Argentina performs better in terms of equality, but low income prevents it from accessing many services.
A report prepared by the Fundación Libertad y Progreso, based on Argentine INDEC’s Permanent Household Survey (EPH) and the Supplementary Income Survey (ESI) of the National Institute of Statistics of Chile (INE), determined that on average a Chilean household has 1.9 times more purchasing power than an Argentine one.
The situation worsens when looking at households with lower incomes. The lowest decile in Chile, whose average income is $ 140,277 Chilean pesos (US $ 175.40) can buy 3.04 units of the selected food basket, whose cost is $ 46,143 Chilean pesos (US $ 57.21). Their Argentine counterparts, with an average income of $ 5,321 (US $ 53.1), can barely buy 1 unit of this basket whose cost is $ 5,483 (US $ 54.7). Economists from the Foundation explain that the ratio is 3 to 1. That is, the poorest Chileans have the possibility of buying 3 times more than Argentines under equal conditions.
As income increases, we see the gap between the countries’ purchasing power narrowing. However, the purchasing power of the trans-Andean country is always greater. That said, focusing on the richest fraction of both countries, we can conclude that the richest Chileans, with an average income of $ 2,006,983 Chilean pesos (US $ 2,509) can buy 1.7 times more than Argentines in the same situation, who earn an average of $ 138,066 (US $ 1,376.7). As the data show, although food in Chile costs almost twice its price in Argentina, wages are several times higher in the trans-Andean country. Therefore, the purchasing power ends up being higher.
According to economist Natalia Motyl, “Chile has a GDP per capita that’s two-thirds higher than Argentina’s, one-third Argentina’s debt and an accumulated inflation that last year was equal to the inflation that we have in a month. Perhaps we should take note of the Chilean model ”.
The graph shows the average purchasing power of each decile of the population of both Argentina (blue bars) and Chile (red bars). The first decile represents the lowest-income households. This includes up to $ 11,500 in Argentina and up to $ 240,000 Chilean pesos in the neighboring country). In the wealthiest social stratum, income in Argentina comprises between $ 85,000 and $ 800.000, while in Chile income ranges from $ 1,204 .083 Chilean pesos to $ 9,000,000 Chilean pesos. In turn, the dotted line represents the ratio between the two countries. Thus, focusing on the richest fraction of both countries, we can conclude that, in Chile, the best positioned can buy 1.8 times more than Argentines in the same situation.
Lautaro Moschet, Analyst at Libertad y Progreso explains that the graph was created taking into consideration “representative products (rice, bread, dairy products, flour, oil, cookies, etc.) with the same characteristics” and “the values of these in different supermarkets in both countries. We decided to measure in units of the food basket and not in current dollars in order to be able to separate the cost of living that differs between territories and to be able to measure the real purchasing power ”, he explained.
Moschet stressed that “the most obvious lesson from this graph is that as Argentines we can buy much less than a person who is in the same decile of the income distribution in our neighboring country. Therefore, to say Chile has an inequality problem as an excuse for not adopting pro-market measures is to ignore the main problem: poverty ”. The analyst also emphasized the superficiality of an analysis focused on inequality “How separate the tenth decile is from the first is not relevant. What’s relevant is the latter’s level of income that the latter has since it is what directly impacts the well-being of said individuals” he concluded.
Aldo Abram, Executive Director at Libertad y Progreso, explains that “this work could be carried out with similar results comparing Argentina to Uruguay” and that it shows that price makers “are not responsible for what happens to Argentines, as the government says. The values of the same things are lower here than in either of the other countries. The problem is that the policies applied have impoverished Argentines because , when one is poorer, one can buy less of everything. ” Finally he added that “investment of Argentines and foreigners has been discouraged for a long time. To understand it, someone who works with an increasingly old machine will produce less and earn less. In addition, the Central Bank impoverishes us by taking away our purchasing power, with the inflation tax, to finance excess spending by governments ”.