Fear returns to Argentina, again on the brink – Global Troubles

View of a civil society demonstration in a Buenos Aires square in July. The scene takes place almost every day in Argentina’s capital, a country where poverty has remained stable at about 40 percent of the population since before the COVID-19 pandemic. The possibility of a social uprising is one of the fears in the face of the deepening socio-economic crisis. CREDIT: Daniel Gutman/IPS
  • by Daniel Gutman (Buenos Aires)
  • Inter Press Service

The problems looming over this South American country, where the vast majority of the population has become poorer in the past four years and social unrest is on the rise, exploded this month with an exchange and financial crisis that created enormous uncertainty about what lies ahead for us. is.

The central bank ran out of dollars and imports, which are to a large extent a source of inputs for domestic production, were capped. The result has been fear, speculation, heightened social unrest and inflation spiraling out of control, causing price references to be lost and some companies and firms hedging their bets with preemptive raises, or even deciding not to sell.

Today, on the streets and in the media, questions are whether the country is on the verge of a social outbreak and whether President Alberto Fernández, so politically isolated that he is being questioned by his own governing coalition, will reach the end of his term in office. . term in December 2023.

At that time, Argentina will be celebrating 40 years of democracy, marked by a succession of economic crises that have left an aftermath of growing inequality and caused mistrust to spread easily in society at the first sign that things are not going well.

The crisis deepened early in the month, when the resignation of then Economy Minister Martín Guzmán on July 2 led to a 50 percent drop in the parallel exchange rate — known locally as the dollar blue — the only one that can be freed. obtained in a country with exchange controls, and this in turn has further fueled inflation, which reached 50 percent in 2021 and is already expected to end above 90 percent this year.

“There has been a series of imbalances in Argentina’s macroeconomics for years, which means that today the government does not have the tools to cope with the exchange rate and financial pressures,” Sergio Chouza, an economist who teaches at the public university of Buenos Aires (UBA), told IPS.

“In this country, the value of the dollar dominates price expectations and as a result it is increasingly difficult to avoid a ‘spiral’ of inflation. At the same time, government bonds have collapsed and are already yielding less than Ukraine’s.” he adds.

Chouza says the COVID-19 pandemic was one of the key factors in creating a situation that appears to have spiraled out of control.

“There was an increase in government spending, as in most of the world. But the problem is that although most countries financed it with credit, Argentina couldn’t do it because it was already too indebted,” explains the expert. from.

social protests

The square in front of the Palacio de Tribunales, in the heart of downtown Buenos Aires, is full of people. The youngest protesters are holding banners of social movements from poor suburbs, but there are also whole families with small children in their arms. Traffic in the area is completely cut off as columns of protesters continue to pour in.

It’s a Thursday in July, but this is an image seen almost every day in the Argentine capital, where the most vulnerable social sectors stage a series of protests as the government, in the midst of the crisis, is extending the Potenciar Trabajo program.

That is the name of the National Program for Social Productive Inclusion and Local Development, which offers a stipend from the government in exchange for four hours of work in social enterprises, such as soup kitchens or cooperatives of city waste recyclers.

“It has been very difficult in our neighborhoods for years, but now it is getting worse because we can no longer afford to put food on the table,” Fernando, who preferred not to mention his last name, told IPS. He is a young man from Laferrere, one of the poorest places on the outskirts of Buenos Aires, who was a waiter in a bar before becoming unemployed in 2021. Today he occasionally does construction work.

Santiago Poy, a researcher at the Social Debt Observatory at the private Argentine Catholic University (UCA), tells IPS that the combination of currency devaluation and inflation has caused wages to lose about 20 percent of their purchasing power since 2018.

“Poverty was around 25 percent in 2017, rose to 40 percent in 2019 and then remained stable. Today there is a feeling of widespread impoverishment, despite the unemployment rate being only seven percent, as 28 percent of the workforce is poor” , says Poy, describing the situation in this Southern Cone country of 47.3 million people.

After the peak of the pandemic in 2020, social indicators improved in 2021, but are deteriorating again this year and the extensive social assistance network does not appear to be enough to curb the decline.

“Social aid is not going to fix things in Argentina because the macro economy is a permanent factory of poverty,” Poy said.

The prize race

“I am ashamed to set some prices at which to sell basic things like bread, flour or sugar,” said Fernando Savore, president of the Federation of Grocery Stores of the Province of Buenos Aires, which has 26,000 companies in the most prominent countries. of the country groups. densely populated region, IPS says.

Savore says price increases by suppliers have been constant since the beginning of the year, but skyrocketed in the first week of July after the economy minister stepped down.

“We’ve seen increases of more than 10 percent in food and more than 20 percent in cleaning products. I don’t think they’re justified, but every time the dollar rises, prices go up,” said Savore, adding that grocers are hesitant. to sell some products because of uncertainty about the cost of resupplying them.

And in a context of general jitters, the government is unofficially leaking rumors of economic measures, which then don’t materialize but fuel the feeling of insecurity.

President Fernández said the lack of dollars would be solved if agricultural producers sold much of their soybean crop, which they currently hold, worth $20 billion.

They are obliged to export at the official exchange rate, whose gap with the parallel dollar has reached a record level of more than 150 percent, and they are apparently waiting for a devaluation.

On July 25, the new economy minister, Silvina Batakis, met in Washington the director of the International Monetary Fund (IMF), Kristalina Georgieva, to assure her that this country will comply with the agreement reached this year with the multilateral lender has been signed, which includes objectives to reduce the budget deficit and increase the reserves of the Central Bank.

But in Argentina, few dare to predict where the crisis will go and how quickly it will evolve.

© Inter Press Service (2022) — All rights reservedOriginal source: Inter Press Service

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