BUENOS AIRES, Argentina – While the U.S. and Europe struggle to revive their economies by imposing austerity measures, South American leaders have generally done the opposite, spending their way to growth and the voters’ acclaim.
Few have gone farther afield from the economic doctrines of Washington and Brussels than Argentina’s President Cristina Fernandez, who proudly says that her government is doing more than any other in Latin America to improve the buying power of its citizens.
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She raised what was already the highest minimum wage south of the U.S. border by another 25 percent and increased welfare payments by 23 percent. Fernandez also has raised retiree pensions, brokered steep pay hikes for union workers and poured huge subsidies into energy and transportation.
“We are one of the countries with the best social protections for our children and for all of our population, which makes me very proud,” Fernandez said as she decreed a $520 million expansion in direct child subsidies ahead of her expected re-election on Oct. 23.
The stimulus has goosed an economy already benefiting from soaring commodity prices. Argentine data released by the International Monetary Fund this week show its gross domestic product rising 8 percent this year, second only to China, in a world where many leading economies have become stagnant.
But her government’s largesse may be feeding inflation that is devouring the peso’s value as quickly as it lands in Argentine pockets.
Officially, Argentina’s annual inflation rate was 9.8 percent last month, but even government allies have given up trusting the numbers after politicians began intervening in the data collection in 2007.
The IMF reprimanded Argentina in its global economic outlook this week, saying that until the data’s quality is restored, it will supplement the government’s figures with data from private consultants and Argentina’s provincial governments.
One such province, San Luis, reports inflation running at 26 percent, equal to Venezuela’s.
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