World Economy

Stagflation Hits Poor Argentines

Stagflation Hits Poor Argentines Stagflation Hits Poor Argentines

The economic recovery promised by Argentine President Mauricio Macri for the second half of this year looks so unlikely it has become the butt of jokes on Twitter.

But at the Bokitas soup kitchen in Buenos Aires, poor families squeezed between high inflation and a stagnant jobs market aren’t laughing, Reuters reported.

Twice as many people line up for a free hot meal every day at the city-funded cafeteria compared with seven months ago when Macri was sworn in, promising that budget cuts in the first half would help tame consumer prices and spark growth in the second.

“Macri said the first few months would be critical and then things would start to improve. But there are people who need to eat. They can’t wait a year,” said Lorena Diaz, who manages Bokitas in the working class neighborhood of La Boca.

Diaz serves 500 people per day, up from 250 six months ago, a trend seen in other free cafeterias throughout the country.

Indicators like industrial output are so bad that forecasts of a timely rebound have become the subject of black humor, under the hashtag SegundoSemestre, Spanish for “second half”.

One Tweet says: “Waiting for the second half”, accompanied by a picture of poor children playing on a dirt street.

Another shows a man diving into an empty swimming pool and a third shows Darth Vader (a fictional character in the Star Wars universe), saying, “Luke, I am your second half.”

  Purchasing Power Diminishing

Economist Hernan Hirsch calculates that families have lost 12% of their purchasing power since December. He expects a 2% economic contraction this year and 1-2% growth in 2017, forecasts broadly in line with those of other private economists and the International Monetary Fund.

The government’s statistics arm has not put out any economic growth forecasts.

“Expectations of a recovery have been postponed and reduced,” Hirsch told Reuters. Business groups like the Argentine Industrial Union say they agree.

Macri started his term with a flurry of free-market reforms. He lifted currency controls, weakening the peso by 30%, fired thousands of government workers, cut energy subsidies, lowered import barriers and freed grains exports after years of tight curbs.

The Indec statistics agency is being revamped after years of accusations it cooked the numbers under previous president Cristina Fernandez to make the economy look better than it was.

On Wednesday Indec reported May inflation of 4.2%.

“I’ve felt it since the start of the year. Wages and pensions can’t keep up with prices,” said Juan Rojas, a 63-year-old disabled worker living on pension.

“Basics like milk and bread have gone up like crazy,” said Rojas, a regular at Bokitas, located near the Boca Juniors soccer stadium where Diego Maradona once played.

Wednesday’s was the first official inflation data to be published by Macri’s administration.

Gross domestic product figures are expected to start being published late this month.

Macri early in his term settled a decade-old lawsuit with bond-holders, which allowed Argentina to emerge from default.

His inflation-fighting plan involves issuing debt rather than printing money as Fernandez did to finance a fiscal deficit that ended last year at 5.8% of gross domestic product.

So far none of this has helped the poorest of the poor.

  Social Fridges

“Prices aren’t going up month by month,” said Nimia Duarte, an unemployed single mother living in a dirt-floor shack in the Buenos Aires suburb of Villa Fiorito. “They’re going up day by day.”

With hardship rising due to job cuts and inflation, Argentina has adopted a scheme from Europe’s economic crisis: putting food in outdoor “social fridges” for the needy, AFP reports.

So-called social or solidarity fridges, where people leave food for those who need it, popped up in countries such as Spain and Germany in recent years during the recession in Europe.

Now the trend has spread to Argentina.