The Economic and Social Reality Study Group (GERES) calculated, based on official data, that the package of items that make up the so-called social spending fell 22.6% year-on-year in real terms. The collapse marked a sharp deterioration compared to the previous months, in which more limited increases and decreases alternated. The data includes items destined for contributory retirements and pensions, family and child allowances, non-contributory pensions, PAMI benefits, Potenciar Trabajo and Alimentar Card, among others.
In the breakdown made by GERES, the biggest drop occurred in non-contributory pensions, with a real cut of 36.4%; family allowances, AUH and AUE, with 31.2%; and retirements and contributory pensions, with 23.9%. In PAMI, the adjustment was 5.1%. In the rest of the programs (Promote Work, food policy, bonus for retirees, etc.) it was 16.6%.
It is true that before the presidential change, social spending was already showing a contraction in real terms and that Milei did not govern throughout December, but the megadevaluation and its inflationary impact (without compensation with new games) they made the liquefaction speed up abruptly.
“In the accumulated January-November, considering the cash-based data (the payments actually made), there was already an average drop in social spending of 4.5% in real terms compared to the same period in 2022. But In December the adjustment intensified significantlywith a cut of 22.6%,” he said. Tomas Paezeconomist GERES, in dialogue with Ámbito. The analyst explained that the last budget expansion of the previous government (on December 1) was already insufficient to avoid a fall in real terms, but clarified: “In the context of the inflationary flash, the current management could have expanded the corresponding items, but one of its primary objectives consists precisely, without a doubt, in the liquefaction of spending through inflation.”
Social spending: the adjustment to come
That photo from December, which does not contemplate the deterioration of salaries or the removal of rate subsidies in middle- and high-income households, appears as a preview of the film that the economic team is scripting for this year. Without going any further, in his first announcement as minister, Luis Caputo had already anticipated a cut of 0.4% of GDP in retirements and pensions for this year in view of the 0% financial deficit goal. For social programs (such as Enhance Work), a cut of the same magnitude was proposed based on the freezing of the items in a context of inflation that travels above 200% annually, with the extension of the 2023 Budget as a tool. The only exceptions were the doubling of the amount of the AUH in January and the Alimentar Card in February.
Pension spending is already experiencing a deepening of the adjustment at the beginning of the year. With bonds frozen at the same $55,000 as in December and skyrocketing inflation that will not impact the increase due to the mobility formula in March, In the first quarter, a minimum retiree with a bonus will lose 32% in real terms compared to the same period in 2023, according to a calculation by the Argentine Institute of Fiscal Analysis (IARAF). What happens from the second quarter will depend on whether the Government makes a new attempt to suspend or modify the formula, after withdrawing this point from the omnibus bill.
Retirees and pensioners come from years of deterioration, after the collapse of assets during the mandate of Mauricio Macri, which was far from recovering during that of Alberto Fernández. According to GERES calculations, in 2023 the minimum asset with bonuses was on average 16.4% below the 2017 level and the asset without reinforcements was 38.7% lower. “Comparing the months of December of both years, the drop rises to 21.7% and 50.9%” respectively, the study group highlighted.
Another item that hits directly the homes most affected by the crisis is that of attendance at soup kitchens attended by more than 10 million people. It is a item that the Ministry of Human Capital directly kept at zero in the first month of the year after the announcement that the Government would change the system in allocating funds, as can be seen from the Citizen Budget data. Last week, the minister’s response Sandra Pettovello It was that he would not receive the representatives of the organizations, but that he would serve “one by one the people who are hungry.” This Monday there was a 20-block queue from the door of the Pellegrini y Juncal building where he has his office to almost Belgrano Avenue. Pettovello did not receive them and the leader Juan Grabois He criminally denounced her for “not arranging the delivery of food in neighborhood and community soup kitchens” and for failing to fulfill her duties “as a minister with direct jurisdiction over the issue.”
“Caputo’s first announcement already predicted that inflation was going to increase rapidly without comparable social containment measures. Only a slight increase for the Alimentar Card and AUH. Therefore, between lower retirement payments, public sector salaries and social plans in real terms, it is adjusting part of what it intends to save for this year,” he said. Martin Kalosdirector of Epyca Consultores, in dialogue with Ambit.
And he concluded: “This speaks of where the Government finds room to reduce spending without touching other interests. Because there are some economic promotion programs for specific sectors that are not altered even though they could be modified by regulatory decree, that is, they would not have the legality problems that both the DNU and the Base Law have, but they have not been touched. Ultimately, adjustment to ‘caste’ is an orthodox adjustment to workerswith a right-wing populist logic that served the campaign but that possibly has short legs because in the coming months we will see that the adjustment falls on the majority of the population.
Source: Ambito
