BUENOS AIRES, July 27 (IPS) – Darío is a locksmith in Flores, a traditional middle-class neighborhood in the Argentine capital, who will have to take time off work for the next few days. “Suppliers have suspended deliveries because of shortages or prices,” he lamented. His case is an illustration of a frenzied economy in a country that is once again on the brink of an abyss.
The problems are lingering in this South American country, where much of the population has become poorer over the past four years and social unrest is growing, exploding this month with a financial and exchange crisis. creates great uncertainty about what lies ahead.
The central bank ran out of dollars, and imports, largely supplying inputs for domestic production, were capped at maximum. The result is increased fear, speculation, social unrest, and out-of-control inflation, which is losing price references and some companies and businesses are hedging the risks. hedge gains, or they even decide not to sell.
Today, on the streets and in the media, questions arise as to whether the country is on the verge of a social boom and whether President Alberto Fernández, who is politically isolated, arrives. questioned by its coalition government, whether it will achieve its end. due in December 2023.
At that time, Argentina will celebrate 40 years of democracy, marked by a succession of economic crises that have resulted in growing inequality and making it easier for distrust to spread within the country. society at the first signs that things are not going well.
The crisis was exacerbated earlier in the month, when the July 2 resignation of then Economy Minister Martín Guzmán caused the parallel exchange rate to fall by 50% – known as the green dollar – to the exchange rate. can only be bought freely by the country with an exchange control, and this, in turn, continues to drive inflation, which in 2021 is 50% and this year is expected to end above 90% .
Sergio Chouza, an economist who teaches in the public sector: “There have been a series of imbalances in Argentina’s macroeconomics over the years, meaning that today the government does not have the tools to deal with the exchange rate and financial pressures. University of Buenos Aires (UBA)tell IPS.
“In this country, the value of the dollar dominates price expectations, and as a result it becomes increasingly difficult to avoid an inflationary ‘spiral.’ At the same time, government bonds have collapsed and yields are low. than Ukrainian bonds”. he added.
Chouza says that the COVID-19 pandemic is one of the main contributing factors to a situation that seems to have spiraled out of control.
“There is an expansion of public spending, as in most countries in the world. But the problem is that while most countries finance with credit, Argentina cannot do so because it is too indebted. much,” the expert explained.
Social protest
The square in front of the Palacio de Tribunales, in the heart of Buenos Aires, was packed with people. The youngest protesters held banners from social movements from remote poor neighborhoods, but also entire families with young children in their arms. Traffic in the surrounding area was completely cut off as the columns of marchers continued to pour in.
It’s a Thursday in July, but here’s what can be seen on a daily basis in the Argentine capital, where the most vulnerable sections of society are organizing a series of protests. because, in the midst of the crisis, the government suspended the expansion of Potenciar Trabajo program.
This is the name of the National Program for the Integration of Social Production and Local Development, which provides a grant from the government in exchange for four hours of work in social enterprises, such as kitchen or municipal waste recycling cooperative.
Fernando, who did not want to give his last name, told IPS: “In our neighborhoods, things have been very difficult for many years, but now it is getting worse because we are no longer there. enough to put food on the table. He is a young man from Laferrere, one of the poorest localities on the outskirts of Buenos Aires, who worked as a bartender before losing his job in 2021. Now, he occasionally works in construction.
Santiago Poy, a researcher at Social Debt Observatory in private Catholic University of Argentina (UCA) told IPS that, with a combination of currency devaluation and inflation since 2018, wages have lost about 20% of their purchasing power.
“Poverty was around 25% in 2017, increased to 40% in 2019 and has remained stable since. Today, there is a widespread sense of poverty, even though the unemployment rate is only 7%, because 28% of workers are poor, Poy said, describing the situation in this southern cone of 47.3 million people.
After the peak of the pandemic in 2020, social indicators improved in 2021 but are worsening again this year, and the vast social assistance network is unlikely to be enough to contain the decline. .
“Social aid is not going to solve everything in Argentina, because macroeconomics is a perpetual factory of poverty,” Poy said.
Price race
Fernando Savore, president of Federation of Grocery Stores of the province of Buenos Aires, which is home to 26,000 businesses in the country’s most populous region, told IPS.
Savore said that since the start of the year, suppliers’ price hikes were flat, but they spiked in the first week of July, following the resignation of the Economy Secretary.
Savore adds: “We’ve seen over 10% increase in food and over 20% increase in cleaning products. We are hesitant to sell some products because of uncertainty about projected costs. store them.
And amid the overall turmoil, the government unofficially leaked rumors about economic measures, which later failed to materialize, creating a sense of uncertainty. .
President Fernández said that the lack of dollars would be solved if agricultural producers sold a good portion of their soybean harvest, which they currently keep, worth $20 billion.
They are obligated to export at the official exchange rate, the spread to the parallel dollar has reached a record level of more than 150% and they appear to be waiting for a devaluation.
On July 25, the new economy minister, Silvina Batakis, met with the chief executive officer of International Monetary Fund (IMF)Kristalina Georgieva, to assure her that the country will stick to the agreement signed with the multilateral lender this year, which includes the goals of reducing the fiscal deficit and increasing the Central Bank’s reserves.
But in Argentina, few have dared to predict where the crisis is headed and how quickly it will unfold.
© Inter Press Service (2022) – All rights reservedOrigin: Inter Press Service
