VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0852/01 1031952
ZNR UUUUU ZZH
R 131952Z APR 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 4162
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 2139
RUEHC/DEPT OF LABOR WASHDC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 5469
RUEHMN/AMEMBASSY MONTEVIDEO 5479
RUEHSG/AMEMBASSY SANTIAGO 5070
RUEHBR/AMEMBASSY BRASILIA 5268
RUEHSO/AMCONSUL SAO PAULO 2851
RUEHRI/AMCONSUL RIO DE JANEIRO 1949

UNCLAS BUENOS AIRES 000852 
 
SIPDIS 
 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI 
PASS USTR FOR LESLIE YANG 
TREASURY FOR RAMIN TOLOUI AND CHRIS KUSHLIS AND OCC 
FOR CARLOS HERNANDEZ 
USDOC FOR ALEXANDER PREACHER 
USDOL FOR ILAB PAULA CHURCH AND ROBERT WHOLEY 
SOUTHCOM FOR POLAD AND J5 FOR JUAN RENTA 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ELAB ETRD ALOWAR
SUBJECT: POVERTY DECLINING AT AN EVER-DECREASING RATE 
 
------- 
SUMMARY 
------- 
 
¶1.  According to a recent National Bureau of 
Statistics and Census (INDEC) report, the percentage 
of people living below the poverty line was 33.8 
percent in the 28 most important urban areas of 
Argentina during the second half of 2005.  The 
percentage of people living below the destitution line 
was 12.2 percent in the same areas.  Poverty and 
destitution have been decreasing since the 2002 
crisis, when the percentage of people living below the 
poverty line reached a peak of 57.5 percent and the 
percentage of the destitute was 27.5 percent.  The 
Embassy expects poverty and destitution to continue to 
decline in 2006, but at an ever-decreasing rate.  This 
is because economic growth will be lower than in 2005 
and because the easy employment gains have already 
been made.  The continued decline in poverty and 
destitution will also be slowed by the differential 
wage gains between formal, informal and public sector 
workers.  End summary. 
 
--------------------------------------------- --- 
RECENT FIGURES ON POVERTY AND DESTITUTION LEVELS 
--------------------------------------------- --- 
 
¶2.  According to a National Bureau of Statistics and 
Census (INDEC) report released on March 21, the 
percentage of people living below the poverty line was 
33.8 percent of urban population in the 28 most 
important urban areas of Argentina, during the second 
half of 2005.  The percentage of the poor was 38.9 
percent in the first half of 2005, and 40.2 percent in 
the second half of 2004.  The 33.8 percent poverty 
rate represents 7.9 million people that cannot afford 
the value of the total consumption basket estimated by 
INDEC every month. 
 
¶3.  The percentage of people living below the 
destitution line was 12.2 percent of urban population 
in the 28 most important urban areas of Argentina, 
during the second half of 2005.  The percentage of the 
destitute was 13.8 percent in the first half of 2005, 
and 15 percent in the second half of 2004.  The 12.2 
percent destitution rate represents 2.8 million people 
than cannot afford the value of the food consumption 
basket estimated by INDEC every month.  However, the 
percentage of people living below the destitution line 
without considering income supplements (Heads of 
Household and similar programs) was 14.2 percent in 
the second half of 2005. 
 
¶4.  The sharpest drop in the poverty rate during the 
second half of 2005, compared to the second half of 
2004, took place in Rio Gallegos, the capital city of 
Santa Cruz Province, where poverty decreased from 16.1 
percent to 8.9 percent.  Posadas, the capital city of 
Misiones Province, was the only city in which the 
poverty rate increased, growing from 51.3 percent to 
53.0 percent in the same period.  The percentage of 
people living below the poverty line in Greater Buenos 
Aires decreased from 37.7 percent in the second half 
of 2004 to 30.9 percent in the second half of 2005. 
 
-------------------- 
POVERTY DEVELOPMENT 
-------------------- 
 
¶5.  The poverty and destitution levels have been 
decreasing since the 2002 crisis, when the percentage 
of people living below the poverty line reached a peak 
of 57.5 percent of urban population, and the 
percentage of people living below the destitution line 
was 27.5 percent.  Local economic consultant Artemio 
Lopez said that the latest drop in the poverty and 
destitution rates was due to the increase in formal 
and informal sector salaries, and to the increase in 
hours worked, in a context of strong economic growth 
and decreasing unemployment.  However, economic 
analyst Jorge Colina pointed out that poverty is 
diminishing at a slower rate than economic growth. 
Annual GDP grew 9.2 percent in 2005 and the economy 
reached the pre-crisis levels, whereas poverty only 
dropped 6 percentage points and is still above the 
1990s levels. 
 
---------------------- 
THE LOW MARGINAL CLASS 
---------------------- 
 
¶6.  Economic consultant Ernesto Kritz noted that most 
people who have recently risen above the poverty line 
belonged to the middle class before 2002 and became 
poor during the crisis.  Therefore, poverty among 
individuals belonging to the low marginal class is 
still a structural problem, and is related to high 
unemployment and increasing employment in the informal 
sector. 
 
------- 
COMMENT 
------- 
 
¶7.  The Embassy expects poverty and destitution to 
continue to decline in 2006, but at an ever-decreasing 
rate.  This is because economic growth will be lower 
than in 2005 and because the easy employment gains 
have already been made.  Future reductions in poverty 
and destitution will depend in part on educational 
gains and technical training.  While there is a 
growing demand for skilled workers, there is also a 
shortage of skilled workers who are able to take 
advantage of these opportunities. 
 
¶8.  The continued decline in poverty and destitution 
will also be slowed by the differential wage gains 
between formal, informal and public sector workers. 
Formal sector workers have used their higher skills 
and union associations to secure wage gains above the 
rate of inflation.  Informal sector workers have 
barely been able to secure wages that keep up with 
inflation and public sector workers have fallen 
behind.  This means that the informal and public 
sector workers (including pensioners and recipients of 
government subsidies) are less likely to rise out of 
poverty and destitution, even if they find employment. 
This could also work against a better income 
distribution, particularly in the provinces, where 
growth often occurs along with a worsening of income 
distribution. 
 
¶9.  To see more Buenos Aires reporting, visit our 
classified website at: 
http://www.state.sgov.gov/p/wha/buenosaires 
 
GUTIERREZ