Gulf Between the Rich and the Poor Grows in Argentina

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Washington Post Foreign Service Friday, May 16, 2003; Page A24

BUENOS AIRES -- Claudio Gerosa has done well for himself. His consulting business all but sprouted wings in the 1990s, growing by 500 percent as he and his partners helped foreign businessmen sell soft drinks, cars, televisions and other merchandise. Gerosa's income quadrupled. He stashed some but spent gobs more: He took the family to Disney World, went through eight cars in 10 years and bought a new home.

"I'm not the kind of guy who hides his money under his mattress," said Gerosa, a tanned and affable man. "I like to spend it."

Enrique Saavedra, 44, is a year older than Gerosa and agonizingly poorer. The past decade was not nearly as kind to him, as the deluge of better-made foreign goods into the country cost him not one factory job but two. Since 1999, he has made a living -- for lack of a better word, he says -- rummaging through garbage for cardboard, cans and other recyclables to sell for a few pennies per pound. He says he earns about $50 a month. Even with the recession, Gerosa says that he earns the equivalent of between $1,000 and $2,000 monthly, down from a peak of $5,000 in the 1990s, but still enough for a middle-class lifestyle.

"We live like animals now," said Saavedra, wiry as a bantamweight and the father of a 9-year-old boy. "What I do to survive is what a stray dog does to survive. I was much better off 10, 11 years ago than I am today. It's like I'm living my life in reverse."

The differing fortunes of the two men provide a vivid illustration of how Argentina's effort to plug into the global economy has split this comfortably middle-class country in two: one well-off and hungry for more, the other wretchedly poor and hungry.

The gap in incomes between Argentina's richest and poorest families is now more than 10 times what it was just 15 years ago. According to government statistics, the wealthiest 10 percent of Argentina's population earned nearly 178 percent more than the country's poorest 10 percent last year; in 1988, the margin was only 18 percent.

It is an epic transformation for a country that has not known pervasive poverty since the Great Depression and has largely avoided the abyss that divides rich from poor in such other Latin American countries as Brazil, Mexico and Venezuela. And it is that growing division that largely fueled the backlash against former president Carlos Menem, who abandoned his bid Wednesday to win a third presidential term. Opinion polls had showed Menem trailing Nestor Kirchner -- now the president-elect -- by margins in the double digits. Under Argentine election law, Kirchner, who qualified for a runoff election by finishing second to Menem in a field of five major candidates in the first round of balloting on April 27, won the presidency when Menem dropped out.

Just a decade ago, Argentina's middle class made up 80 percent of the population, according to government statistics. The unemployment rate had not eclipsed 5 percent since the 1940s, when Juan Peron's government expanded the rights of labor unions, extended government control over domestic industries and modernized the welfare system.

In 1993, however, Argentina's unemployment rate surpassed the 5 percent barrier for the first time in more than 60 years and has continued to climb. Economists estimate that a quarter of Argentina's workforce is jobless.

When Menem was elected in 1989, he sold virtually all of the country's state-run industries, pegged the value of the peso to that of the dollar to quell inflation and borrowed heavily from international lenders such as the World Bank and International Monetary Fund. Those policies yielded a potent but short-lived growth spurt in the 1990s, at once raising the ceiling on possibilities for the educated and well-connected while removing the floor underneath blue collar workers.

Argentina's economy contracted by 10.9 percent last year. That, coupled with its default on nearly $141 billion in foreign debt payments and the devaluation of the peso by nearly 70 percent 16 months ago, has dried up foreign investment.