Although the Government assures that pension benefits stopped losing purchasing power against the inflationthe reality is that The majority of retirees and pensioners continue to bear the brunt of the adjustment. In the first seven months of the year, the chainsaw Javier Milei cut $22.5 billion compared to 2023 at constant values.
From that formidable cut, unprecedented in history according to the government officials themselves, 27% is supported by the pension system, According to a report by the Argentine Institute of Fiscal Analysis (IARAF).
In turn, that weight of the The chainsaw on pensions is reflected in a record drop in purchasing power due to the liquefaction effect. Although the Government changed by decree the adjustment formula of the previous administration to bring it in line with last month’s inflation, The truth is that currently the pension of a retiree is integrated with the component of a bonus ($70,000) that they keep fixed in the last months.. In this way, the effect on the assets of the majority of retirees, who are those who receive the minimum, is a loss of purchasing power.
How the cuts will come in 2024
According to the IARAF, between January and July, “national public spending paid fell by $22.5 billion in constant July pesos compared to 2023.”
“It is important to analyze the distribution of public spending cuts. Fourteen of the 16 types of spending saw cuts of $22.9 trillion in constant currency”the report details.
Instead, he points out that “two of the 16 had increases of $0.4 billion,” “So, as a result, primary spending fell by $22.5 trillion.”
“Of those expenses that fell, it is seen that Retirements and pensions accounted for 27% of the total reduction (their share decreased 2 pp compared to the previous month),” the report says. In contrast, direct real investment contributed 15% of the adjustment, transfers to provinces 14%, energy subsidies 12% and wages 8%, among the most important.
Pensions lose
According to data from the Catholic University of Argentina (UCA) the “most critical moment of the value of the minimum retirement pension took place in February 2024, when the minimum retirement fell to $144,993, without the bonus, and to $220,430, with the addition of the bonus”“These figures represent a drop of 66% and 48%, respectively, compared to the average pension in 2013. At that time, although it was not the lowest value in the series, the minimum pension – including the bonus – was similar to that received between 2003-2004 (in the process of recovery of real income),” the study indicates.
“After this fall in February 2024, in the context of the implementation of a new pension update formula, The minimum pension was achieving a relative recovery, reaching in July an amount of $215,581 without bonus and $285,581 with bonus. Between February and June 2024, the recovery would have been 49% for the salary without bonus and 30% for the minimum bonus salary,” the report says.
What needs to be taken into account is that, During that period, the cumulative inflation for the first seven months was 79.8%, while the interannual inflation for July was 271%.
Research indicates that the value of minimum pensions, in the best moment between 2001 and 2024, was in the first half of 2013. At current values, The minimum without a bonus should be $494,490.
Blender effect
After the change of the formula of adjustment of pensions, September salaries will rise by 4%, in line with the increase in inflation reported by the National Institute of Statistics and Census (INDEC) for July.
Because The Government maintains the additional bonus of $70,000 (which has been fixed since March of this year), the retiree with the minimum will receive $304,540 in hand, so that the effect It is an increase of 3% in the net, approximately.
In this way, the minimum will rise from $225,454.42 gross to around $234,540 while the maximum will go from $1,517,094.80 gross to $1,578,234. With the discounts for PAMI, $227,504 and $1,490,576 remain on hand. With the effect of the bonus, the minimum would be $304,450 in hand.
Source: Ambito
