ARGENTINA: Where Inequality Reigns

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Nov 10 2004 (IPS) - Some 20,000 people live in miserable conditions in a slum not far from a pedestrian shopping street in the centre of the Argentine capital, where only prestigious brands are sold to well-heeled shoppers amidst the aroma of imported perfumes.

The sharp contrast between the upscale Patio Bullrich shopping centre and the Villa 31 slum in the Retiro neighbourhood of Buenos Aires is just one illustration of the social and economic gap that has taken on dimensions never before seen in Latin America’s number three economy, since the late 2001 crisis.

Analysts say Argentina, which used to be one of the most equitable countries in Latin America, now runs the risk of turning into a new "Belindia" – a term that refers to the division in neighbouring Brazil between the large segments of society whose living standards equal those of a country like Belgium and the even larger sectors that face poverty levels similar to those of India.

Argentine experts consulted by IPS warned that the same phenomenon, which has been going on in Brazil for a long time, can now be seen in Argentina: the middle class is in decline, wealth is concentrated in fewer and fewer hands, and poverty is expanding and deepening.

Retiro, which borders the financial and cultural centre of Buenos Aires, is home to 90 percent of the city’s five star hotels, its most exclusive shops, and multiple high-rise office buildings. But just on the other side of railroad tracks and a high wall live thousands of slum-dwellers, many of whom came from Argentina’s hinterland or neighbouring countries.

Norma Gutiérrez, who lives in Villa 31, laughs and seems to dream aloud when IPS asks her what she would do if she had 300 U.S. dollars, equivalent to the price of an Italian designer sweater in Patio Bullrich. Gutiérrez works in a local community soup kitchen that serves 150 children and a few elderly people every day.

"We would prepare a feast!" says Gutiérrez. But then she decides it might be a better idea to simply enlarge the portions of milk, bread and crackers served in the day-care centre she also runs. "In the summer (the southern hemisphere summer begins in December) the children eat less, but the winter is tough and they ask us for more bread," she says.

Gutiérrez is the head of a day-care centre in Villa 31, which feeds and looks after 30 children ranging in age from a few months old to pre-adolescents. The centre is maintained by what the children’s impoverished parents can contribute. "We haven’t received any donations since 2003, and then it was only clothes," she says.

Official statistics indicate that income distribution has become more unequal than ever since the economic, social and political collapse in late 2001, when popular unrest forced president Fernando de la Rúa to resign halfway through his four-year term.

In 1974, rated by experts as the year equality peaked in Argentina, the wealthiest ten percent of the population earned 12 times more than the poorest ten percent – a ratio that reached 19.7 by 1994 and jumped to 30.4 in 2002.

If one looks at data from Buenos Aires, the gap is even greater. At the height of the crisis, the richest ten percent came to have 60 times more wealth than the poorest. And although the economic upturn began at the end of 2002, it is moving at a different pace for each social sector.

"The recent crisis led to a rapid increase of inequality, which dropped again in 2003 due to the stabilisation of prices, the recovery of jobs, and government assistance plans," economist Emmanuel Abuelafia of the Centre for the Implementation of Public Policies Promoting Equality and Growth (CIPEC) explained to IPS.

The resurgence of economic growth, to 8.8 percent in 2003, and the slight decline in the poverty level from a peak of more than half of Argentina’s 37 million people has had a positive impact on income distribution. Today, the richest ten percent have 24.7 times more wealth than the most impoverished.

But "growth (of the gross domestic product) doesn’t guarantee better distribution," said Abuelafia, who cited the example of fast growth of the Argentine economy in the 1990s, which went hand in hand with the widening of the gap between rich and poor.

In his perception, what is needed to reduce the difference between rich and poor are tax policies that put a burden on profits.

For his part, parliamentary Deputy Claudio Lozano said the official figures shed more light on poverty levels than on wealth. He suggested instead taking a look at the changes in the share of GDP contributed by wage-earners and pensioners.

The incomes of workers in the formal and informal sectors of the economy, unemployed workers who receive subsidies from the state, and pensioners represented 34 percent of GDP in 2001, prior to the crisis.

But that share plunged to 29 percent in 2002, to 27 percent in 2003, and to 25 percent today, according to Lozano, a highly respected economist with the centre-left Central de Trabajadores Argentinos (CTA), one of Argentina’s two main trade union federations.

"This drop reflects the high levels of concentration of wealth," he said, arguing that the economic recovery has been felt by only a limited number of businesses.

Thus, while economic growth stood at eight percent last year, the earnings of the 100 leading companies in Argentina grew 47 percent, he noted.

Both Lozano and Abuelafia said that in order to revert this picture, a direct transfer of public revenues to the poorest sectors of society would be required, as well as a tax reform that would put a larger burden on profits than on consumption.

In Argentina, more than 60 percent of tax revenues come from taxes on consumption, which are considered regressive, as they have a much greater impact on the poor than on the rich. On the other hand, the tax burden on business profits is relatively light, as businessman Eduardo Constantini admitted in an interview.

Constantini told the local newspaper Página 12 that his best business deal last year involved the construction of the "Grand Bourg" building in Buenos Aires, whose luxury apartments went on sale at a price of 3,000 dollars per square metre. "In spite of the steep price, the apartments sold like hot cakes," he said.

However, the businessman maintained, "the biggest problem in Argentina is not the wealth but the widening of the social gap."

"The solution is not to kick out the rich", he said. "There are developed countries where some people spend hundreds of thousands of dollars on a watch, but the government takes care of the most destitute."

In order to attain the resources that would allow it to do that, the Argentine state should charge higher taxes, he said. "Some people will want to kill me for what I’m saying, but it’s absurd that in this country, financial income and dividends are tax-exempt and instead those who work pay the taxes."