Argentina’s poverty rate peaks in the first six months of President Milei’s shock therapy

BUENOS AIRES, Argentina — Argentina’s poverty rate rose from nearly 42% to 53% during the first six months of Javier Milei’s presidency, the statistics agency reported Thursday. A steep increase reflects the pain of the country’s most intense austerity program in recent history.

The government’s finding that Argentina’s poverty rate rose by 2024 to its highest level since 2003, when the country was reeling from a catastrophic foreign debt default and currency devaluation, marks a setback for the far-right economist . So far, foreign investors and the International Monetary Fund – to which Argentina owes $43 billion – have applauded his controversial fiscal shock therapy, which has managed to reduce the country’s monthly inflation to 4.2 from 25.5% last December % in recent months.

Argentina’s inflation rate, now over 230% annually, is among the worst in the world.

Bracing for negative news hours before the poverty report’s release, Milei’s spokesman tried to deflect the blow during a lengthy press conference.

“The government has inherited a disastrous situation,” Manuel Adorni told reporters, denouncing decades of rampant spending under Milei’s left-wing Peronist predecessors, which caused chronic inflation. “They left us standing on the brink of a country where virtually all of its inhabitants are poor.”

Unlike previous populist governments that kept consumer spending high at the expense of a huge budget deficit, Milei dismantled price controls, cut energy and transport subsidies and devalued the peso by 54% in December after taking office.

Austerity measures and deregulation have led to a brutal reduction in purchasing power and dragged the economy deep into recession.

Milei, a political outsider who has made fighting Argentina’s staggering inflation his campaign promise, is betting that if his government can lower prices, growth will return and spark a miraculous recovery.

Milei’s austerity measures have helped push annual inflation down from a peak of almost 300% in April. His government’s budget proposal expects annual inflation to fall to 122.9% by the end of the year.

But the coming months will be difficult, economists say. After an initial decline, monthly inflation has remained around 4% since July. Milei’s budget proposal for 2025 aims for a budget surplus of more than 1.3% of the country’s annual economic output. That would require further cuts, as calls to restart frozen public works and raise pensions and wages grow louder.

Of the millions who fail to rise above Argentina’s official poverty level of about $950 a month in local currency for a family of four, even more have fallen into poverty. Thursday’s poverty report showed that Argentina’s extreme poverty rate rose to 18.1% during Milei’s first six months as president, from 11.9% in the last half of 2023.

Among those affected is 32-year-old Rocío Costa, who said rapidly rising prices have undermined her family’s meager income of just over $400 a month. Comforts like hair dye, soda and pizza had long been out of reach, but in July she realized she didn’t have enough money to both buy diapers for her four-month-old child and put dinner on the table for her family. five.

“There wasn’t even a packet of noodles, there was nothing,” Costa said from her home in the capital Buenos Aires. “The government of Milei is killing me.”

Desperate, Costa turned to friends and volunteers, eventually securing diapers from a social assistance center and $1 worth of second-hand sneakers for her daughter at a local parish.

“We are closing the gaps,” she said.

Runaway inflation – shocking even for Argentines who have experienced years of annual inflation averaging above 50% – has forced middle-class Argentines to cut back on spending and drain their savings.

The economy has shrunk 3% so far this year. Government surveys show that both Argentina’s vast informal labor market and the formal workforce have lost hundreds of thousands of jobs since Milei came to power.

That has pushed more of Argentina’s once strong middle class into poverty.

“I am part of Argentina’s lost middle class,” said 48-year-old Leonardo Constantino. Before losing his job six years ago, he had a steady salary, worked in restaurants and played padel, the popular racket sport, with friends whenever he could.

Finding a new job has never been so difficult. “It kept getting worse,” he said.

Now a weekend bouncer earning just $155 a month, he says he can’t afford basic household items without the help of the Buenos Aires municipality.

A few months ago he gave up his favorite hobby. The $6 padel court fee had become too high.

For decades, low-wage Argentinians have managed their upside-down economy by padding their meager incomes with government cash transfers and generous subsidies that have lowered the costs of utilities, food and transportation.

But utility bills rose by more than 200% for many after Milei cut subsidies to reduce the deficit.

For Sofia Gonzalez Figueroa, a 36-year-old single mother who paid $10 a month for electricity last year, the pain of Milei’s cuts was immediate. Her energy bill skyrocketed by 830%.

Gonzalez Figueroa trades clothes for shampoo and other necessities, and uses the government’s family welfare program to buy groceries.

“It’s not much, but it helps me,” she said.

Those who do not qualify for assistance have increasingly turned to part-time jobs to pay utility bills. Emilce Correa, who works 42 hours a week as a lab technician at a public hospital, picks up whatever extra shifts she can at far-flung medical centers. “Halfway through the month I already have nothing,” she said.

Others have joined the growing legions of workers offering to wash car windows at red lights and mine dumpsters for a living.

Débora Galluccio, a 48-year-old legal expert who lost her job in Congress during the previous administration, went from dining in restaurants to soup kitchens in less than a year.

“It’s hard, but we’re coping the best we can,” Galluccio said as he sipped the stew provided by a local nonprofit. She said she feels lucky to live in an apartment her partner inherited. Milei’s move to relax rent control rules has priced most working-class Argentines out of the real estate market.

Despite all this, Galluccio – like many Argentinians – seems to have accepted that the immediate pain of Milei’s economic reforms is an inevitable step towards prosperity.

Fed up with generations of crises among left-wing populists, Galluccio gives the chainsaw-wielding radical a chance.

“In eight months he can’t fix the mess they’ve created over 20 years,” she said.

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