Confronted with inflation exceeding 60%, the Argentine Government faces tough decisions regarding the funding of its social programs in an economy where 50% of the workforce participates in the so-called “informal economy.”
Government spending is on the table, according to multiple international reports, as Argentina grapples with a collapsing economy dragged down by runaway inflation forecasted to exceed 90% for the year. The contemplated cuts to social programs are stirring unrest and accusations of right-wing policies. According to a report in the Epoch Times, well over one million Argentines depend on a social program which provides a living wage for an indefinite period of time.
Currently, more than 40% of Argentines live in poverty. Interestingly, the country appears to be extremely under-employed – a key driver of the economic situation and severe macroeconomic imbalances. The unemployment rate is only 7%. However, only 43% are “employed” with half the workforce employed in the informal economy. Thus, the idea of cuts to social benefits – a staple in many Latin American countries – are a hard pill to swallow. Protests, like one led by the Union of Workers of the Popular Economy, have pushed for economic reforms including a universal salary and access to land.
HR Policy Global’s Take: Unfortunately, the situation does not look like it will improve any time soon. Despite a historically romanticized view of Argentina, many multi-national corporations no longer have large investments in the South American country. However, for those that still do, the economic instability may make any needed workforce changes much more difficult due to the country’s stringent labor codes.