January 18, 2022 11:24 pm

Now, the reality of the economic quarantine

Argentina has returned, at least for now, to normality. Hidden behind the drama of the pandemic and the opacity of the quarantine, reality returns clear, tangled and compelling. In his book The dark side of econometrics, Walter Sosa Escudero develops one of those concepts that illuminate the most arduous analyzes: “All good paper empirical should be able to be summarized in a single number ”. The father of the idea is the American economist Orley Ashenfelter. If you had to choose that number to explain the complexity ahead of us would be 10. The economy will grow this year about 10%. At the same time, sales of basic products such as flour, sugar, oil, rice, noodles and cans of tomatoes, fell in the first 9 months of 2021 by 10%, according to the Scentia market audit. How do you explain these two seemingly contradictory data?

The first thick line reading is simple. Even with that vigorous recovery, the Gross Domestic Product (GDP) of our country returns only to 2019. If we spin a little deeper the fall and the recovery were not homogeneous. Quite the opposite. The impact of the closure was extremely mixed. There are sectors that are still badly hit. On the other hand, what was lost along the way to survive and be able to get here is not easily recovered. The destruction of capital was violent. By operating under the logic of survival, there is no factual or symbolic space to optimize decisions. You do what you can, you take what you have. Tomorrow does not exist, life becomes pure present.

Putting it in practical terms, whoever had to sell dollars saved for years at $ 80 or $ 100 at the beginning of the lockdown cannot necessarily buy them back at $ 200 today. Those who got rid of a property at the price they could in a paralyzed market, or those who “auctioned” their car, today need to collect many more pesos to transform them into dollars and recover those assets. To make matters worse, in some cases, such as cars, the shortage of supply – due to the lack of foreign exchange – means that the values ​​have risen no longer in pesos, which is obvious, but in dollars. Those who took on debt, even at low rates, must now pay it off. The situation is even more delicate for those who suffered the painful situation of having to close a shop or a company or among those who lost their jobs.

Getting back to the macroeconomic starting point is undoubtedly good news. For this reason, assuming that “it is done”, that “nothing happened here”, that “we already fixed it” implies underestimating the impact of what was one of the most tortuous and distressing processes in the economic and social history of our country on the microeconomy , which is the economy that most of the citizens live and understand.

People and businesses are prepared for ups and downs, uncertainty and changes in the rules of the game. There was no manual or strategy that contemplated “zero billing” for so many months.

In our last qualitative survey of social humor, carried out between October 19 and 25, we found a very delicate panorama in the sectors that suffered the most from that black hole that meant “life without a street”. They are the lower middle class (28% of families) and the non-poor lower class (19% of families).

Within a month of its completion, the full opening was well received, but little enjoyed. The “crazy years effect” that we had been anticipating for the end of the pandemic and that, like everything related to the virus, is global and crosses cultures, geographies and languages, is taking place. The point is that Due to the restriction of a purchasing power that is liquefied in the face of an inflation that in the eyes of consumers looks “out of control”, there are not so many who can enter “the party”. At least for now.

The upper class (5% of families) and the upper middle class (17% of families), to a greater or lesser extent, have already jumped on the healing wave of enjoyment. It does not make them forget what happened, but they allow themselves to begin to close the wounds. For them, after so much discomfort, well-being is priceless. They are the ones who have returned to travel, fill restaurants, bars and concerts and are rebuilding the night. Their desire for repair allows projecting a historic summer.

Even assuming that some members of the lower middle class could join that group, we can hardly be talking about more than 30% of Argentine families.

For the rest, the encounter with reality is frustrating. Now that they can, they clearly perceive that they cannot. Or at least that they cannot neither all that they could nor all they want.

If we add the households below the poverty line to the two groups most affected by the combination of the pandemic + quarantine –lower middle class and non-poor lower class-, we are talking at least 70% of Argentines.

For them, daily concern continues to be confined to the home environment. Regardless of what happens “outside”, the problems are still “inside”. They feel and express that it costs a lot to get the money and when they have it in their hand “the money is worth nothing.” Their day to day goes through the basics, through “food.” Products such as cheese, yogurt and beef, among others, have become exceptions of a luxurious nature.

Statistics from the Ipcva (Institute for the Promotion of Beef) confirm this. Today 47 kilos of beef are consumed in the country per inhabitant per year. 6% less than last year, 18% less than in 2018 and 32% less than in 2008. It is the lowest record in history.

That is why, in front of the exit, now they speak of a confinement that continues, no longer by imposition but by restriction. They express having gone from quarantine due to the pandemic to an economic quarantine.

If we distance ourselves from the situation and look with a little more perspective, we can better understand what is happening. Between 2012 and 2021, still recovering 10% this year, the economy fell 5% end-to-end. After a decade, the cake is smaller. If we do it Per inhabitant, the number is obviously worse, given that the population grows 1% per year. The fall gives 14% in 10 years.

At the same time, during the same period, inflation was 2300% accumulated and the mass consumption market – food, beverages, cosmetics and cleaning – contracted 13%.

If we engage in the challenging exercise of looking ahead, the forecasts are not very encouraging. The bulk of Argentine economists project inflation close to 50% by 2022 and growth of 2%, according to the Market Expectations Survey (REM) published by the Central Bank in October. No oasis is in sight on the near horizon. The way out of the current situation will be arduous and laborious. People know.

When you look in depth and unravel what is behind the data, everything that seemed contradictory begins to make sense. Reality returned. The situation is delicate.


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