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ECONOMY | 26-09-2023 23:51

Argentina boosts election spending, risking even more inflation

Informal jobs make up nearly half of Argentina’s labour market, depending on the degree of formality that’s considered.

Argentina’s Economy Minister and presidential candidate Sergio Massa is ramping up public spending before the October 22 election, promising cash handouts that are likely to fuel inflation already running at 124 percent a year.

Massa announced Tuesday the government will give informal workers two welfare checks totalling 94,000 pesos, or US$268.50, in October and November. The payouts will be financed by an extraordinary tax imposed on banks and other big companies Massa says have benefitted the most from a currency devaluation that followed the August 13 primary vote. 

The government will notify the entities that will be hit by the new tax on Wednesday, Massa said during the announcement of the measures, stressing the levy would offset the fiscal cost of the new pay-cheques. He again blamed the 18 percent devaluation of the peso’s official exchange rate on the International Monetary Fund, saying it was a condition for the country’s US$44-billion agreement with the Washington-based lender. 

“We have made the decision to charge an extraordinary income tax to those sectors that were the biggest winners of the devaluation imposed by the International Monetary Fund,” he said.

Informal jobs make up nearly half of Argentina’s labour market, depending on the degree of formality that’s considered. As of March, Argentina had over 11 million workers who either didn’t have a registered job or weren’t salaried. Massa, whose ruling coalition came in third in the primary vote, has been trying to boost his election chances by cranking up the money-printing machine to fund social programmes and increase salaries.

The government is estimated to have printed about two trillion pesos (US$5.7 billion) to finance additional spending in the run-up to the election, according to Marina Dal Poggetto, executive director of consulting firm Eco Go.

Massa had already announced pay raises for public sector employees and income tax cuts for all but the top one percent of the population. Yet those measures hadn’t reached informal workers who are not on an official payroll.  

The cheques will reach an estimated 2.7 million people, who can sign up online to receive the money starting Wednesday, according to an Economy Ministry spokesperson. However a similar handout system to informal workers during the Covid-19 pandemic saw nearly nine million people sign up at its peak, far more than the government had originally estimated. 

by Manuela Tobias, Bloomberg

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