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Milei's Argentina has European prices and Asian salaries: It is more expensive to fill the car in Buenos Aires than in London - El Economista
March 27, 2024
Milei's Argentina has European prices and Asian salaries: it is more expensive to fill the car in Buenos Aires than in London
In the city of Buenos Aires we can find prices up to 30% more expensive than London, one of the 4 most expensive cities in the world.
The minimum wage in Great Britain is US$23,000 a year compared to US$2,400 a year in Argentina .
By Ramiro Gamboa
Tom is English and lives in Hampstead, one of the greenest and most beautiful neighborhoods in London, the place where Sigmund Freud chose to live when he escaped from Hitler. He is the Director of Digital Communications at Penguin Random House, one of the largest publishers in the world. Tom is 32 years old, studied politics and communication and is someone interested in British public affairs; He reads newspapers, listens to journalist Andrew Marr on the radio, and gives his opinion on Twitter.
He visited Argentina in February and found it a very expensive place.He met his colleague Pilar in Buenos Aires. After dozens of work meetings over Zoom, they could finally see each other face to face.
Pilar, a political scientist, is an educated person who studied at the UBA and also works at Penguin Random House in the same position as Tom: head of Digital Communication for the publishing house in South America. Tom earns something like £5,000 a month, £60,000 a year; Pilar earns US$1,200 monthly, US$14,400 annually.
Today, from London, Tom writes to him: "I still don't understand how Argentinians manage to survive in the face of such economic hardship."
British poet Auden wrote that "America can break your heart." Argentina too. Going to the supermarket today generates anxiety and, at times, it seems that lack of money - being short of money - is the only issue that the entire middle class has in common. "No matter how, no matter with whom: no conversation in Argentina today is complete without the section about how expensive everything is," writes Tamara Tenenbaum.
About the price of Tom's food in London and Pilar's in Buenos Aires, El Economista spoke with Martín de Dios, a lawyer from the University of San Andrés, who studied a master's degree in Applied Economics at the Torcuato Di Tella University and a master's degree in public administration at the London School of Economics.
De Dios worked in the Ministry of the Interior during the administration of Rogelio Frigerio , where he was in charge of the strategy to coordinate public policies between the Nation and the provinces. His work allowed him to understand the weight of realpolitik in executing public policies ; He also saw up close the inefficiency of the State and the admirable and fantastic capacity of many of our public servants.
Development is the great passion of De Dios, who did a comparative study of prices:"If we compare going to the supermarket in the city of Buenos Aires, we can find prices up to 30% more expensive than in London, one of the four most expensive cities in the world."
In London, De Dios explains, a liter of top-of-the-range olive oil costs US$17; in the City of Buenos Aires, US$ 21. A liter of whole milk costs US$ 0.98 compared to US$ 0.87 for the London price; a kilo of bananas costs US$ 1.78 in Buenos Aires compared to US$ 1.14 in London; and a kilo of avocado, US$6.93 in the capital of the River Plate compared to US$4.75 in the British capital. He shares a detailed price list with the newspaper.
"For me, the big problem is when you compare salaries in the UK with those in Argentina. The minimum wage in Britain is US$23,000 a year compared to US$2,400 a year in Argentina. The average Briton earns ten times as much more than an Argentinian, as in the case you mention about Tom and Pilar; but when they go to the supermarket, they see that the prices are tied . Another way to highlight the seriousness is that, with the salary in the United Kingdom, you can buy ten times more liters of milk than with the Argentine salary. The biggest problem at this moment in Argentina is how the increase in prices affects purchasing capacity, because salaries were not adjusted. In fact, the Government slows down and limits the increase in salaries to stop the inflationary spiral," says Martín.
—If the Government limits the increase in salaries, to -according to Javier Milei and Luis Caputo- avoid an inflationary spiral, when will people be able to make ends meet?
-That is the big question.The Government still does not have a horizon for salary adjustment.There are temporary factors and structural factors. Structural factors have to do with productivity per worker in Argentina. Argentina still has much lower productivity per worker when compared to high-income countries, such as the United Kingdom. On the one hand, you have to make a long-term transformation to increase productivity per worker, which is fundamentally a job in human capital, and that is something that is not going to happen immediately, because for that the time that needs to pass must pass. separates one generation from another.
—When will salaries be able to be readjusted?
—They should be rearranged due to the appreciation of the exchange rate, as inflation decreases, and as long as there are salary increases, you will be able to have an increase in people's purchasing power.Milei has managed to make a necessary rearrangement of the macroeconomy; What worries me, and what can happen, is that the economic recovery, the famous short V, does not arrive and is more of an L.The serious thing would be if we go to a country model that has high prices and low salaries. This is going to be what judges the success or failure of Milei. He comes to make this systemic change, to completely change the rules of the game, but by doing so, Argentina can move towards being a developed country, or it can become much more like an underdeveloped country with poor purchasing capacity. That happens to many low-income countries in our region, too. If you look, for example, at the income level of salaries in Paraguay, you have high prices, but salaries that are much lower.
—And do you think that Milei's model is going towards that underdevelopment or is it going towards a high-income country?
—He has always preached an anarcho-capitalist ideology that implies withdrawing the State , that the public sector does not deal with any type of politics, and that the market resolves itself. Reality has been molding him and today he does not question, for example, social assistance as an emergency. And precisely, Milei repeatedly talks about his model being from Ireland. Today we are in the juncture of adjustment, in what he calls first generation reforms.But if your model is Ireland, you should not promote policies that expel people from the education system, from the science and technology system, where it discards the possibilities of developing human capital and innovation.Clearly, if after the macroeconomic adjustment the path you choose to get to Ireland is this, then we are going to go to a country with very low purchasing power and very high levels of poverty. Unless after the macroeconomic correction the course changes.
Milei "has always preached an anarcho-capitalist ideology that implies withdrawing the State"
—What is the Irish model like?
- The kind ofIrelandIts fundamental pillar is to attract foreign direct investment and that implies offering a highly qualified workforce. For this , a strong investment in public education was essential . If we want Irish-style development, obviously we are going to have to change course. Argentina today is a country with high levels of poverty, and extreme poverty that has already become structural and not circumstantial. This brings a lot of problems, and the successive crises we have had have pushed more Argentines into persistent poverty from which it is very difficult to escape. For example, the most profitable and sometimes possible economic activity for many is drug trafficking, because we live in a region where that happens. The case of Ecuador, to name something more current, is clear: when there is an incapacity of the State, there is fertile ground for the advance of narcoterrorism and today we are seeing it in Rosario. Where there is good income from the private sector, there is no place for the development of drug trafficking.
Ireland is a high-income country that generated rapid and sustained development , based mainly on the installation of multinational companies that hire Irish people. Ireland managed to transform its workforce into a highly trained one, and to achieve this, the country made a very high investment in the educational system, generating the workforce to be highly qualified and offering companies political stability, which is what today Milei is not offering. Unfortunately, Milei has very little support to achieve the reforms he seeks in a sustainable way. His political and legal strategy may have served to reaffirm his anti-caste discourse, but both the DNU that has effects suspended by precautionary measures and the basic bill that falls in Congress have not been satisfactory in bringing tranquility. For international businessmen, Argentina continues to be "the far west", and Milei does not bring tranquility to the markets.
The Irish model has as its fundamental pillar the attraction of foreign direct investment and that implies offering a highly qualified workforce.
He looks at financial variables such as bond prices and the numbers for his first 100 days are very positive, but this is the first step. Foreign direct investment is a great pending in Argentina.Ireland's model put foreign direct investment at the center, with a workforce that is increasingly more trained, with companies that relocate to your country, with a growth in the real economy. The Irish model also has a fiscal strategy; It lowered corporate taxes to encourage companies to settle in its territory and took advantage of a geopolitical factor that Argentina does not have: its entry into the European Union, which allows it to be the gateway from the United States to Europe and the English language. The development model made by the market always has a small but intelligent state behind it. Ireland did not become Ireland without a strategic investment in education, in infrastructure and with a commitment to political stability and with a serious tax plan that offers tax advantages for companies to come to the country.
—I don't see Milei obsessed with public education.
-It is not a big problem. As is also the weakness of a President with little parliamentary support and little control of the governors. It makes it difficult to bring tranquility to the institutional framework for development.It's strange that he says he wants to be Ireland but gives a speech at a private school where he criticizes public education as a space for "indoctrination."The problem of education cannot be blamed on Milei. Sadly, one of the worst public policies in our history was the federalization of education. In the '90s, the provinces began to manage education without technical or economic capabilities, and the relative deterioration of education from 1990 to now was terrible. This produced a less productive country. According to a recent study , today even Argentine children from high-income families receive a worse education than their peers in countries in the region. Argentina's relative low productivity is associated with its deterioration in public education.Today, everywhere you hear that Argentina lacks engineers, and that has to do with the educational policies of 20 years ago. The May pact, which Milei proposes with the provinces, has to put education at the center. If you want to be Ireland, there has to be an agreement with all the provinces on the fiscal strategy to attract companies and the importance of education. It is impossible to attract foreign direct investment to a country with few engineers.
After the accelerated increase in inflation, prices in Argentina are compared to the most expensive cities in the world. If we compare going to the supermarket in the city of Buenos Aires we can find prices up to 30% more expensive than London, one of the 4 most expensive cities in the world .
