eBusiness Weekly
Argentina was once one of the richest countries in the world, richer than France or Germany.
And much of that wealth was built on exports of beef, especially to Britain. But that was well over 100 years ago.
Now, thanks to a profound economic crisis, it languishes in around 70th place, according to the latest figures from the World Bank.
And a growing number of people here simply can’t afford to eat beef from the cattle that still roam the fertile grasslands known as the Pampas. People like Oriana and Samir, a young couple in their early 20s living in a run-down neighbourhood of the capital Buenos Aires.
“It’s very difficult,” Oriana says. “You’re constantly asking yourself — ‘how am I going to make ends meet?’ We’re the country of beef, but we only eat chicken because it’s cheaper.”
Even chicken is a treat. Last year, inflation soared to 211 percent, the highest rate in three decades. In December alone, prices rose by more than 25 percent.
The family share a small flat with their young daughter Chiara, and also Samir’s parents and his brother.
Paying the bills is a constant worry. The costs of food, but also rent, electricity and transport keep rising all the time.
Samir is a self-employed delivery driver, but the economic crisis means that demand has dropped sharply. His earnings can’t keep up with rising prices.
Plus he worries about growing insecurity on the streets, as people get more and more desperate.
“They might kill you just for your cell phone,” he says.
At least 40 percent of the population live in poverty, according to the last set of official government figures. Most suspect the real figure is even higher.
Both Oriana and Samir voted for Argentina’s new leader Javier Milei, the radical right-wing libertarian with extravagant hair and an abrasive style. He came from behind in last year’s election to win more than 55 percent of the vote.
“He understands people’s problems,” says Samir.
“I think he’s just what Argentina needs . . . to deal with the inflation.”
Others aren’t so sure. Claudio Paez used to be a successful businessman with a chain of sweet shops and grocery stores, 12 in all. Now he’s down to just two as the costs of running the shops and the collapse in customers’ disposable income ate into his revenues. And he expects things to get worse, not better.
“If the economic problems continue for three more months, I’ll be in trouble and I won’t be able to cover my outgoings,” he says.
More and more people in Argentina are having to improvise to survive. Not far from one of Claudio’s shops, a small van is parked by the side of the road, the boot piled high with trays of eggs.
The cheap price, US$1 (79p) for a dozen eggs, has attracted a queue. But the van’s owner does not linger long, just in case the police come by.
The streets of Buenos Aires may still be lined with the ornate architecture of the country’s 19th-Century boom, but they’re also teeming with street vendors, delivery app riders and unofficial taxis. Analysis of official figures by the National University of Salta suggests that the informal sector employs nearly half the workforce in Argentina .
Added to which, few people actually pay any income tax thanks to a law passed by the previous government, just before the election. And that’s bad news for a country that’s essentially broke and badly needs to generate income.
Argentina spends far more than it earns, and it already owes eye-watering sums: currently, about US$44 billion to the International Monetary Fund, making it the organisation’s largest single debtor.
President Milei says he has answers to the economic crisis. An economist by training, he’s a devout believer in untrammelled free markets and a shrunken state.
On the campaign trail, he garnered plenty of attention by waving a real chainsaw in the air, to signal his commitment to cost-cutting.
He also promised to blow up the central bank and get rid of the local currency – the peso — altogether, and replace it with the US dollar. Both those ideas are currently on the back-burner, not least because the government itself is so short of dollars.
Instead, President Milei has devalued the peso by half to boost competitiveness. And he’s slashed the number of government ministries by a similar amount.
And, with a raft of proposals known as the “Omnibus” bill currently before Congress, it’s now the turn of public spending.
“For the last 30 years,” says analyst Sergio Berensztein, “we’ve been printing money like maniacs, which is why we have such high inflation. Now, for the first time, we have a president who understands the problem.”
The only solution, says Mr Berensztein, is to try to balance the budget, something the government’s promised to do by the end of this year. But it’s going to be “rough”, he adds.
And so it becomes a question of politics. Mr Milei may have a clear personal mandate from voters, but he doesn’t have a majority in Congress. Nowhere near in fact.
His party, Freedom Advances, won just 15 percent of the seats in the 2021 legislative elections. Add to that, powerful opposition in the shape of the country’s trade unions.
They called a general strike last week and organised big demonstrations across the country. Tens of thousands of people took to the streets in a noisy protest.
Juan Cruz Díaz from advisory firm, Cefeidas Group, worries that the impact of the proposed changes may be too damaging.
“Most of the people who voted for Javier Milei wanted a change,” he says.
“But that doesn’t mean they support this libertarian approach to the economy and the state.”
Next week, Congress will vote on whether to approve the president’s plan. It’s by no means certain it’ll pass.
And anyway, there’s no guarantee that the measures will make any difference to the rate of inflation.
And ultimately, that’s the only thing that matters to most people here.
Mr Díaz believes the president has just a “few months” to turn things around and for people to start feeling better off. Mr Milei’s political honeymoon is likely to be very short. — BBC
