Argentina’s economic collapse leaves almost half of its population poor

The latest data from the Argentinian National Institute of Statistics (INDEC) shows that in 2020 the economy shrank by 9.9% leading to a rise in the level of poverty.

The Argentinian economy is currently experiencing its worst fall in almost 20 years with the situation deteriorating due to COVID-19. However, years of economic mismanagement have also played a crucial role. Data from the Catholic University of Argentina from September 2020 indicates that by the end of June 2020, 46-47% of the Argentinian population lived in poverty. However, INDEC’s statistics assess this figure to be about 40.9% which in the same period last year was about 35.5% and the most recent data from INDEC indicates that this number had increased by almost 2%, reaching 42% by the end of 2020.

This sharp rise is considered to be the side effect of the pandemic and the subsequent surge in unemployment, especially in the informal jobs sector which is estimated to involve 3.5 million jobs.

Today, four out of 10 Argentinians live below the poverty line.

Argentina has seen the greatest economic decline in Latin America alongside Peru (apart from Venezuela which is a separate case – Ed. Note). Inflation is estimated to be 38.5% and Central Bank reserves stand at less than US$3 billion. Although the COVID-19 pandemic has definitely contributed to this disastrous economic scenario, it is a fact that Argentina has been functioning in cycles of recovery and bankruptcy since 1921.

Data from the World Bank shows that between 1950 and 2016 Argentina experienced 14 recessions. Economic experts point out that this Latin American nation has in fact never fully recovered from economic crisis because no government has ever taken appropriate measures to conduct in-depth reforms to get the country back on track. Economists suggest this is the main reason for negative phases being repeated over and over again.

Unfortunately, this lack of political responsibility and proper management has affected the most vulnerable, i.e. children, the most. While about 42% of Argentinians live in poverty, those rates are even higher for the youngest of the population. UNICEF has assessed that by the end of last year, 7.7 million Argentinian children lived in poverty (58.6% of the nation’s children) and 2.1 million of these (16.3%) experienced extreme poverty. However, even before the pandemic hit the country in 2020, this number was already very high.

In August 2019 poverty amongst children was estimated at 50% while 13% experienced hunger. One million children in Argentina are homeless and many of them are exploited and forced into child labor or become “house slaves” according to numerous media reports. Some work in illegal textile workshops, mining construction, or agriculture or are subject to sexual exploitation.

It is hard to imagine that this situation will improve as the Argentinian economy is practically sinking. According to INDEC, many sectors have shrunk by almost half with the worst-affected in 2020 being the HoReCa – the hotels and restaurants. This sector decreased by 49.2%, social and personal services by 38.9%, and construction by 22.6%. Imports dropped by 18.1% and exports by 17.7%. Consumption decreased by 13.1% and investment by 13%. These huge falls triggered job losses depriving many of any income.

The government has tried to find a way out of the current crisis but the solution it chose only seems to have deepened the problem and triggered inflation. Finance Minister, Martin Guzman, seeking a way to subsidize the businesses and citizens severely impacted by the coronavirus crisis, decided to print money leading to the Central Bank issuing an additional 1.2 billion pesos (US$13 million at current rates) in 2020. As a result of this action, prices rose by 4% making poor people even poorer.