Just as the first inflation estimates for March were not surprising (7% according to the C&T consultancy and 7.2% for EcoGo), they also did not come as a surprise that the poverty level measured by the Permanent Household Survey (EPH) of INDEC will yield 39.2%. The reason is that all the projections for this semester (the period that the statistical agency takes into account for the measurement) They affirm that it will comfortably pass 40% and by the end of the year it could be closer to 45%.
Dynamic. For news purposes, the number serves to verify a perception, but it is already old. The Economist Martin Rozadaresearcher of the Di Tella University and author of the study poverty nowcast, which monitors with estimates and on the basis of the EPH survey, explains that, although the figure released is an average for the semester, the fourth quarter of 2022 is already estimated at 40.7. “We finished 2022 on top and what has already been seen in the first quarter of this year in which the basic food basket increased 110% year-on-year while family income grew less, so poverty will be above the last quarter “adds Rosada. Thus, the poverty rate for this semester that INDEC will publish in September already has a floor of 41%. “There are no indications that inflation can be controlled in any way, but there are indications that economic activity is slowing down and we are entering a 2023 recession. And if a devaluation comes, it will imply more inflation and bad news for poverty”, he adds.
It is a movement of tweezers that has as its victim the situation of 11.5 million people (out of a total of 29.3 million of the inhabitants of urban agglomerates). who in the last semester were below the poverty line and 2.9 million out of 9.9 million in the survey (29.6%).
He UCA Social Debt Observatory has been measuring poverty, among other social deprivations, for more than 20 years. But the figure that is monitored is always higher than that of the EPH because it includes more variables and not only that of income. Your manager, Augustine Sage, also supports the projection that, between the rise in the basic food basket and the total, above the general index, but also with the slowdown in economic activity, poverty will continue to grow throughout the year. “The problem is that employment also stagnated at the end of 2022, so the generation of jobs could not be compensated for as it happened before (it was used for this with more hours worked or more work, formal and informal)”points out.
Salvia believes that how 2023 ends is unpredictable, it depends on whether or not the macroeconomic variables get out of hand. But, if not, it would stabilize at 44 or 45%, which is equivalent to the levels of poverty that we were with the pandemic. In this regard, Salvia points out that We are facing a structural dimension of poverty that has to do with the quality of jobs generated by the economy. “49.5% of jobs in Argentina are carried out in the informal market, Therefore, their relations are not framed in negotiations between unions and employers or in a sectoral dialogue, but rather due to competition in the informal market, which is very ruthless and that leads to lower wages”, he concludes. This would explain to a large extent
the long process of Argentine impoverishment: the coexistence of a competitive sector with another of very low productivity that is not even able to obtain the regulatory mechanisms in labor matters that allow them to compensate and update income and are below inflation.
The brake. The Argentine economy was recovering from the pandemic as fast as its brutal fall during 2020. But by the third quarter of 2022, economic activity began to show signs of slowdown that turned into stagnation at the end of the year. Everything indicates that with the downturn in the first quarter of the year, technically the economy has accumulated two quarters of decline: entering a recession. The main cause of this was the chronic shortage of foreign currency that, even in a year with exports with historical nominal records, did not generate enough dollars to supply the demand of an exchange market riddled with controls and distortions. Therefore, the only tool at hand was the trap and with it, the difficult entry (late and expensive) of inputs of all kinds.
To this was added a projection of a pessimistic scenario for the second half of the year due to the effects of the drought, which for the third consecutive year fell on agricultural production and therefore on exportable balances. Jorge Vasconceloschief economist of IERALin the last report of the entity estimates that “the production of the main summer crops will contract at least between 35%-45% and that the total value of the country’s 7 main crops (including both summer and winter grains), at current market prices and those projected for the next months, it will be falling by a figure close to US$20.9 billion (-38% year-on-year), a drop equivalent to 3.3 points of GDP”. But in addition to the external consequences, tax revenue will also be affected, largely dependent on the payment of withholdings that overwhelms the sector. It is estimated that they could continue collecting US$5.300 million, almost US$4.500 million less than what was pocketed in 2022. Just when the State needs an anticyclical social policy that would consume funds. A blow that is still difficult to estimate accurately.
check to work. The situation of a stagnant economy and a paved path towards a very strong contraction in the middle of an election year (when there are pressures to retrace fiscal or monetary adjustment paths) could have an impact on a variable that until now had not suffered the crisis of other and that is decisive when it comes to understanding what happens with poverty: employment. In the opinion of Manuel Meradirector of Social Protection of CIPPEC, this process occurs in a context where wages do not reach inflation: in 2022 it was 94.8% (IPC-INDEC) but wages in the registered private sector increased by 93.8%. “In the case of those not registered, the situation is even worse, according to the latest data available (July 2022), the interannual increase in inflation for that month had been 71% and the salary index had only varied by 59%.”, he emphasizes. But he also observes that wage negotiation (in this case, with the urgency of beating inflation) is even more difficult in informal and independent sectors (formal and informal), which are not covered by a formal parity and do not have guaranteed increases. . And precisely, it is these types of employment that have been growing in recent years and have drastically modified the composition of the labor market, making the position of a growing percentage of the base of the pyramid even more vulnerable to inflation.
The package of chance, but also of the results of malpractice in the management of the economy for many years, is strengthened to arrive at the great failure of Argentine social policy. “In the last 20 years, poverty could remain below 30% for more than a year only from the third quarter of 2012 to the fourth quarter of 2013 and from the first quarter of 2017 to the third quarter of 2018”, interprets Mera. A lesson that with or without the IMF must be assimilated for the design of future economic policies: do not overheat activity, generate reserves to apply when the cycle reverses and do not take favorable situations as permanent. The winds can also blow against it, as we are experiencing this year.
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