During a visit to New York in September, Argentine President Javier Milei said he saw "no problem" with the country's economic growth.
The statement was made in response to fears that the country could be heading towards a "technical recession", a phenomenon that occurs when there are two consecutive quarters of economic contraction.
Argentina's economy experienced ups and downs in the first half of this year.
There are positive numbers: when comparing the first half of the year with the same period of the previous year, the Gross Domestic Product (GDP) continued to grow at a rate of 2.2%.
The government's cash flow recorded a fiscal surplus, Central Bank reserves increased and inflation, a long-standing drama for Argentines, fell to 33.5% — while the accumulated figure for the year 2023 reached 211%.
But on the streets the scenario is very different: one in three Argentines lives in poverty. Unemployment is around 8%, while the population's real purchasing power is lagging behind.
One of the biggest concerns of Argentines is the precariousness of employment, which has led many people to work informally — without contracts or social security — and to take on debts far beyond their ability to pay.
Default affects around a third of those who took out loans, and many have not yet seen the economic recovery promised by Javier Milei reflected in their pockets.
Meanwhile, wages are falling in relation to the cost of living, basic services are more expensive — following cuts in subsidies — and much of the local manufacturing industry has been affected by the opening to imports, which put an end to a long history of policies protecting national industry.
Amid the debate about the discrepancy between positive macroeconomic numbers and the daily lives of the majority of the population, Milei classified as "stupid" the statement that 80% of Argentines have difficulty surviving.
"What will they live on, air? What will they eat, air? What will they drink, air?" He stated this in early September, during the Annual Convention of the Argentine Institute of Finance Executives, in Puerto Iguazú.
And he rejected criticism regarding the increase in defaults.
"The reality is that when private credit goes from virtually non-existent to expanding at its current pace, it is basic mathematics that defaults will increase during the transition; it is a natural consequence," he said.
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In the business sector, winners and losers emerged.
Growth was driven by sectors such as mining, energy, agriculture and banking services (financial intermediation), while commerce and industry have faced difficulties this year, according to the latest reports from the Central Bank of Argentina (BCRA).
Therefore, there is talk of a two-speed economy or even a country with two parallel economies.
And, among the companies that faced difficulties, small and medium-sized enterprises (SMEs) were the most affected.
According to the Argentine Political Economy Center (Cepa), with data available until June, 31,342 companies have closed since Milei took office in December 2023, equivalent to around 6% of the total.
This estimate, which the organization updates monthly, is based on information provided by the Superintendency of Occupational Risks (SRT), using data from the social security system, as there is no official number that specifically reports the opening and closing of companies in the country.
'I had to close'
Small business owners like Alejandro Marchizotti experienced the harsh reality of having to close their doors.
Despite all his attempts to save his burger business, Hupa San Andrés, the situation became unsustainable. "Business was going well until consumption fell drastically and I had to close," he told BBC News Mundo, the BBC's Spanish-language service.
Credit, Alejandro Marchizotti
At the beginning of 2024, the first problems began. Sales were slow, paying employees' salaries was a struggle, and the company took out a loan, then another, but couldn't stay afloat.
“I went from having five employees to just one,” says Marchizotti. The lack of customers reached a point where the business became unsustainable. “Furthermore, the price of public services such as electricity and gas, and the cost of rent, brought me down,” he explains.
The absence of formal jobs and the proliferation of precarious work, he says, played against his business: "People are fired and you stop buying because you can't pay; I've experienced this firsthand."
He ended up closing the burger restaurant at the end of May and faces an uncertain future. "I'm anxious because I'm 63 years old and it's difficult to find a stable job", he highlights. For now, he is driving for passengers on a transport app.
Although Marchizotti's experience is common among small business owners, other large, more export-oriented companies are in good shape.
"The problem is that the sectors that generate the most jobs are performing poorly," explained Hernán Letcher, director of Cepa, to BBC News Mundo.
From his perspective, the closure of companies is due to a combination of factors, such as the drop in consumption, the decrease in real wages, the increase in basic tariffs for public services and, of course, the large volume of imports entering the country.
"The slice of the pie has shrunk. And this slice, which is now smaller, is being shared with new competitors that matter", he argues.
Under the current government, the manufacturing industry has been the most affected in terms of job losses.
Local factories complain about the difficulties in competing with the massive entry of low-cost foreign products, which — according to them — are "destroying" the national industry.
The Argentine Industrial Union (UIA) stated that, despite the advances achieved by Milei in terms of macroeconomic stability, the sector is going through a "critical" situation, with high tax pressure and difficulties in obtaining financing.
The entity also warned that the transition to a new economic model involves a profound adaptation process, which "is neither homogeneous nor immediate".
Credit, AFP via Getty Images
Faced with these issues, Milei stated that many of the companies that are closing are staffed by just one person, minimizing the impact on employment.
The Minister of Deregulation and State Transformation, Federico Sturzenegger, announced a few weeks ago that more than half a million jobs had been created during the current government, based on data from the National Statistics Institute.
This statement fueled the debate on the Argentine labor market and brought to the fore again the issue of the quality of jobs created.
Economists have been warning in recent months that a more detailed analysis of job creation reveals that formal employment has actually declined, while informal work (without a contract or social security) and self-employment have increased.
When asked about the issue of employment in New York, the Argentine president acknowledged that job creation has undergone a turnaround. "What is happening is that these jobs are being created in the informal sector. Therefore, there is a contraction in the formal sector and an expansion in the informal sector. The net result is expansion," said the president.
This phenomenon, related to the closure of companies and unequal growth between the country's productive sectors and regions, is a point of great controversy, and Milei has been quite clear in his position: "Those who are in the worst situation, if they do not adapt, will go bankrupt".
Winners and losers
The mining, energy and agricultural sectors, considered the engines of Argentina's economic growth, are bringing a record amount of dollars to the country, a fundamental element for the current government to achieve its monetary and fiscal goals and maintain economic stability.
Milei has advocated a transition to sectors capable of generating large amounts of foreign currency, based on an incentive program for large investments in projects related to gas, oil, lithium and critical minerals, with investment commitments totaling billions of dollars.
Credit, Getty Images
In this context, the closure of companies considered uncompetitive and the loss of formal jobs in the private sector do not seem to be a major concern for the government, according to some experts.
"This is a government more concerned with macroeconomic stability, and in Argentina, this should be interpreted as having enough dollars, and everything else is of little interest to them," says Letcher.
Guido Zack, director of the economic area at the Fundar Research Center and professor at the National University of San Martín (Unsam), also argues that simply accumulating dollars is not enough, as it only encourages the development of one sector of the economy.
The economist agrees with the idea of trade liberalization so that Argentine companies can compete with the rest of the world in national and international markets, but he is concerned about the way this is being done.
"The economy needs to be open, but it needs to be opened on equal terms", he tells BBC News Mundo, adding that many foreign companies pay less taxes than Argentine companies.
"The government is opening the economy with equitable conditions in favor of foreign companies, and this is a death sentence for many national companies", argues Zack, pointing to one of the reasons that contributed to the closure of companies.
Other factors that have accelerated the closure of companies, he adds, are the appreciation of the exchange rate and the increase in logistics and financing costs in a very difficult economic environment.
With a strong dollar, high taxes and expensive financing, it has become very difficult for them to compete, says the economist: "Only the sector of the economy linked to raw materials is growing, and we are facing the highest number of company closures in more than 20 years."
Economist Miguel Boggiano, founder and director of the company CDI Capital, does not share this view. "It is inaccurate to say that not all sectors of the economy are growing," he told BBC News Mundo.
While it is true that the energy, mining and agriculture sectors have shown the greatest growth, others have also grown, he says, citing data from the Monetary Policy Report (IPOM), published quarterly by the Central Bank.
Regarding the closure of more than 30 thousand companies during the Milei government, Boggiano states that this number is "misleading".
“If growth is at its highest level, how can so many companies be closing?” he asks. "It seems like a huge number, but in reality, the businesses that have closed are many small businesses with just one or two employees."
"I would imagine that this number was mainly used to attack the government, to show that there was a massive destruction of jobs, but that is not the case," he concludes.
The important thing, according to the economist, is that the country is undergoing a major structural transformation. A transformation that points to the growth of export-oriented industries, following the trend of international trade.
The companies that have closed, Boggiano argues, are generally businesses or sectors that, under previous governments, were financed through monetary issuance — that is, by printing money and increasing inflation. “These sectors that were financed with populist policies are now the most affected,” he says.
In the current model, there is no longer room to help companies through monetary issuance, he says. "The government is responsible for the macroeconomy, it is responsible for leveling the playing field, for reducing taxes as much as possible and, to do so, it needs to reduce spending," he adds.
And, according to him, the provinces also need to reduce the tax burden on companies, something that depends on local governments in each region and not the central government. Looking to the future, his perspective is that many companies in the productive sectors, which are currently struggling, will slowly recover as wages outpace inflation.
“This is why it is crucial that inflation remains low,” says Boggiano.
The debate surrounding the closure of companies, the loss of formal jobs, debts and the cost of living will continue — especially from October onwards, when the fuel tax increase will come into effect.
And it is likely to intensify considerably next year, when Argentines go to the polls for the next presidential elections.
