“The Rate of Poverty Due to Argentina`s Peso Devaluation Expected to Surpass 50 Percent“

There are concerns about increasing number of poor populations as a result of Argentina`s devaluation of the peso.

Argentina`s leading daily `Pagina 12` cited the report on devaluation and rise in poverty prepared by Argentine investment consulting firm based on documents from the Argentina statistics office and the World Bank and projected, "Due to the devaluation of the peso, living costs will increase and poverty will rapidly increase."

According to the report, the increasing poverty in Argentina, which began at the end of 1980, has entered its fifth stage after the currency devaluation. The number of the poor, which has increased over four stages from 1988 to 2001, currently make up 44.2 percent of the entire population (14,500,000 out of 33,000,000 total).

The report indicates that if the Argentine government succeeds in suppressing inflation by devaluing the peso at 1.4 to the dollar, the cost of living expenses will increase by 10 percent and the number of the poor to 49.1 percent. In that case, the number of the poor population will increase by 1,700,000 and will total 16,200,000. If, however, the Argentine government fails to suppress inflation, as most experts worry, the poor population is expected to rise above 50 percent. In the initial stages of inflation, cost of living expenses will increase by 20 percent, which in turn will put the population below the poverty line at 54.1 percent. This will create 3,000,000 additional poor which will result in a total population in poverty at 18,000,000.

The report warns, "As a result of the breakdown of the conversion policy, the increase in poverty is unavoidable and this will accelerate the breakdown of communal structures such as the family."

Meanwhile, the Argentine government is aggressively pursuing strong preventative measures for inflation as they worry about the recurrence of the inflation crisis in the 1980s.

President Eduardo Duhalde held an emergency meeting with industry representatives on the 7th and stressed the need to prevent increase in prices, saying, "The success and failure of the peso devaluation and other emergency policies depends on the state of price inflation."

Jorge Luis Remes Lenikov, new Minister of Economy, advised at a news conference held on this day, "The success or failure of the emergency economic policies depends on the people`s cooperation and the consumers` sense of ownership. If store owners raise prices, the consumers must fight to secure their rights."

Mi-Kyung Jung mickey@donga.com