Argentina looks to China to tackle crisis

With more than half of Argentina's population now officially living in poverty, President Javier Milei's administration is facing growing calls to rethink drastic economic policies, focus on job creation and provide relief to the public.

The government reported recently that more than 52.9 percent of Argentines, or 24.9 million people, were living in poverty in the first half of 2024 — a massive jump from the 41.7 percent reported the previous year. At the same time, 18 percent, or 8.5 million people, are considered impoverished, up 4.2 million since 2023.

"Argentina is going through a very difficult time," said Roberto Bacman, a sociologist and director of the Center for Public Opinion Studies, a research firm based in Buenos Aires. "Some (sections) of the middle class have also become impoverished and, according to statistical breakdowns, would be part of the poor segment."

Reversing this trend toward poverty will require widespread domestic and international support, including from partners like China, which is one of Argentina's largest investors.

Milei is now reaching out to China. The president confirmed on Sept 30 that he will travel to China in January 2025, saying during a television interview that China is a "very interesting commercial partner".

The rise in poverty is increasing the pressure on Milei, who has deployed drastic economic measures to deal with a yearslong crisis, including high levels of inflation. Some are blaming Milei's economic model for turning Argentina into a "poverty factory", said Bacman.

The government's austerity measures and fiscal surplus plans have led to a sharp rise in poverty levels and reduced economic activity, said Manuel Zunino, an economist and associate director of consulting firm Proyeccion, which focuses on public policy.

The austerity policies have included reducing social assistance programs, suspending public works projects and conducting large-scale layoffs. The government aims to achieve a zero deficit as Argentina owes $43 billion to the International Monetary Fund.

Milei has also moved quickly to dissolve or privatize state-owned firms and organizations. For example, a state-owned railway firm was shut down and more than 1,300 employees were laid off.

Milei's government has claimed it inherited the poverty situation, but has not acknowledged the role its economic policies have played.

When Milei reached his 100th day in office in March this year, a poll found that 81 percent of Argentines said their financial situation had worsened over the past year.

Rating drops

Milei's approval rating has fallen from 61 percent on Dec 10, 2023, to just over 40 percent last month, despite some success in bringing down inflation.

Official data released last month showed Argentina's monthly inflation rate stood at 4.2 percent in August, after easing to 4 percent in July, the lowest in two and a half years. However, inflation for the 12 months through August remained staggeringly high, at 236.7 percent.

The economic crisis has hit children and adolescents the most. More than 66 percent of minors are now living in poverty, according to government figures, with 27 percent living in extreme poverty.

Zunino said Argentines are coping by cutting back on essential goods and leisure spending, tapping into savings, or going into debt. While the government is implementing measures to support those most in need, he said there is no clear strategy in place to create jobs and stimulate recovery.

"That is the pressing question now — how will the government manage to revive the economy with an austerity-focused approach?" said Zunino.

Support from partners like China is key for Argentina to address the poverty problem.

China is Argentina's second-largest trading partner and an important source of investment. It is also a leading market for agricultural goods like soybean and beef, whose trade is an important source of foreign currency for Argentina. Meanwhile, increased Chinese infrastructure investment in areas such as railroad, renewable energy and lithium mining can help generate much-needed jobs.

In June, Argentina renewed a $5 billion portion of its $18 billion currency swap line with China, allowing it to manage debt repayments due over the following two months and avoid a potential payment headache for Milei's government.

The writer is a freelance journalist for China Daily.