Argentines sacrifice vacations, internet and even food as economic crisis intensifies
Argentina, Latin America’s third-largest economy is being whipsawed by rising inflation and a plunge in its currency, the peso - hurting everyone from laborers who are getting less work to professionals facing credit card bills with soaring interest rates.
The turbulence is the result of several factors: unclear policies, a foreign debt crisis, and an increase in U.S. interest rates have led investors to pull out of Argentina and into safer U.S. bonds.
President Mauricio Macri came to power in 2015 promising to reverse 12 years of protectionist, free-spending policies enacted by the leftist governments of Néstor Kirchner and his widow, Cristina Fernández de Kirchner.
But cuts to subsidies have instead led to sharply higher utility bills and fares, feeding inflation which under Macri has averaged 35% - 10 points higher than under his predecessor - and may reach 50% this year.
Wages are meanwhile rising by just 20%.
Critics consider the utility hikes effectively a tax increase amounting to 6% or more from average incomes - while $4 billion a year were granted in corporate and high-end tax cuts.
The economy grew last year by 2.9%; but GDP fell 4.2% in the second quarter of 2018 compared with a year earlier. Unemployment rose in June to 9.6% - the highest in 12 years - and another 60,000 jobs were lost in July.
The peso has lost over half its value so far this year, from 19 to 42 per dollar.
This has pushed up gasoline prices by over 60% - which impacts the price of many products, especially food. Argentina also suffered its worst drought since 2009 earlier this year, crippling soy exports and putting further pressure on food prices.
Stuck in the middle
The drop in purchasing power has also hit the middle class, which represents about 40% of the country’s population and were until recently strongly supportive of Macri.
The shrinking peso has made it more expensive to buy imported goods such as smartphones, or to travel abroad. Foreign spending by Argentine nationals fell abruptly in June by 28% - a $300 million monthly savings for the central bank dwarfed by $3 billion in capital flight a month.
Some have coped by dropping their internet service or sharing it with neighbors, while others have postponed buying a new home or car and have opted for public transport.
Over 130,000 borrowers with adjustable-rate (UVA) mortages promoted by Macri in 2016, are now facing steep negative amortization (loss of equity) or outright foreclosure as both their installments and principal rise - a situation similar to the 1981-82 Circular 1050 mortgage crisis during the last dictatorship.
From plaudits to bailout
Macri's image as a market-friendly businessman meant that early in his administration there was an inflow of cash from foreign lenders, which helped cover rising budget and external deficits.
Argentina sold $133 billion in bonds in Macri's first two years - more than any emerging market except South Korea. Foreign investors stopped buying in January however, popping last year's carry-trade debt bubble - known locally as the financial bicycle - and leading to wave of capital flight.
The crisis forced Argentina to request a $50 billion IMF credit line in June - a bailout conditioned on steep budget cuts. These cuts, plus an interest rate hike to 60% in a bid to shore up the peso, have exacerbated the recession.
And the crisis is unlikely to ease in the near future: The new central bank head, Guido Sandleris, announced he would "restrict the monetary base to reduce demand for dollars to a minimum."
Similar scorched-earth monetary policies during past financial crises in Argentina have failed to tame the dollar.
Nora Pastrana, 45, says she voted for Macri and his right-wing coalition — known as Cambiemos, or “Let's Change.”
“He promised change,” Pastrana said, “but change failed.”
At: https://www.washingtonpost.com/world/the_americas/argentines-sacrifice-vacations-internet-and-even-food-as-economic-crisis-intensifies/2018/09/27/2fc10082-c01e-11e8-9f4f-a1b7af255aa5_story.html
Normally hectic Ninth of July Avenue at a near-standstill during a September 24th general strike - the fourth since Macri took office in 2015.
Macri has already spent the $15 billion IMF loan from June 22, mostly to cover capital flight by speculators.
"Our future is not in speculation and financial rackets," CTA labor federation head Pablo Micheli said. "That's for the loafers in the administration."
= new reply since forum marked as read
The only news outlets which have become large have flourished during the time they served the fascist interests, and completely whitewashed if not ignored the hell on earth unleashed by the murderously greedy power-mad, sociopathic people users who rode in over the backs of the poor.
It's horrid seeing Clarín doing as well now, probably, as it was doing during the Dirty War, when the owner was out being toasted by the head of the military dictatorship Videla, treated as the most favored civilian citizen in the country, at times.
What a shame they have been able to derail heavy exposure of the incriminating evidence of Bolsonaro's "terrifying" experience as someone appearing, at a distance, to be attacked.
It certainly worked for him, didn't it? A whole lot of people were involved in that elaborate, but crude hoax. It has to involve the fact there are so many poor people without real access to information, and, of course, the high number of reactionary knee-jerk clowns there as we have here. Unfortunately, with the rise of the middle class has been the rise of dogs-in-the-manger who can easily be controlled by continual prods reminding them "commies" might want to steal their stuff and give it to lazy people!
Very glad to see your comments tonight, real food for thought!
