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UNCLAS BUENOS AIRES 000699 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV AR
SUBJECT: Poverty in Argentina: A Silent Crisis? 
 
REF: Buenos Aires 160 
 
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SUMMARY 
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¶1. (SBU) According to official GoA statistics, poverty levels 
continued to fall in the second half of 2008, reaching 15.3% of the 
urban Argentine population (with extreme poverty declining to 4.4%). 
 However, doubts about the validity of other official Argentine 
statistics have led many analysts and social activists to question 
official poverty figures.  A number of private analysts calculate 
poverty above 30% using more accurate estimates for inflation and 
household incomes.  They argue that the GoA's deliberate 
underestimation of the level of poverty allows it to claim that it 
has doubled social spending for the poor and reduced poverty, when 
in fact per capita social spending has declined in real terms and 
poverty appears to be rising.  End Summary. 
 
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POVERTY IN ARGENTINA - THE OFFICIAL NUMBERS 
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¶2. (SBU) According to the National Bureau of Statistics (INDEC), 
poverty in Argentina continues its steady fall from its peak-level 
of over 50% following the 2001-02 crisis.  In a report released in 
March, INDEC stated that the percentage of the urban population 
living below the poverty line during the second half of 2008 fell to 
15.3% from 17.8% in the previous quarter.  (The urban population 
comprises roughly 90% of the total population of Argentina.) 
Extreme poverty (destitution) fell to 4.4% from 5.1% during the same 
period.  INDEC defines a poor person (individual or family member 
based on average income per capita) as one who cannot afford to 
purchase a basket of basic consumer goods and services (defined and 
adjusted monthly by INDEC).  The "extreme poor" are defined as 
unable to afford an even more basic food consumption basket.  INDEC 
only tracks poverty in the urban, not rural, population. 
 
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POVERTY IN ARGENTINA - THE TRUTH? 
--------------------------------- 
 
¶3. (SBU) As Post has reported on a regular basis since early 2007, 
private sector analysts widely suspect that INDEC has systematically 
underreported official "headline" inflation (or Consumer Price Index 
- CPI), which is ostensibly based on the cost of the consumption 
basket of goods and services (Reftels).  Poverty statistics, 
however, are not/not based directly on the CPI.  Rather, INDEC 
estimates poverty and extreme poverty based on its own estimates of 
the values of the two aforementioned consumption baskets. 
Nevertheless, INDEC calculates the values of these consumption 
baskets using the prices collected for the CPI analysis.  In this 
way, the widely suspected manipulation of inflation statistics also 
indirectly results in the manipulation of the values of the 
consumption baskets.  This is one of the main arguments many 
observers use in questioning the validity of INDEC's reported 
poverty statistics. 
 
¶4. (SBU) In addition to the poverty consumption baskets, INDEC uses 
its national urban household income surveys to calculate poverty and 
destitution levels.  INDEC conducts these household surveys four 
times per year in the 31 major urban areas of Argentina.  Although 
these reports were made public in the past, INDEC has not made them 
public since the second quarter of 2007.  This lack of transparency 
has raised suspicions among the private organizations that monitor 
poverty issues in the country. 
 
¶5. (SBU) In April, eight well-known Argentine academic organizations 
demanded that INDEC provide public access to its household survey 
databases, suggesting that they suspected that INDEC's published 
aggregate results were inaccurate.  These organizations published a 
joint communique stating that INDEC's "denial of access to the 
survey databases undermines the analysis of socioeconomic issues in 
areas as sensitive as poverty, labor markets, health, and 
education." 
 
¶6. (SBU) In the absence of accurate government statistics, many 
local economic think tanks and consultants have built their own 
poverty indices, based on their own income surveys and estimates for 
"true inflation," in order to present a more accurate picture of 
poverty levels in Argentina.  To date, the consensus among these 
analysts is that the actual poverty rate in urban Argentina is about 
30% or higher as of late 2008. 
 
-- SEL Consultores, for example, after noting that poverty rates 
fell from 2003 to 2006, reports that the rate began to climb again 
in 2007.  Based on its own research and surveys, SEL estimates that 
poverty reached 32.3% in mid-2008. 
 
-- Ecolatina Consultants, headed by former Economy Minister Lavagna, 
reports that poverty was 30.5% in the second half of 2008, up from 
30.3% in the first half. 
 
-- The research unit of labor confederation Argentine Workers 
Central (CTA), headed by economist and national Congressman Claudio 
Lozano, has hired former INDEC employees to develop poverty figures 
using INDEC's former operating procedures.  (Note: INDEC fired these 
employees in 2007 after they refused to participate in implementing 
INDEC's new system of measuring inflation.)  The CTA reports poverty 
at about 33.5% at the end of 2008. 
 
-- Prefinex Consultants also estimates the poverty rate at close to 
30% and highlights that the result is an increasing risk of 
malnutrition among the poor in Argentina. 
 
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RELEVANCE TO GOA CLAIMS OF POVERTY REDUCTION 
-------------------------------------------- 
 
¶7. (SBU) An assessment of how well the GoA is faring in its various 
programs to assist the poor depends critically on which set of 
poverty statistics one believes.  Policies to assist the destitute 
in Argentina are basically channeled through five social programs: 
the Head of Households Plan (Plan Jefes de Hogar Desocupados), 
Unemployment Benefits (Seguro de Capacitacion y Empleo), the 
Families Plan (Plan Familias), the Food Security Plan (Plan de 
Seguridad Alimentaria), and the Non-Contributing Pensions Program 
(Programa de Pensiones no Contributivas).  Using GoA data, SEL 
Consultores calculates that GoA social spending under these five 
plans targeting the poorest communities increased 30% in nominal 
terms between 2006 and 2008 to 6.35 billion pesos (slightly over 
US$1.7 billion or about 0.6% of GDP as of year-end 2008). 
 
¶8. (SBU) Furthermore, using GoA estimations of rapidly declining 
poverty and inflation levels, SEL calculates that total social 
expenditures more than doubled in real per capita terms during the 
same period.  However, when SEL uses its own inflation and poverty 
estimates, it calculates that real per capita social spending for 
the poor actually fell 28% during this period.  (Comment:  According 
to World Bank officials, the rolls for inclusion in GoA subsidy 
program for heads of households have been closed since 2003, leaving 
many people who would otherwise qualify without any form of 
government assistance.) 
 
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COMMENT 
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¶9. (SBU) Artificially low inflation statistics allow the GoA to 
argue that its economic model of fiscal stimulus, maintaining a 
competitive currency, and government intervention succeeded in 
promoting high growth between 2003 and 2008 without overheating the 
economy and spurring damaging inflation.  Similarly, artificially 
low poverty rates allow the GoA to claim it is increasing social 
expenditures on the poor and reducing poverty.  Unfortunately, 
neither claim appears valid.  The clear consensus among reputable 
private sector organizations is that "true" poverty and inflation 
levels are both more than double official reported numbers.  Since 
poverty has a lower profile than inflation -- which has complicated 
wage negotiations and adversely impacted investors' willingness to 
invest in this country -- the underestimation of poverty levels has 
not become a political liability for the government ahead of this 
month's mid-term elections.  On the contrary, President Cristina 
Fernandez de Kirchner's government, which, in grand Peronist 
tradition, draws significant political support from the urban poor, 
is still able to tout lower poverty rates as one of its main 
accomplishments.  If private sector estimates are correct, a 
significant percentage of the urban population remains under the 
poverty line, but is no longer considered officially poor.  This 
inaccurate reporting has adverse consequences for the most 
vulnerable, as it prevents an accurate diagnosis of Argentina's 
poverty challenges, leaving many people outside of the GoA's social 
safety net. 
 
KELLY