| BUENOS AIRES
BUENOS AIRES Feb 28 At a soup kitchen in a
Buenos Aires slum, Alejandro Monzon hung his head as he stood in
line and recounted how his fortunes have unraveled over the last
Food prices have soared, the 29-year-old maintenance worker
complained, squeezing his meager monthly budget and leaving him
reliant on charity to keep his wife and six children fed.
"I hoped it wouldn't come to this," he said. "But it's just
too hard to make ends meet now."
He is not alone. A sharp currency devaluation in Argentina
last month has worsened one of the world's highest inflation
rates, threatening to unravel a generous social safety net at
the heart of President Cristina Fernandez's economic policies.
One in four Argentine families now rely on state welfare
programs ranging from payouts for the unemployed to scholarships
for poor high school students, as social spending boomed along
with the economy over much of the past decade.
Monzon was one of millions of Argentines who benefited. He
moved into a bigger government-built apartment and found a job
at a supermarket that helped him buy a car and even a
But climbing consumer prices in recent years have overtaken
his monthly salary of 4,000 pesos ($507 at the official exchange
rate, or about $350 at the black market rate) - a complaint
echoing throughout Argentina.
Monzon watched the value of his paycheck tumble further last
month when the Argentine peso devalued sharply, triggering a
spike in prices of food and other goods.
Facing criticism that it underreported inflation for years,
the government recently unveiled a consumer price index showing
3.7 percent inflation in January, the highest in over a decade.
Most economists say inflation is running at more than 25
percent a year, compared with government data that has put
annual inflation at just over 10 percent.
As that gap has grown, so has the sense among many
struggling Argentines that government-set stipends cannot cover
what they used to.
A few months ago, Monzon reached his breaking point. As
more of the family budget went to just putting food on the
table, he sought help at the Los Piletones soup kitchen.
On a recent day, a line of adults and children, some with
bowls in their hands, stretched outside the dining hall and onto
the dust-filled streets in the Villa Piletones slum in Buenos
Aires. Inside, workers dished out bowls of meat stew and people
sat and ate at long wooden tables.
Beatriz Antunez, who helps run Los Piletones, said she saw
the crowds lining up for a meal grow late last year.
"People are having to make choices about how they spend
their money. And to cut down on their food expenses, they're
turning to us," she said.
NO NEGOTIATING POWER
While Argentina's influential unions have leverage to demand
steep wage hikes keeping pace with inflation, those who rely on
government social programs depend on policymakers to raise
subsidies at the pace of consumer prices.
"The poorest are always the most sensitive to inflation,"
said Eduardo Amadeo, a former secretary of social programs who
runs an anti-poverty think tank. "But they can't negotiate their
subsidies. Their only tool is taking to the streets."
Although there have been no large-scale demonstrations this
year, some groups of poor Argentines staged a day of protests
following the peso's plunge in January, demanding a 40 percent
increase in cash payouts for the unemployed.
Keeping a lid on social tensions will be a priority for
Fernandez for the rest of her second four-year term. Under the
constitution, she is unable to seek a third term and will leave
office in December 2015.
On the streets of Buenos Aires, the signs of economic
strains are unmistakable. Some of the famous boulevards that
earned the city a reputation as the "Paris of South America" are
lined at night with homeless people.
In the shadow of the century-old railway station Retiro at
the heart of the city, a slum known as Villa 31 has grown about
50 percent in four years, housing an estimated 40,000 people in
ramshackle brick homes three stories tall.
The vulnerability of so many Argentines remains a sore spot
for a nation proud of its affluent history. In the early 20th
century, Argentina ranked among the richest countries in the
world, thanks to its booming beef and wheat exports.
However, a succession of financial crises in recent decades
battered its well-educated middle class. As much as half of the
country fell into poverty during the economic collapse that
followed a record 2002 sovereign debt default.
Fernandez and her late husband and predecessor Nestor
Kirchner turned back that tide thanks in part to new social
programs and strong economic growth over a period of several
Kirchner took office in 2003 and four years later stepped
aside for Fernandez to run. Popular for steering the country out
of the economic crisis, Kirchner was widely expected to run
again for president, but he died in 2010 near the end of his
wife's first term.
"There's no question things are better than 10 years ago,"
said Daniel Arroyo, a professor at the University of Buenos
Aires and former vice minister of social development under
Kirchner. "But many of the accomplishments have been through
direct cash transfers rather than new jobs."
Formal job growth has withered in recent years as economic
growth slowed and private investment dried up, scared off in
many cases by Fernandez's heavy-handed approach to the private
sector, economists say.
At the same time, the cost of the government's social and
subsidy programs have grown to 15 percent of gross domestic
product from 10 percent a decade ago, according to economists at
the Universidad Catolica de Argentina.
As the government has been lowballing inflation since 2007,
however, official poverty statistics are suspect.
According to official data, adults can cover their basic
needs and stay out of poverty with less than 600 pesos ($75) per
month. Independent economists estimate that in fact those basic
goods now cost twice as much.
The result is a startlingly low official poverty rate -
below 5 percent last year - as millions saw their salaries
inflated over an artificially low bar. Private economists say
the real poverty rate could be five times higher.
With government finances under pressure, more deficit
spending may worsen Argentina's perilous inflation spiral. But
allowing the value of subsidies to decline could also undermine
the bedrock of Fernandez's political support.
"The government is facing a serious social dilemma," said
Amadeo. "It's hard to know what they're going to do."
The new official price index serves as a tacit admission
that inflation is higher than previously reported and may open
the door to raising subsidies faster, adding strain on the
budget. Last year, the fiscal deficit before debt payments grew
fivefold as public subsidies increased.
Fernandez has made repeated announcements this year of new
or expanded social spending programs. Most recently, she tripled
a stipend for families to buy school supplies, just as the
academic year is starting.
Still, Monzon said he and his wife looked at the family
budget and realized they would have to cut back on spending if
they wanted to afford their children's school materials.
"I'm still having a hard time making the numbers add up," he