Argentina’s deepening economic crisis is pushing millions into poverty, with the latest government data revealing a stark reality: more than half of the country’s 45 million citizens are now living below the poverty line.
The poverty rate jumped from 41.7% at the end of 2023 to 52.9% in mid-2024, according to the National Institute of Statistics and Census (Indec).
The report also found that homelessness is on the rise, reaching a staggering 18.1%. This represents a significant jump of 6.2% compared to the second half of 2023.
The worsening financial situation casts doubt on President Javier Milei’s ambitious plans to turn the country’s economy around.
Critics, particularly from opposition parties, quickly blamed Milei’s harsh austerity measures. They argued that his aggressive cuts in government spending were exacerbating the hardships faced by millions of Argentines.
Eduardo “Wado” de Pedro, a senator from the opposition Unión por la Patria (Peronism), tweeted that “in six months, the ‘biggest adjustment in history’ has impoverished more than 5.3 million Argentines and pushed more than 3 million into poverty.”
Economic crisis is nothing new for Argentina. But the recent drop in revenues comes at a critical time, as the government embarks on a bold “shock therapy” to stabilize the economy.
Upon taking office, Milei wasted no time in implementing drastic reforms. He slashed subsidies on essential goods such as fuel, electricity, and transportation, and laid off thousands of government workers, with civil servants bearing the brunt of the cuts.
His reforms even extended to a significant reduction in his own cabinet, eliminating many senior political figures in an effort to reduce government spending.
In some areas, these austerity measures showed early signs of success. Annual inflation, which had soared to an unprecedented 250% in August, began to ease.
The government also managed to run a budget surplus every month since February. But the rapid withdrawal of cash from the economy had unintended and visible consequences.
Once-bustling shopping streets became eerily deserted. As Milei tightened the cash flow, powerful trade unions – empowered by previous socialist governments – responded with strikes, further challenging his economic agenda.
These unions are now seen as a major obstacle to Milei’s reforms. His administration attributes Argentina’s economic woes to the excessive social welfare programs championed by previous governments led by Peronist Alberto Fernández.
‘Disastrous Inheritance’
At a recent press conference, presidential spokesman Manuel Adorni described the country’s current economic hardship as ‘a disastrous inheritance’.
Until a few years ago, populist policies were a favorite weapon of political parties to attract voters. These programs drained government funds, leaving the country struggling to meet bond payments and upgrade critical infrastructure.
As Argentina teetered on a brink of default, foreign creditors sued the country in U.S. courts, demanding repayment. The ruling favored the creditors, but leftist politicians in Argentina famously labeled these bondholders as “vulture funds.”
Meanwhile, a series of government interventions, such as price controls on essential goods, further worsened the economic situation.
These actions undermined investor confidence and dried up foreign investment, leaving the Argentine peso vulnerable to a sharp decline. As the peso weakened, Argentines began hoarding U.S. dollars, further destabilizing the currency.
Referring to this history, the president’s spokesman said, “A building can be destroyed in a second, but it takes much longer to rebuild. That is what happened in Argentina.
Dollarization Program
To restore stability, Milei is now pushing for “dollarization” – a radical plan to replace the peso with the U.S. dollar. He believes this move could finally solve Argentina’s long-standing economic instability.
To facilitate this, he has introduced an amnesty program that encourages citizens to deposit their U.S. dollar savings in domestic banks. Under the program, Argentines can declare up to $100,000 in cash without facing tax penalties, an attempt to bring large amounts of untaxed dollars back into the formal financial system.
The program has had some early success. By the end of September, dollar deposits in Argentine banks had jumped 40%, reaching $19.8 billion. However, this is only a fraction of the estimated $200 billion still held outside the formal banking system, in homes, safe-deposit boxes and foreign accounts.
Despite these early gains, Milei’s administration faces enormous challenges. The central bank’s reserves remain in negative territory, and the overall economic landscape is precarious. Although some progress has been made, the road to restoring stability and rebuilding Argentina’s economy will be long and uncertain.
Add comment