Inflation jeopardizes Argentina anti-poverty gains

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By Lucas Bergman

BUENOS AIRES, (Reuters) - Argentina's five years of breakneck economic growth has more than halved poverty in the country, but the government's failure to curb inflation threatens to reverse that progress.

President Cristina Fernandez and her husband and predecessor ex-President Nestor Kirchner have overseen an annual growth rate of 8 percent a year, but analysts say poverty rose in late 2007 for the first time in four years although official data is not yet available.

"Poverty and extreme poverty today are rising in Argentina due to inflation, even though the economy is growing 7 to 8 percent," said Rosendo Fraga, a prominent independent political analyst.

Argentina's official Consumer Price Index rose 8.5 percent last year, but private calculations estimate the real increase was up to three times that, and experts say that explains deteriorating living conditions of millions of people.

Dramatic increases in prices for meat, vegetables and other food have hit lower-income people especially hard.

Official poverty data for the second half of 2007 was due for release a month ago. The official statistics agency INDEC has delayed its publication indefinitely.

The last official figures put the poverty rate at 23 percent for the first half of 2007, down from a peak of 57 percent in October 2002.

But analysts and consumer associations say even the first half 2007 poverty rate may be understated due to faulty inflation data, widely believed to be stated as underplayed.

The government steadfastly denies INDEC manipulates statistics. But INDEC staff members have resigned charging the Kirchners have massaged data which could prove unpopular.


The widespread perception of the understating of inflation is cited as a reason in polls for the erosion of popularity of President Fernandez, who took office in December.

The Poliarquia Consulters polling firm show her approval rating fall from 56 percent January to 47 percent in March.

The government has tried to curb inflation by signing price accords with companies and also limiting grains and beef exports. But analysts in Buenos Aires and on Wall Street widely believe that current policies will not curb inflation.

"Poverty and extreme poverty, taking into account the real prices hikes in foods, is undoubtedly increasing," said economist Jose Luis Espert, who is a government critic.

"With this inflation rate, salaries in real terms stop going up. We have more poverty and extreme poverty and the distribution of wealth, the flagship of this government, starts deteriorating," he added.

Argentina's official poverty line for a four-member family was last calculated at $308, the minimum seen needed to pay for food and consumer staples and key services and transport.


"The goal to reduce poverty, shared by the government and the society, is tied to a decrease in inflation," the local labor issue consultancy SEL said in a report.

"The most important fact is that the number of poor would have risen by 1.3 million people in 2007, breaking the (downward poverty) trend seen since 2003," it added.

SEL calculates the second half 2007 poverty rate at 30 percent, up from 28 percent in the first half.

In the absence of up-to-date official data, anecdotal evidence suggests growing poverty.

Social workers say they are noticing an increase in children coming to government-funded food programs.

"We see there is more demand. Continuously people come here to ask" for help, said Mirta Vissani, manager of a public kitchen where at least 100 children a day come for a hot meal.

"There are lots of informal workers who get little pay and prices are rising. People complain all the time because they don't get enough money. I don't understand the government statistics. Who is the economy growing for?" she said.


Sociologist Artemio Lopez said food price increases have a disproportionate impact on the extremely poor.

"We see poverty keeping steady in general terms, but extreme poverty is different because the impact of the food prices is really strong," he said.

Extreme poverty -- defined as the inability to purchase a basic $46 worth of food per month per person -- peaked at almost 28 percent in the first half of 2003 and fell steadily to 8.2 percent in the same period of 2007.

"We suspect poverty has risen because the informal workers' income grew less than the real price of basic goods," said Jorge Colina, chief of research at Idesa Consultancy.

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