Priorities for exiting poverty traps in Argentina

Download: The Poverty Traps in Argentina (LINK)

Solid walls on quicksand

Argentina faces a paradox: it has good programs and allocates significant resources to fighting poverty, yet it has not fallen below a floor of 25 percent over the last 40 years. The report illustrates this situation by saying that Argentina builds solid walls on quicksand. In other words, an economy that does not grow and does not generate quality employment limits the opportunities to escape poverty for the population that increasingly requires social assistance. As a result, poverty and income inequality worsened between 2013 and 2023.

The Poverty Traps in Argentina explains how macroeconomic dynamics have hindered the ability of poor and middle-income households to generate higher incomes in a sustainable manner.

The Four "Poverty Traps"

What are the four interrelated obstacles that contribute to the persistence of poverty in Argentina?

1. Inflation and Fiscal Imbalance: Price increases particularly affect the poorest families, who spend a larger share of their income on food and basic products. Inflation also erodes the purchasing power of wages, especially in the informal sector and low-income households. The constant need to adjust social programs and maintain economic subsidies to compensate for inflation has strained government budgets and created a vicious cycle of dependency, limiting the redistributive efficiency of public spending.
   
   
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2. Labor informality: A large part of the Argentine population works in the informal sector or is self-employed. These jobs are often precarious and poorly paid, making it difficult for people to save and improve their quality of life. The average labor income is lower for informal jobs and has been progressively reduced towards the poverty line since 2018 due to losses in its real value, a situation that also occurs among formal workers. In addition, informality limits access to services such as health care and education.
   
   
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3. Generational and regional inequality: Although poverty is higher among children and adolescents, social spending is skewed toward the elderly population, resulting in chronic poverty and lack of social mobility. Moreover, it is difficult to address territorial inequalities because poverty measurement is partial as it does not include the population in small cities and rural areas.
   
   
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4. The impact of climate change: Extreme weather events, such as droughts and floods, disproportionately affect the most vulnerable populations. These events destroy crops, homes, and livelihoods, pushing many into poverty. For example, the index of flood risk is highest in the northern provinces and Great Buenos Aires, where the incidence of poverty is higher. These households find it difficult to recover from the loss of assets. For example, in the face of severe flooding, 80% of the population in Formosa would take almost 5 times longer to recover than in the city of Buenos Aires.

Priorities for poverty reduction and inclusive growth in Argentina include strengthening the income-generating capacity of households. To this end, macroeconomic stabilization and the reduction of inflation in a sustainable manner are an important step and sustain fiscal consolidation processes by protecting those who need it most.

On the other hand, promoting the generation of quality jobs and connecting the population with economic opportunities through investments in education, health and security, attending to the needs in different contexts and geographical areas, would be needed. In addition, as a way to reduce vulnerability to extreme climate events, promoting activity and export diversification and having risk insurance mechanisms and adaptation investments are essential steps.

Finally, Argentina faces blind spots for its public policies as it has statistical information only for large urban conglomerates. Having adequate instruments for measuring and monitoring poverty, including rural areas, and allowing for coordination with subnational policies, will contribute to the development of better-targeted public policies.

Tackling poverty in Argentina will require sustained efforts to create a more equitable and prosperous future for all Argentines.