CHALLENGES 2004-2005: Argentina’s Recovery Has Not Yet Trickled Down

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Dec 30 2004 (IPS) - Although by all accounts Argentina’s economic recovery is in full-swing, and shopping malls are packed with year-end buyers, poverty and unemployment levels remain high and the gap between rich and poor is steadily growing.

While the improvements reflected by the statistics are real, their effect is as tangible as a drop of water in the sea.

Further, the tiny progress made is actually harmful to the poor, because it creates a sensation that Argentina’s economic crisis is over, leading to a decline in donation flows, which are essential to the wide network of community soup kitchens and other relief efforts on which so many unemployed and impoverished Argentines depend for their survival.

"We know the economy has begun to move, but everything is still the same here," says Julio Esquivel, who lives in the La Cava slum neighbourhood in the San Isidro district of greater Buenos Aires.

"You know who are better off? The people who live in Las Lomas," he comments to IPS, pointing in the direction of a nearby upscale neighbourhood.

Esquivel was born 38 years ago in La Cava, which is home to around 12,000 people. The ups and downs of this poor neighbourhood are marked by the availability of jobs.

Thirty years ago, wages were low, but pretty much everyone was employed. And 20 years ago, the factories in the neighbourhood were not the huge, rundown empty warehouses of today, and in the early morning hours, the area was a beehive of activity as people headed out to work.

"Now in the early morning, it’s only the ‘chorros’ (thieves) who are going out," laments Esquivel.

For the past 10 years, Esquivel has been helping to run a community soup kitchen where 350 children, as well as a dozen elderly and sick adults, eat breakfast and dinner every day.

"La casita de la Virgen" (the Virgin Mary’s little house) depends on donations, which shrank this year as the economy began to rally.

"In October we were about to close down, but the national government sent us 2,500 kilos of food, so we’re still here," says Esquivel.

According to Esquivel, the underlying problem is the lack of jobs and the corruption surrounding the assignation of the government’s small monthly stipends for unemployed heads of households, which he says are manipulated by local political bosses and handed out in exchange for political support.

He says it makes him feel "sick" to see how the stipends, part of a social assistance plan created in 2002 to ease the impact of the worst depression in Argentine history, are misused.

"These payments are theirs by right, but they (local political leaders) hand them out to gain support (in street demonstrations, for example), and a lot of people have no choice but to accept," he says.

The upsurge in employment seen in the past few months is only temporary, he explains, the product of increased seasonal demand. The jobs are sporadic: "a shop that is doing better business hired an extra delivery person, or more people for cleaning and security. But without ‘real’ jobs, people lack dignity and self-esteem, and very little has changed in that sense," Esquivel adds.

The Argentine economy began to pull out of the doldrums in the second half of 2002, after gross domestic product (GDP) shrank nearly 20 percent since 1999.

In 2003, GDP expanded 8.7 percent, and similar growth is forecast for this year.

The government of Néstor Kirchner, who took office in May 2003, has raised wages and pensions, and is following an austere economic policy rather than slashing public spending and implementing International Monetary Fund-style structural adjustments.

Unemployment, which peaked at 24.1 percent in the second half of 2002, has dropped to 13.2 percent. However, part of that decline was due to the fact that the heads of households who now receive monthly unemployment payments are counted as employed.

The poverty rate, meanwhile, fell from a record 57.5 percent at the height of the crisis to 44.3 percent by mid-2004. Nevertheless, poverty and marginalisation remain a serious problem in this once-rich nation of 37 million.

The figures indicate that there have also been major improvements in commerce, industry, consumption, investment and tax revenues, all of which have contributed to a rise in foreign reserves. In addition, some Argentines who moved abroad, fleeing the crisis, have begun to return home.

But many people feel they are not yet out of the woods.

Mónica Wolowelsky, a psychologist, owns a restaurant for people with celiac disease, who cannot eat foods containing gluten – "the only one in Latin America," she tells IPS with pride.

However, she is getting ready to close her business in the next few months because she has been unable to retain a steady clientele that can afford to eat out on a regular basis.

Her husband manufactures clothing, and they have two children who are still in school.

"The economic recovery is somewhat fictitious," she says. "There is a portion of the population that is spending and consuming, but it is a narrow section, while the rest are still immersed in recession, and many are buried in credit card debt, which they are unable to pay off."

Wolowelsky and her family were among those who contemplated joining the huge wave of Argentines who emigrated after the late 2001 economic meltdown.

"We knew some people in Miami and even went on an exploratory trip, but we didn’t like it there at all, so we stayed here," she says. Since then, her family feels like they are "starting over". But she adds that they have not completely given up on the idea of moving overseas, because Argentina "spits out people".

Analysts say the sensation of social and political chaos – Argentina went through four different presidents in just a few weeks in December 2001 – is giving way to a steady recovery of confidence in the country’s institutions, a process that many attribute to the Kirchner administration.

"With this government, we have more hope, and greater access" to government officials, says Esquivel, who has dealt with several different administrations. "For example, when we were going to close the soup kitchen, we sent a letter (to the authorities) and received a response within 24 hours: they sent us food for eight months. That kind of thing didn’t happen before."

With his determined stance against the impunity enjoyed by those who committed human rights abuses during the 1976-1983 military dictatorship, his support for a purge of a corrupt Supreme Court, and economic policies that seem to be working, Kirchner restored the credibility of the presidency and helped cool off the public animosity towards the country’s political class as a whole.

But structural economic problems persist, and 2005 will bring one of the Kirchner administration’s biggest challenges: the delayed restructuring of the over 80 billion dollar foreign debt to private creditors, which Argentina stopped payments on in December 2001.

Only when the government begins to meet debt servicing commitments once again will it be possible to gauge the limits of the economic recovery. Analysts say that moment will serve as a sort of acid test for the solidity of the economic resurgence.

Economist Claudio Lozano with the independent Central de Trabajadores Argentinos trade union federation, told IPS that the ratio between projected growth and future debt servicing payments "will mean a deterioration of per capita income" that will hurt the poor.

"The manoeuvring room for resolving our problems of poverty and extreme poverty will be reduced," he warned.

For all of these reasons, as 2004 draws to a close, Argentines can celebrate the fact that the worst is over, even though a large majority have not yet felt the benefits of the recovery.