The Recent Crisis of the Argentine Economy: Some Elements and Background

Arturo O'CONNELL (University of Buenos Aires, Argentina)

People in the streets, tragic deaths, riots, supermarkets and other shops being raided, banks under siege and surrounded by fences, roads blocked by pickets of the hungry and unemployed, widespread violence and insecurity, the downfall of a government duly elected only two years before and a succession of presidents, etc. The story of the Argentine crisis exploded in TV and newspapers all over the world by the end of 2001.

In sheer economic and social terms, manufacturing output, building sector activity and shopping centres sales were by February 2002 (last available figures), respectively, 15, 43 and 30 per cent below levels corresponding to the same month in 2001, already a depression year. Unemployment that by October 2001 had reached 18 per cent of the labour force is widely estimated to be close to 25 per cent with at least that same percentage being less than fully employed in a country with almost no unemployment insurance system. Driven by a devaluation of the peso of almost 200 per cent (after having reached 300 per cent close to last Easter) and unabashed exercise of market power and wild speculation, inflation has returned to Argentina (consumer and wholesale prices had increased, respectively, 9.7 and 32 per cent between December last year and March 2002) even if for the time being it is restrained both by the depression in demand and pressure from government on public utilities providers on top of a temporary freeze on rents. Wages and salaries are frozen in the public sector - with prolonged delays in actual payments - and are being bargained down in the private sector profiting from the dearth of jobs; labour conditions - like hours of work and restrictions on firing - have regressed to those of many decades ago. As a result of both unemployment and the price increases it is estimated that, for instance, in the Greater Buenos Aires area almost half the population is below the poverty line and a quarter is below the food poverty line, meaning they don't have enough income to adequately feed themselves in a country that is still among the major food exporters in the world.