Argentina has 4 times more poverty than Chile and Uruguay - IDESA


Report Nº: 80204/04/2019

Argentina has 4 times more poverty than Chile and Uruguay

Although it was predictable, the increase in poverty reported by the INDEC generated consternation. As the experience of neighboring countries shows, less opportunism and more professionalism are needed at the three levels and branches of government to achieve better social results. INDEC reported that the urban poverty rate increased to 32% of the population in […]

INDEC reported that the urban poverty rate increased to 32% of the population in the second semester of 2018. In the same period of the previous year, it was located in the vicinity of 26%. It is easy to associate this deterioration in the social situation with the big devaluation of 2018 and its inflationary correlate. At the end of 2017, a family of four members needed incomes above $ 16 thousand per month to avoid poverty (Total Basic Basket). At the end of 2018, this amount rose to $ 25 thousand, that is, an increase of 55%. As the income of the population grew by less this percentage, many families whose incomes were close to the Total Basic Basket value fell into poverty.

Faced with this situation, diagnoses focused on temporal issues, such as the devaluation and the fiscal adjustment. However, it is necessary to have a more integral and profound vision to identify the origins of the problem. In this way, more consistent strategies can be designed to reduce poverty substantially and permanently.

Thought in this way, it is pertinent to compare the social dynamics of Argentina with its neighboring countries. This is relevant given their geographical and cultural proximity, beyond the political differences between them. In this sense, according to official data of the three countries, between 2006 and 2018 poverty had the following behavior:

  • In Argentina it went from 29.2% to 32.0% of the population.
  • In Chile it went from 29.1% to 8.6% of the population.
  • In Uruguay it went from 32.5% to 8.1% of the population.

These data show the enormous dimension of the social failure suffered by Argentina. Starting from similar situations in 2006 –the three countries with 1 in every 3 people in poverty– Chile and Uruguay lowered poverty to 8% of the population in little more than a decade. In the same period, Argentina in 2006 began to distort the INDEC statistics to conceal poverty and then stopped measuring it in 2013. With the new government, in 2016 it was measured again and was in the order of 1 in every 3 people in poverty, a level that, except for some swings, is maintained over time. The consequence is that Argentina currently has 4 times more poverty than Chile and Uruguay.

Such involution exceeds the current economic crisis and leads to an emphasis on more structural issues. Between 2006 and 2018, the state’s income at its three levels (federal, provincial and municipal) went from 28% to 35% of GDP and public spending from 27% to 41% of GDP. That is to say, a much larger and deficit-prone public sector was generated, deepening a trend that comes from more than half a century. The main consequence was the spurious monetary expansion and high public indebtedness, from which high inflation multiplies poverty. The neighboring countries with a more responsible and professional state administration (public spending in Chile is 25% and Uruguay 33% of GDP) have managed to avoid inflation and substantially reduce poverty.

The central problem is the mismanagement of the Argentine state that is plagued by irresponsibility, opportunism, and mediocrity. There are hundreds of welfare programs run from the three levels of government that only serve to justify bureaucracy and corruption, but have shown that they do not serve to lower poverty. This is despite the fact that adding up what the federal level, provinces and municipalities spend on social assistance reaches to eliminate poverty. Something similar happens on the side of the tax system. While the declamations in favor of the equity reach unpalatable levels, systematically public decisions are made so that the rich pay less tax. A recent example is the Court’s decision to exempt and return income tax to a privileged retiree.

Assigning responsibility to the current government or the IMF for the increasing poverty is a simple and politically attractive way to explain the failure. But, as the experience of Chile and Uruguay demonstrates, what is needed is less hypocrisy and more professionalism in public management in all levels and branches of the public sector.

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