The contrast couldn’t be greater: Argentina took the World Cup victory in football, but economically the country is in a disastrous state. More than 40 percent of Argentines live below the poverty line, inflation hits 100 percent, and pensions are melting away. The population is deeply divided.
But after Sunday’s final victory, there was no trace of that: every square centimeter of Avenida 9 de Julio, Buenos Aires’ main 160-metre-wide street, was covered by a sea of people. . Millions across the country celebrate their World Cup victory on the streets.
Print money for debt financing
According to Maria Silvia Abalo (70), her hometown is having a historic moment. “The tournament showed what can be achieved with great commitment and cooperation,” says the director of the Swiss-Argentine Chamber of Commerce in Buenos Aires. She hopes that this mentality will infect the entire population and shake up the country and the economy.
Because economic misery is homemade, Abalo said, “Politics has provided insufficient incentives in some industries for decades.” In Argentina, it is common practice to almost completely subsidize offers such as public transport or hospitals. To finance the new national debt, the government runs the central bank’s printing press, pushing inflation through the roof.
“The second major problem is substantial foreign debt,” Abalo says. In some provinces, too many people work in the administration at the expense of the state. This leads to a relatively low unemployment rate of 6.9 percent. However, at the same time, customer policy increases the gap in the state coffers. Argentina was still a wealthy country in the middle of the last century. It is blessed with farmland as well as natural resources like silver, copper or lithium. It’s still an area with a lot of potential.
Incentive to spend money fast
The world title should actually inspire the country. Research shows that the economy of the world champion country grew by 0.25% in both quarters. Additional interest drives exports even more. But the effect fades again after half a year.
Argentina needs far-reaching, long-term reforms, Abalo says: “The government can only contain inflation with a balanced budget.” Then the country can attract more fresh money for investments. Subsidies had to be cut for this.
Current inflation makes it difficult for the middle and upper classes to save. Those who can convert Argentine pesos to dollars. However, the government restricts foreign exchange trading in order to maintain foreign exchange reserves. The absurd result: the middle class is spending their pesos as quickly as possible. He usually eats at restaurants, buys electronics, cars, or goes to the World Cup. This explains why so many Argentines are cheering for their local teams in Qatar.