“The economic situation is catastrophic, people are very sad,” says Luis from behind the counter of his pet food store in a middle-class neighborhood of Buenos Aires. Argentina is used to recurring economic crises, but the covid-19 pandemic has aggravated the umpteenth recession that the country is suffering, this time since the middle of 2018. Argentina’s Gross Domestic Product (GDP) fell by 19.1% in the second quarter of the year, the largest quarterly collapse since the statistical series began in 1981. Between January and March 2002, the worst moment of the corralito crisis that erupted at the end of 2001, the economy had fallen 16.3% .
The current recession has had a harsh impact on the lower middle class and, of course, the poor. The government of Alberto Fernández has protected formal employment with laws and subsidies, but the blow for those without a contract has been hard. Numerous domestic workers, waiters, bricklayers and commercial employees, among other professions with high numbers of informal work, have lost their income or have seen it reduced below the poverty line. The number of poor people grew by more than five percentage points in the first half of the year: from 35.5% to 40.9%. In 2017, the last year of growth for the Argentine economy, poverty was 25.7%.
The pandemic has also wiped out many businesses. Restaurants, bars, party halls and gyms have drawn down their blinds after months of mandatory closures to prevent the spread of Covid-19. Others have been converted into greengrocers, hardware stores and toy stores. This is the case of the business managed by Federico Cillarroca. The ball pools and slides that received children in this children’s birthday room have disappeared and toys of all kinds have been put on sale. “We are doing what we can to get through the shock. We continue to pay employees, which is not a little, but there are many families that depend on this, entertainers, waiters, make-up artists, magicians, the girl who makes the cakes, the snack providers … There are 20 or 30 families, easy “, he says Cillarroca.
“Being in Argentina means having many crises, with drops and rises in consumption, drops and rises in profitability, and one has to fight, we have the soul of entrepreneurs. But this is different, everything was closed. Zero income and expenses were maintained ”, laments Cillarroca. The same is the opinion of the manager of a nearby gym, Carolina Vielman. They reopened the doors this week, after 222 days of mandatory closure, and are back in business with less than a third of the partners they had in March: they have gone from 1,400 to 400.
The subsidy that the Government has given to pay part of the salaries to thousands of companies has helped them to pay employees, but many businesses accumulate large debts with the treasury or the companies that provide electricity, water and electricity and do not know how they will pay off. “Everything is very quiet, almost nothing is sold,” laments Miriam, the owner of a stationery store who does not remember a more difficult moment in the five years that she has been with the store.
Julio Cabrera chose a path inverse to that of many: grow to survive. “I got bigger because this item did not close due to the pandemic. It was also added that I had to leave the previous premises and lower the blind would have been to close permanently and stop selling, ”says this 44-year-old toy salesman, father of three children.
Without access to credit markets until the Government renegotiates the debt with the IMF, Argentina finances the economic paralysis of the pandemic with the issue of currency. Only in the first half of the year, the Central Bank issued more than 1.35 trillion pesos to cover the fiscal deficit and finance subsidies such as the IEmergency Family Login, distributed to nine million people. The level of issuance is so high that Argentina has had to import 400 million banknotes from Brazil.
Waiting for a devaluation
Printing increases inflationary pressure – in September there was a year-on-year increase of 37% – even in this context of crisis and with severe controls on the exchange market. The dollar is sold at 83.50 pesos in the official market, in which there are more and more obstacles to access, already more than double —169 pesos per dollar, but touched 200 pesos a week ago — in the parallel market. Nobody believes that the exchange rate gap can remain so high, so many fear a devaluation that will trigger prices even more. “I can’t buy dollars, so I stock up on merchandise,” says Luis, showing a place where he can hardly move from so many huge sacks of food for dogs and cats. “Last year we saw it, the peso was devalued by 20% and from one day to the next they transferred it to prices,” he argues to justify the early purchase.
“There are many people who want to work, but everything is stopped for various reasons. One, that the municipalities are not working and do not give construction permits. When they work, they are going to find a multitude of permits and there will be a funnel there too. Later it happens that there are works that are being done, but there is neither iron nor concrete because the cement and iron factories are not delivering, they are hoarding, waiting for the devaluation. Even if you want to build, you can’t ”, says Roberto Barcala, a freelance architect.
In addition to the transformation of many businesses, this architect believes that the pandemic will also bring important urban changes, as reflected in the sudden interest in countries, as they call in Argentina the private neighborhoods on the outskirts of cities. Many offices in the center of the city have been deserted and, on the contrary, teleworking has forced to reorganize the interior of the houses.
The immediate future worries Argentines. The increase in the price of raw materials helped Argentina to emerge from the crisis of 2001-2002, but the international context is now very different, with a global recession. “Next year will be worse, I am very afraid. I think that if I didn’t have a family I would go live abroad ”, predicts Luis, father of two adolescent children. Others, like Cabrera, the toy salesman, trust that the country will recover: “I always go up, if not, I close and start selling sandwiches. The situation is very complicated, but I am very optimistic. Next year we will be better. What else can we think of? You have to continue in some way ”.