ARGENTINA:
Economic Growth Doing Little to Reduce Rich-Poor Gap

Marcela Valente

BUENOS AIRES,  (IPS) - The steady economic growth experienced by Argentina over the past two years has brought the unemployment and poverty rates down from record highs.

But the expansion that pulled the country out of the pit into which it had fallen in late 2001 is doing little to reduce social inequalities and the huge gap between rich and poor.

”The redistribution of wealth is our big challenge,” admitted a high-ranking member of the government of left-leaning President Néstor Kirchner, who preferred to remain anonymous.

”There is a huge debate in the government on that issue,” the source told IPS. ”We know that economic growth is not sufficient, if the way income is distributed is not questioned.”

The December 2001 collapse marked the start of the worst crisis in Argentine history. But the economy has been enjoying a slow recovery, with 8.8 percent gross domestic product (GDP) growth in 2003 and nine percent in 2004.

This year, the government was able to restructure public debt that the country had defaulted on in late 2001, in a debt swap that entailed losses of around 70 percent for bondholders.

Unemployment, meanwhile, which had soared to 24.1 percent in the second half of 2002, dropped to 12.1 percent by late 2004, and poverty, which affected a shocking 57.5 percent of the population of 36 million at the height of the crisis, had fallen to a level of 40.2 percent by the end of 2004.

At the same time, the recovery of industry and trade has been reflected in a rise in exports, consumption and investment.

However, the rallying of the economy has had nowhere near an equivalent impact on the distribution of wealth, which remains highly unequal in Argentine society.

In 1994, the income of the richest 10 percent of the population was nearly 20 times that of the poorest 10 percent. But by 2002, the income of the wealthiest was 30 times higher, a ratio that only dropped slightly, to 29:1, in 2004.

Economist Claudio Lozano at the Central de Trabajadores Argentinos trade union confederation told IPS that the problem lies in ”the lack of a programme aimed at reindustrialisation and the redistribution of wealth,” which should also include reforms of the tax system, in order to levy heavier taxes on the highest-income groups.

Lozano is calling for a development strategy that would include society as a whole, and not just some sectors that are already growing at a fast pace, while the benefits, he said, are not ”trickling down to the rest of the productive structure.”

Another economist, Leonardo Gasparini at the University of La Plata Centre for Distributive, Labour and Social Studies, remarked to IPS that in Argentina, economic growth, even at the high levels currently seen, is not enough in and of itself to revert the profound inequality.

What is needed, according to Gasparini, are additional measures in the areas of education, labour and health policy in order to alleviate the poverty suffered by such a large proportion of the population, and to move towards a more equitable development model.

Doubts have also been raised as to the solidity of Argentina's economic recovery, which is based largely on the growth in farm exports in a context of rising international commodity prices.

But the president of the state-run Banco Nación, Felisa Miceli, said the post-crisis economic growth achieved ”is more than just a simple rebound.”

”We see a vigorous, vital economy in which key variables like exports, consumption and investment are strong,” Miceli told foreign correspondents at a news briefing Thursday.

But she also foresaw ”bottlenecks” that could act as curbs on the process, such as insufficient investment in transport and energy infrastructure.

Other challenges she mentioned were the scarcity of skilled labour, the concentration of the country's large companies in a few hands, the lack of tax reforms, and the regressive distribution of income.

Miceli, the first woman to ever head Argentina's largest bank, said that although these problems are ”structural” and difficult to resolve in the short-term, she is confident that they form part of the Kirchner administration's concerns.

Latin America is the region with the most unequal distribution of wealth, and is having problems reducing extreme poverty at the rate required to meet the Millennium Development Goals (MDGs), which were adopted in September 2000 by the international community.

The first MDG is to halve the proportion of hungry and extremely poor people in the world by 2015.