Argentina’s poverty rate spikes in first 6 months of President Milei’s shock therapy

BUENOS AIRES, Argentina (AP) - Argentina’s poverty rate jumped from almost 42% to 53% during the first six months of Javier Milei’ s presidency, the statistics agency reported Thursday, a steep rise reflecting the pain of the country’s most intense austerity program in recent memory.

The government’s finding that Argentina’s half-year poverty rate in 2024 had surged to its highest level since 2003, when the country was reeling from a catastrophic foreign debt default and currency devaluation, marks a setback for the far-right economist. So far, foreign investors and the International Monetary Fund - to which Argentina owes $43 billion - have cheered his controversial fiscal shock therapy that has succeeded in pulling down the country’s monthly inflation from 25.5% last December to 4.2% in recent months.

Argentina's inflation, now running at more than 230% annually, is among the worst in the world.

Bracing for negative news hours before the poverty report’s release, Milei’s spokesperson sought to deflect the blow in a lengthy press conference.

"The government inherited a disastrous situation," Manuel Adorni told reporters, lambasting the decades of unbridled spending under Milei’s left-leaning Peronist predecessors that generated chronic inflation. "They left us on the brink of being a country with essentially all of its inhabitants poor."

Unlike previous populist governments that kept consumer spending high at the cost of a massive budget deficit, Milei dismantled price controls, cut subsidies on energy and transport and devalued the peso by 54% in December after taking office.

The austerity measures and deregulation have marked a brutal contraction in spending power and dragged the economy deep into recession.

A political outsider who made fighting Argentina's dizzying inflation his flagship campaign promise, Milei is betting that if his government can keep prices falling, growth will return and fuel a miraculous recovery.

Milei's austerity measures have helped drive down the yearly inflation rate from a peak of almost 300% in April. His government's budget proposal expects annual inflation to drop to 122.9% by the end of the year.

But the months ahead will be tricky, economists say. After its initial decline, monthly inflation has been stuck around 4% since July. Milei's 2025 budget proposal aims for a fiscal surplus of over 1.3% of the country's annual economic output. That would require further spending cuts as calls to restart frozen public works and boost pensions and wages grow louder.

Of the millions who can't clear Argentina's official poverty level of about $950 a month in local currency for a family of four, even more have tumbled into destitution. Thursday's poverty report showed that Argentina's extreme poverty rate had shot up to 18.1% during Milei's first six months as president from 11.9% in the last half of 2023.

Among those affected is 32-year-old Rocío Costa, who said the rapidly rising prices have sapped her family's meager income of just over $400 a month. Comforts like hair-dye, soft drinks and pizza had long been out of reach, but in July she realized she didn't have enough money to both buy diapers for her four-month-old and put dinner on the table for her family of five.

"There wasn't even a package of noodles, there was nothing," Costa said from her home in the capital of Buenos Aires. "The Milei government is killing me."

Desperate, Costa turned to friends and volunteers and eventually secured diapers at a social assistance center and $1 second-hand sneakers for her daughter at a local parish.

"We are plugging the holes," she said.

The runaway inflation - shocking even for Argentines who lived through years of annual inflation averaging above 50% - has forced middle-class Argentines to cut back on spending and drain their savings.

The economy has contracted 3% so far this year. Government surveys reveal that both Argentina's vast informal jobs market and formal workforce have hemorrhaged hundreds of thousands of jobs since Milei took office.

That has put more of Argentina's once-robust middle class in danger of sliding into poverty.

"I'm part of Argentina's lost middle class," said 48-year-old Leonardo Constantino. Before he lost his job six years ago, he had a regular paycheck working in restaurants and played padel, the popular racket sport, with friends whenever he could.

Finding a new job has never been harder. "It kept getting worse," he said.

Now a weekend bouncer earning just $155 a month, he said he couldn't afford basic household items without help from the Buenos Aires municipality.

Some months ago, he gave up his favorite hobby. The $6 padel court fee had become too much.

For decades low-paid Argentines have navigated their upside-down economy by padding their meager incomes with government cash transfers and generous subsidies that reduced the cost of utilities, food and transport.

But utilities bills jumped over 200% for many after Milei scrapped the subsidies to trim the deficit.

For Sofia Gonzalez Figueroa, a 36-year-old single mother who last year paid $10 a month for electricity, the pain of Milei's austerity was instantaneous. Her utilities bill skyrocketed by 830%.

Gonzalez Figueroa barters clothes for shampoo and other essentials, and uses the government's family welfare program to buy groceries.

"It is not much, but it helps me," she said.

Those who don't qualify for assistance have increasingly turned to side hustles to pay utilities bills. Emilce Correa, who works 42 hours a week as a lab technician at a public hospital, picks up all extra shifts she can at far-flung medical centers. "By the middle of the month, I already have nothing," she said.

Others have joined the growing legions of workers offering to wash car windows at red lights and mining dumpsters for sustenance.

Débora Galluccio, a 48-year-old legal expert who lost her job in Congress during the previous administration, went from dining in restaurants to soup kitchens in less than a year.

"It's hard, but we manage as best we can," Galluccio said, sipping stew provided by a local nonprofit. She said she feels lucky to live in an apartment that her partner inherited. Milei's move to relax rent-control regulations has priced most working-class Argentines out of the real estate market.

Despite it all, Galluccio - like many Argentines - seems to have accepted that the immediate pain of Milei's economic reforms is an inevitable step toward prosperity.

Fed up with generations of crises under left-wing populists, Galluccio is giving the chainsaw-wielding radical a shot.

"In eight months he can't fix the mess they made in 20 years," she said.

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