ECONOMY-ARGENTINA: Shopping Malls Filling Up Again

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Dec 23 2003 (IPS) - Two years ago, the Hernández family in Argentina spent the last few days before Christmas on the streets banging on pots and pans, among the tens of thousands of protesters who helped bring down the government of Fernando de la Rúa (1999-2001).

This year they were in a Buenos Aires shopping mall the weekend before Christmas, juggling bags full of presents.

The organisations of unemployed people that mushroomed in the past few years in crisis-stricken Argentina were left on their own this year in demonstrations to commemorate Dec. 19 and 20, 2001, when 37 people were killed amidst the looting of supermarkets, massive street protests, and the harsh police crackdown.

Although the members of Argentina’s down-and-out middle class have not recovered the living standards they enjoyed in the early 1990s, they have noticed a definite improvement.

”For us, things have gotten much better,” José Luis Hernández, the owner of a small cardboard box factory, told IPS.

In late 2001, he thought he would have to close the doors of his business after two years of difficulties. But he held on, and today the company is getting back on its feet.

He and his family were in the mall to do their Christmas shopping, and they are even planning a short vacation in January, to enjoy the hottest part of the southern hemisphere summer.

”Credit is still impossible to obtain, but I have hopes that the situation will improve next year, and that I’ll be able to hire two more employees. Because I do have work; I just don’t dare expand,” he said.

His company employs eight people, including administrative staff, factory workers, and salespeople. Three of his employees are relatives.

Many small business owners tell a similar story, and shopkeepers, professionals and taxi drivers say that in 2001 they were thinking about leaving the country, but now they have so much work that they can’t keep up, especially those who offer services that benefited from the collapse of the peso in 2002.

Pablo Míguez develops software applications for industry. The downfall of the government of de la Rúa drove him to start researching alternatives in Spain and Germany. ”I was afraid of losing my job, of not being able to afford to buy medicine for my two kids or my wife,” he recalls.

While he looked for job opportunities abroad, checked into the costs of companies that help people move overseas, and studied Catalonian (the language of the prosperous northeast Spanish province of Catalonia) and German, he was taken by surprise by increased demand for his services. The family’s plans to move abroad were cancelled.

”I have so much work that I’m going crazy,” he said in a conversation with IPS. ”The company that has subcontracted me asks me to dedicate all of my time to them, but I already told them that if they need me so much, they’ll have to hire me as an employee with full benefits, because I’ve received offers from many places in Argentina, and in Spain.”

His wife, Cecilia, had agreed to leave the country. Her teacher’s salary was unable to make up for her husband’s initial loss of income. But now they have decided to carry out repairs on their house and buy an apartment with the savings that they were going to use to emigrate.

The real estate sector did 33 percent more business this year than in 2002.

The change was gradual in some sectors of the economy and abrupt in others. After four years of a fall in Gross Domestic Product (GDP), 2003 will end with nearly eight percent growth, more than double the level projected by Economy Minister Roberto Lavagna 12 months ago.

That stands in sharp contrast to last year’s 11.1 percent drop. Economists of all stripes say the recovery should continue in the medium-term, and growth of at least five percent is forecast for 2004.

The exchange rate of the peso, in the meantime, has stabilised at around 2.95 to the dollar, while prices have also held steady, with just 3.4 percent inflation between January and November. Unemployment is still high, but has dropped from 17.8 to 14.3 percent over the past year.

Driving the recovery was the early 2002 devaluation of the peso, a decision that ran into staunch initial resistance after 10 years of a currency board that pegged the peso to the dollar. ”Devaluation was the key element in cutting short the recessive tendency. It was the motor of growth,” economist Eduardo Curia told IPS.

Argentina began to fall into recession in late 1998. The dwindling confidence of investors and savers triggered a financial meltdown in late 2001 that dealt the coup de grace to the already shaky government of de la Rúa, who was forced to resign amidst an outbreak of social discontent.

That year, GDP fell 4.5 percent, and Argentina defaulted on the foreign debt owed to private creditors. In early 2002, interim president Eduardo Duhalde scrapped the currency board, and the peso plunged.

It stabilised in mid-2002 at around 3.5 to the dollar, while prices rose more than 40 percent that year, and the poverty rate climbed to 54 percent of the population of 37 million.

Never before had such a large proportion of the population in this once-rich nation in the Southern Cone of South America fallen into poverty. The faces of chronic hunger that began to be seen on the streets and TV talk shows came as a shock to the country and the world.

Although the economy began to show signs of recovery in the second half of 2002, the year ended with an 11.1 percent drop in GDP. Nevertheless, businesses in a range of productive sectors began to look towards the future with a dose of optimism.

Exports of agricultural goods and oil began to climb with the recovery of international prices, while companies on the verge of bankruptcy faced up to the challenge of producing goods to replace the diminishing imports.

Industries like construction, textiles, footwear, machinery, paper, glass and steel increased production levels, to 70 or 80 percent of capacity. Many rehired workers who had been laid off, others hired new employees, and in some industries there is even unfulfilled demand for workers.

Factory owner Aldo Karagozián remarked to IPS that the textile industry generated 950,000 jobs in 1993, but less than 200,000 in 2001.

The number of jobs provided by the textile industry has risen again, to 450,000, and factory owners are hoping to obtain fresh credit, to invest in new technology and increase the number of workers twofold over the next five years.

Karagozián is president of the Pro Tejer Foundation, which brings together businesspeople and educational institutions with the aim of training skilled textile workers.

The post-devaluation recovery was so sudden that the Foundation decided to offer scholarships to encourage high school students to choose courses that would prepare them to work in the textile industry.

At first, the aim was to supply a domestic market that had shrunk because of the economic crisis. But then came the challenge of exporting to Argentina’s Mercosur (Southern Common Market) partners – Brazil, Paraguay and Uruguay – and more distant markets in Latin America, the United States, Europe and Asia.

Today, the focus is on how to expand the domestic market for textiles and other goods.

But the recovery seems to be slowing down somewhat. Economists at the Central Union of Argentine Workers consulted by IPS said that so far, the upturn has been restricted to companies that either export or produce goods that cater to the highest-income segments of society.

That means that while GDP has grown, the impact has not been felt to the same extent in terms of the creation of jobs, a decline in poverty, or a narrowing of the rich-poor gap.

While middle-class shoppers are beginning to flock back to the malls in greater numbers, the poor are still barely scraping by.