dollars less than the sum stated in the budget for this year.

The first budget of the Kirchner administration – he took office in May – lays out a general increase in spending of eight percent over last year’s budget. But in social spending, there are hikes of up to 35 percent, in infrastructure 21 percent and in education 19 percent.

"The ‘adjustment’ budgets are over. There will be increases for research and science because that is a strategic priority of this government, but there will also be a bigger portion for education, for social policies, and for constructing housing and roads, and for creating jobs," the president told a group of scientists Wednesday.

For science and technology alone, the budget was doubled, making it the top beneficiary of the wave of increases. "There are thousands of needs, but we want to begin rebuilding the country from different foundations, and to do so requires neurons (brains)," said Kirchner.

Mariano Levín, a professor and researcher at the University of Buenos Aires, says the increase is unprecedented. "The president called us to meet with him, and he really gave us good news in saying that he is going to support us. No other area saw a 100-percent budget increase."

There will be more money for scholarships and projects, but there will be no salary increases for the scientists and researchers, Levín said. Overall, there are no wage hikes for public employees included in the budget.

The budget is "compatible with our domestic commitments to wage battle against educational and social decline, and compatible with our foreign commitments, which are very serious and were assumed in the recent agreement reached with the IMF," minister Lavagna said.

He referred to the goal of generating a fiscal surplus of three percent of gross domestic product (GDP) in 2004 to pay only interest on the debt held with the multilateral credit institutions, like the IMF, World Bank and Inter-American Development Bank.

"It is a budget drafted with a great deal of realism and moderation," he told the budget committee in the Chamber of Deputies, the lower house of Congress.

The plan submitted to the lawmakers for a vote, said Lavagna, was designed with the assumption that there will be 4.5 percent GDP growth next year, "low" inflation of 10.4 percent, and continued fiscal discipline.

Argentina’s GDP growth for this year is predicted to reach six percent, recovering some of the ground lost during the height of the economic crisis, when the economy shrank.

"There will be more containment of spending than increase in tax pressures," the minister said.

The government plan would have to be executed in a tight financial context, agree observers from across the spectrum.

In the wake of the grave socio-economic crisis that erupted in late 2002 and left more than half of the Argentine population in poverty and an external debt of over 140 billion dollars, the new budget comes off as both generous and restricted.

"It is correct to increase spending on social development, because it implies making the problems of poverty and unemployment a priority," Jorge Ceballos, a leader of the unemployed workers movement, said in an IPS interview.

"But I’m concerned that the budget is limited by the commitment to achieve a surplus of three percent GDP," he added.

Ceballos’s organisation, which is known to set up roadblocks to protest the lack of jobs and food, has offices in a dozen provinces across Argentina and operates more than a hundred soup kitchens.

"There is new hope among the people with regard to Kirchner’s leadership," given that he is trying to fight the corruption problem and the impunity that persists since the last dictatorship, and he promises to attend to the country’s social problems.

"But the expectations of the people living in the most humble circumstances are much more concrete than the political gestures," said the activist.

Marta Maffei, president of the Confederation of Educational Workers, deputy-elect of the centre-left opposition Party for an Egalitarian Republic, told IPS she thinks the budget hike for education "is a step in the right direction."

Nevertheless, she pointed out that the increase is relative, given that the budget had been cut back sharply as a result of the economic crisis.

Maffei led a unique protest to demand a bigger education budget. From 1997 to 1999, nearly a thousand teachers took part in a rotating hunger strike, staying by turn in a tent in the plaza outside Congress. The protesters got their increase, but then the crisis prevented disbursement of the funds.

As for public works projects, the government will have to play catch-up by investing in infrastructure, which is lagging behind due to past funding cutbacks. In 2002, only half of the scheduled projects were executed, and only a third of this year’s projects are underway.

Economist Martín Hourest, with the Confederation of Argentine Workers, one of the countries biggest unions, said that even with budget increase sought for public works, infrastructure will hardly be brought up to date, and expenditures would still be less than in the 1990s.

The government forecasts that the currency exchange on the dollar will remain at around three pesos in 2004, and inflation will be 10.5 percent, after reaching seven percent this year.

Deputy José María Díaz Bancalari, head of the governing party’s bloc of lawmakers, noted that the draft budget does not include the adjustment measures that were common in previous years’ budgets and gives higher priority to social investment, meaning greater state presence.

Díaz thinks the budget could be approved before Dec. 10, when the next cohort of lawmakers – elected this year in provincial votes that began in April and end in November – will be sworn in.