Argentina’s middle class is being severely affected by the elimination of subsidies for transportation and energy, significant increases in charges for prepaid health plans, a high inflation rate, and the resulting decrease in purchasing power. As a result, there is an immediate impact on the already prevalent poverty levels, with the addition of a significant portion of the population, approximately 47 percent, falling below the poverty line.
In an interview, Juan Ignacio Bonfiglio, a researcher at UCA Catholic University specializing in living and housing conditions, stated that the new group of individuals experiencing poverty are primarily from the lower middle class. These individuals are suffering from the impact of austerity measures, which have caused a decline in their household’s real income.
The organization evaluates the quality of life by considering factors like access to basic needs such as suitable housing, household assistance, education, nutrition, and healthcare.
Based on the most recent information from the statistics bureau at City Hall, a family with four members needs to have a monthly income exceeding 745,270.73 pesos to be considered middle-class, assuming they already own their home. Rent prices, on the other hand, have gone up significantly in 2023, with a 260 percent increase (including a recent 18.6 percent rise), surpassing the annual inflation rate of 211.4 percent.
Tenant associations are criticizing the negative effects of the government’s repeal of the Rent Law. Despite the potential increase in available housing units, the ability to enter into contracts without minimum rental periods or security deposits is harming those who need to rent accommodation. On average, a two-room flat costs 334,800 pesos per month and a three-room flat costs 460,000 pesos.
The middle-class will face another financial setback with the removal of subsidies for electricity and gas expenses. After a public hearing regarding gas invoicing, the government has decided to reduce subsidies for January, February, and March. Economía y Energía, a consultancy firm, has calculated that the middle-class will experience a staggering increase of over 600 percent in their bills between January and April for this particular service.
After President Javier Milei issued an urgent decree DNU 70/2023, prepaid healthcare plans have revealed that they will implement price hikes exceeding 80% during the initial two months of this year. Additionally, the cost of medications has outpaced inflation, with prices tripling over the past year.
Food consumption experienced a significant decrease last month, following initial price increases of up to 150 percent for certain items in the first month. The retailers’ association, CAME, reported a 13.7 percent decline in sales compared to the previous December, with a troubling 19.8 percent decline in year-on-year sales of food and beverages.
Bonfiglio stated that we should anticipate these measures to have a significant impact on middle-class sectors in the coming year. This includes the cutting or elimination of subsidies and the decrease in real salaries due to inflation.
The speaker stated that there are certain unknown factors in the medium and long term that are likely to impact the middle-class conditions negatively, which have already been negatively affected in the recent years. According to him, the middle-class sectors are the reason behind the rise in poverty in the past four to five years.
The researcher predicted that in the upcoming years, there is a high likelihood of ongoing dynamics resulting in more poverty, possibly even extreme poverty.
The Social Debt Observatory at UCA also tracks the quality of life through the availability of education. Before the start of the school year, private schools in various chambers expect a rise in fees ranging from 30 to 50 percent.
According to the Ecolatina consultancy firm, monthly inflation is expected to remain at approximately 20 percent from December to March. This is projected to result in a decrease of around 10 percent in real wages during that time frame.
This autumn, the reduced interest rates for fixed-term deposits, along with the restriction on withdrawals from UVA deposits intended for mortgages being extended from three to six months, further exacerbates the limited options for middle-class savers. This decrease in savings opportunities for the middle class was already observed in previous months.
Bonfiglio stated that any new crisis that disrupts the macro-economic variables has a profound impact on people’s quality of life. He also pointed out that with each crisis, poverty and destitution reach even lower levels.
The expert pointed out that there is usually a process of recovery and improvement in living conditions after each crisis. However, the problem is that the rebound tends to be to a worse level than before the crisis. This has been a recurring trend in Argentina over the past few decades, according to the expert’s conclusion.
batimes
