The Most Vulnerable In Argentina, Those Who Always Lose

Photo Ivan Cachanosky
Ivan Cachanosky

Lic. in Business Administration. Master in Applied Economics of the UCA. PhD in Economics from the UCA.

PANAM POST – In recent days, two of the issues that were heard the most in Argentina in the economic sphere were the dollar and the increase in retirees. On the one hand, the Central Bank is bleeding its reserves to keep the official exchange rate constant, while, on the other, inflation is on the heels of the discretionary increases proposed by the Executive.

While it is true that economic stability was lost several years ago, many voters had the hope of improving their future and they manifested this in last year’s presidential elections. Yet 2020 was accompanied by a pandemic virus, a destructive quarantine, and campaign promises that never happened.

Among those words that won votes, it was proposed to increase pensions by 20% and reduce the stock of Leliqs (Liquidity Letters) to pay for retirees’ medications with interest savings. Unfortunately, the data shows us a reverse situation. They suspended the Retirement Mobility Law to grant increases lower than those corresponding to the aforementioned law, and the number of Leliqs increased 64% compared to August last year. In this way, the Leliqs represent 78% of the monetary base and the total of the remunerated debt (adding the Passive Passes) exceeds the totality of it, since it is 105% of the monetary base. In short, we go from the Lebacs pump (Letters issued by the Central Bank) to the Leliqs pump.

This shows that the most vulnerable group in society suffered an adjustment from the government. It is also true that this situation is not unique to the current ruling party. During the Macri government, a peak of 403 dollars was reached, in the minimum amount, but at the end of his administration, it reached only 195 dollars. In addition, at the beginning of the second term of Cristina Fernández de Kirchner (CFK), a retiree could buy $ 351 after collecting her retirement, however, in June 2014 a minimum of $ 218 was reached. In other words, both presidents completed their terms, leaving older adults with an income lower than what they received four years ago. These figures take into account the value of the informal dollar (“blue”), due to the impossibility that the vast majority of people had to access the official market, given the exchange rate.

At present, the last increase decreed in June, combined with the strong devaluation, results in those who receive the minimum retirement, receiving the equivalent of 129 dollars. Furthermore, compared to the price index, retirees have lost 9% of their purchasing power since December 2011. In short, the constant depreciation of retirees’ income causes a relative rise in the cost of living, generating a worse quality in the same.

Minimum retirement expressed in dollars

Let’s not forget that in 2008, the then CFK government decided to nationalize the pension system, expropriating more than $ 20 billion in private savings to continue a populist party that was becoming increasingly difficult to sustain. As the data shows, from this event, there were repeated fluctuations, which although they achieved some sporadic improvements, the long-term trend has always been negative. For this reason, from now until then, retirees have been losing their purchasing power and the nationalization of the pension system was nothing more than a great scam to the Argentine people.

By Lautaro Moschet and Iván Chachanosky: