BUENOS AIRES — Elsa Acevedo is the cook at a government-subsidized “community kitchen” in a shantytown outside Buenos Aires. On a recent day, she was preparing a chicken-and-rice stew in a huge aluminum pot. The facility serves free lunches three times a week to supplement the diets of around 80 people in the neighborhood — most of them youngsters. But as Argentina’s economic turmoil intensifies, that’s no longer enough.
“The children came yesterday holding their plates, but we were not serving,” she said.
Latin America’s third-largest economy is being whipsawed by rising inflation and a plunge in its currency, the peso, hurting everyone from laborers who are getting less work to professionals facing credit card bills with soaring interest rates.
The turbulence is the result of several factors. Unclear government policies and an increase in U.S. interest rates have led investors to pull their money out of Argentina and put it into safer U.S. bonds. Government cuts to utility subsidies have led to sharply higher electricity and gas bills, feeding inflation. In addition, Argentina in 2018 suffered its worst drought in 50 years, crippling exports of soy, a major crop.
President Mauricio Macri came to power in 2015 promising to reverse 12 years of protectionist, free-spending policies enacted by the leftist governments of Néstor Kirchner and his widow, Cristina Fernández de Kirchner.
Macri pledged to open up Argentina to international trade, reduce taxes and cut public spending. His image as a market-friendly businessman meant that early in his administration there was an inflow of cash, which helped cover the government’s budgetary deficit.
The economy grew last year by 2.9 percent, and expanded by 3.6 percent year over year in the first quarter of this year. But gross domestic product fell 4.2 percent in the second quarter of 2018 compared with the same period in 2017. The peso has lost half its value against the dollar this year.
This has pushed up the price of gasoline — much of it imported — and, consequently, transport, which has a direct impact on the price of many products, especially food. The shrinking value of the peso has also made it more expensive to buy imported goods such as smartphones, or to travel abroad.
Now there are daily protests as annual inflation surges past 34 percent, compared with about 25 percent last year.
The trickle-down effects of the economic crisis are clear in the shantytown known as Danubio Azul — Blue Danube — where the community kitchen provides meals with the help of government aid and funds raised by local women. Only about 40 percent of residents have regular employment. But those who work are facing reduced hours, and some have recently lost their jobs. More than 10 percent of the children who eat at the community kitchen are malnourished, according to studies by the Citizens’ Social, Economic and Policy Research Institute (ISEPCI), a nonprofit group.
One resident, Nora Pastrana, 45, says she voted three years ago for Macri and his coalition — known as Cambiemos, or “Let us change.”
“He promised change,” Pastrana said, “but change failed.”
The drop in purchasing power has also hit the middle class, which represents about 40 percent of the country’s urban population. Some families have coped by getting rid of their Internet service or sharing it with neighbors, while others have postponed buying a new home or have opted to use public transport rather than fill their cars with increasingly expensive gas.
“We went from eating out once a week to once or twice a month,” said Victor Carbajal, 46, an illustrator who lives in Buenos Aires. Although his partner has a steady job, the couple decided to cancel a trip to New York and to postpone taking out a mortgage for an apartment because of rising costs — mortgage payments tend to be linked to inflation here — and the uncertainty around work.
Valeria Welfo, 41, who has a good job at Argentina’s tax agency, recently started buying food in a cheap street market. “I am saving on everything, everything,” she says. At home, she tells her five children to turn off the lights when they do not need them: Electricity bills have doubled since the government removed subsidies on utilities as part of its plan to tackle the fiscal deficit.
The last time Welfo was at a street market she spent an hour and a half in line to pay for produce. She would not have done that in the past, but now it is worth it, she said.
In June, the International Monetary Fund granted a $50 billion credit line to Argentina — the largest in the fund’s history — to help the country prop up its finances. It was not enough to stop the run on the peso, as investors kept taking their money out of the country.
On Aug. 30, the country’s Central Bank raised its benchmark interest rate to 60 percent to try to make the peso more attractive to investors — a rate it has maintained. That, in turn, has had a serious impact on the ability of small domestic businesses to get credit at affordable rates. Some credit cards are charging more than 100 percent annual interest on deferred payments.
“We believed with excessive optimism that we could go along fixing things bit by bit. But reality shows us that we have to move faster,” Macri said this month, referring to his economic program. “The world has told us that we are living beyond our means.”
The administration has announced austerity measures, including halving the number of government ministries and imposing a tax on exports. It aims to eliminate its fiscal deficit next year. To boost market confidence and stabilize the economy, it renegotiated the agreement with the IMF this month, increasing the loan to $57.1 billion and gaining accelerated access to the funds.
Argentines worry about the economy more than anything else now.
“For the past 20 years the focus shifted between crime and economic problems,” said Juan Germano, director of Isonomía, a public opinion consulting firm. “But at least for the past 10 months, the focus has been steady on the economy.”
Argentina is not new to economic crisis. In 2001-2002, the economy collapsed and the country defaulted on $100 billion in loans. There was a huge rise in poverty.
But Germano says this crisis is different from the previous one: There was a general rejection of the political class then and unemployment was around 20percent, while it is about half that rate now.
The current situation has hit the president’s image, with 52 percent of Argentines viewing him unfavorably, according to Isonomía. Nevertheless, it is widely expected that Macri will seek reelection in October 2019.
His main contender will probably be Fernández, trying to return to power while fighting multiple court cases for alleged corruption. Many in Argentina have rejected the way her administration managed the country and would never vote for her. But others are now wondering whether Macri should be granted a second term, asking whether he is really capable of fixing Argentina’s ever unstable economy.