Argentina Just lit the Fuse on the Dynamite Called Revolution

argentina

Argentina is following the same path as Egypt, Syria, Venezuela, Greece and other counties where populism as a lifestyle is coming to a halt and citizens take to the street in waves of protest. Years of spending, corruption and graft by the Argentine government has made the country cash-strapped. As is typical with populist countries, the chickens are coming home to roost on the backs of the poor and middle class.

After years of subsidies, which have drained the nation’s reserves to $21 billion, President Cristina Fernandez de Kirchner announced yesterday the cutting of subsidies by as much as 80 percent. The government has subsidized energy (gas and electrical), water utilities and other basic services for over a decade. Teachers, healthcare employees and other earlier allies of the administration are marching to demand pay increases which will keep up with some of the highest inflation on the planet.

In an effort to curry favor with voters, Kirchner has added many subsidies to the economy since taking office. Claiming that many people have seen an increase in their salaries, Fernandez said, “They’ve been able to buy a car or air conditioning.” Kirchner insists her idea of “social inclusion” will not change as she told Argentines to follow an increased reasonable use of electricity.

True, but they haven’t been able to buy food. Food in Argentina has risen 35 percent over the past four months. Inflation hits the grocery cart so fast, that shoppers are finding prices increase between the time they take an item from the shelf and get it to the checkout line.

The economic minister, Axel Kicillof, said that the reduction in subsidies will be carefully focused to avoid crippling Kirchner’s primary base of supporters — the poor. Kicillof went on to say the new economic burden will be carried by enterprise and the middle-class. Already struggling, the “middle class” in Argentina earns, on average, $400 (USD) a month.

Teachers have entered their sixteenth day of strikes for pay increases to keep pace with consumer prices. Roughly 3.5 million children have been enjoying extended vacations as the teachers rejected the government’s offer of a 30 percent raise. Teachers are holding out for a 35 percent increase which will match the rate of inflation.

As the subsidies come to a halt, most residents will see their utility costs double. A spokesman with Econometric, a consulting firm in Buenos Aires, said that energy subsides alone hit the government’s pocket book for $7 billion last year. Other subsidies added another $8 billion to the money spent to keep Kirchner’s base camp — the poor — on her side.

Fernandez, who manages with decree power over the country’s economy, has churned through billions in reserves and pension funds which she has stolen from other government accounts to fund operating expenses. It’s a situation pretty similar to a couple who spend their retirement savings just to pay the light bill and buy food.

Much of the money Fernandez has blown has gone as a prize to political allies, chastise enemies and get the adherence of legions of voters, aka the poor. Kirchner has spent $25 billion in reserves in the past 24 months to accomplish her goals.

Egypt, Syria, Venezuela and Greece are all seeing the results of corrupt, inefficiency government led by a president who can only stay in office by buying votes. Now it is Argentina’s turn.

By Jerry Nelson

Sources
Reuters
Bloomberg
Economist

Leave a Reply

Your email address will not be published.