Argentina’s new government announces a brutal economic adjustment

The announced measures imply the violation of social and economic rights of broad sectors of the population and will exacerbate impoverishment and a social crisis that will be difficult to recover from. This type of adjustment cannot be presented as the only possible path.

During his campaign, Javier Milei said that the privileged sectors he calls the “caste” would pay for the adjustment. Yet, upon assuming the presidency of Argentina, the first measures he announced to reduce the fiscal deficit are designed to collectively generate an inflationary shock that will benefit the most concentrated sectors of the economy and directly hit those who depend on their labor for survival. This is not a fair distribution of the “sacrifice and suffering” inherent in these economic adjustments.

The brutal devaluation is deteriorating the lives of those who depend on their income in pesos, leading to an increase in the number of people living in poverty. Moreover, the rise in taxes on exports and imports will be passed on to prices, especially food prices. The elimination of subsidies will lead to a rise in the cost of basic services: commuting to work, accessing water, or having electricity in the middle of summer will become more expensive. Despite these certain increases, there are no accompanying income measures to mitigate the impact. The national government only announced limited containment through assistance programs such as the Universal Child Allowance (AUH) and the Food Card, which reach less than half of those below the poverty line. At the same time, it defined a nominal freeze on other social plans. This will rapidly lead to a devastating destruction of the purchasing power of formal and informal workers, the popular economy, as well as retired and pensioned individuals. Concurrently, the wealthy and concentrated sectors of the economy will have guaranteed superior incomes, as the measures directly benefit those with income in dollars, such as the export sector and those with financial investments yielding dollar returns.

What will happen to those who already struggle to cover their expenses at the end of the month? What about those who already spend more than half of their income on rent? What about older adults who subsist on already insufficient pensions and retirements? The new economic measures will deepen social inequalities and the gap between higher and lower-income sectors.

The measures will also lead to a significant increase in unemployment. The easing of imports directly harms small and medium-sized enterprises (SMEs), which employ more than half of the registered workers in the country. The halt in public works announced as part of the package will also lead to the destruction of jobs.

Furthermore, leaving public works exclusively in the hands of private entities, as announced, means subjecting them to profitability criteria. However, public works are important for improving communal life. No one would doubt the necessity of building schools, kindergartens, health centers, roads, and bridges, despite them not being investments that later result in profits. This decision will also impact lower-income sectors, which are the most dependent on public services.

The Argentine State has opted to play a diminished role in ensuring the Argentine people’s access to fundamental rights, by scaling back or eliminating services that cater to social needs. The vast majority of those working in the public sector perform tasks essential for our society: document management, medical care, university teaching, technological development, and heritage preservation, among hundreds of functions. These are the roles that should be prioritized and sustained, ensuring their territorial reach to guarantee equitable access conditions throughout the country. The announced economic policies will deepen the already diminished state capacity to respond to the legitimate demands of the majority and leave those who are expelled daily by the market in a situation of greater defenselessness and abandonment.

The money that the State saves with this adjustment will largely be allocated to paying off debt maturities with the International Monetary Fund (IMF), which immediately celebrated the new economic measures. Thus, the Argentine government has decided to pay the debt at the expense of the rights of the majority.

The government presents this brutal adjustment as the only alternative in Argentina. But imposing an adjustment on those who have the least, without even taking measures to mitigate the damage, is always a political decision, not an inevitable path.

PH: Adrián Escandar