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article imageBitter start to Christmas for Argentina's middle class

By Maria Lorente (AFP)     Dec 19, 2019 in World

Argentina's lurch to the left under new President Alberto Fernandez is proving a bitter pill to swallow for much of the middle class, with the wallet-draining Christmas season in full swing.

Fernandez was swept to power in October's elections on the wave of anti-austerity sentiment in a country gripped by an 18-month economic crisis following a currency crash.

While his victory brought hope, that has quickly turned to dismay for many taken aback by a series of taxes imposed on the US dollar, the currency Argentines favor for their savings.

On Tuesday, Economy Minister Martin Guzman announced a 30 percent levy on foreign currency purchases to protect "highly vulnerable" sectors.

Social media is abuzz with indignation over the "authoritarian" measure, which is already scheduled for debate in the Chamber of Deputies, Argentina's lower congressional chamber.

Political map of Latin America
Political map of Latin America
Gustavo IZUS, AFP

Hundreds demonstrated outside Congress on Wednesday shouting "yes we can" -- liberal ex-president Mauricio Macri's campaign slogan, popularized by Barack Obama ahead of the 2008 US election.

On Twitter, critics denounced left-wing policies they fear will drag Argentina down the road Hugo Chavez took Venezuela, which has suffered one of the worst economic collapses outside of war in modern history.

"Alberto's going for the Chavist model: concentration of power, political absolutism, high taxes, asphyxiating the middle classes and the productive sector," tweeted Gregorio Hernandez, a provincial political leader.

- Tourist dollar -

One of the most controversial moves is the return of what Argentines call the "tourist dollar."

A 30 percent tax is being applied on purchases made abroad by credit card as well as withdrawals made in foreign countries. Services such as Netflix and Spotify are also affected by the tax.

Argentina President Alberto Fernandez says his new taxes will help protect the most vulnerable secto...
Argentina President Alberto Fernandez says his new taxes will help protect the most vulnerable sectors of society
Juan MABROMATA, AFP

"I booked a foreign trip many months ago... This 30 percent tax makes it difficult to stick to my budget, as well as not being able to use cards during the trip," said kindergarten teacher Nathalie Goldstein, 24, who saved up for a year to travel to Barcelona.

It is not the first time an Argentine government has imposed such measures. Vice President Cristina Kirchner did something similar during her second presidential term from 2011-15, before Macri canceled the policy.

Economic analyst and newspaper columnist Manuel Adorni accused the government of lying in a bid to convince the least affluent that the tourist dollar "will only affect the richest and that it will benefit them, without realizing that they will get poorer."

With the peso trading at 63 to the dollar, the tourist rate will cost Argentines around 80 pesos. A year and a half ago the exchange rate was 18 to the dollar.

Aldo Elias, president of Argentina's chamber of tourism, blasted a "very bad measure."

Many in Argentina's middle classes feel the left-wing policies of new President Alberto Fernand...
Many in Argentina's middle classes feel the left-wing policies of new President Alberto Fernandez will hit their savings hard
RONALDO SCHEMIDT, AFP

He said it "puts at risk the work sources of almost 5,000 tourism businesses" and predicted that airlines would leave Argentina if the number of tourists heading abroad dries up.

However, Ernesto Oldenburg, a restaurant owner in Lobos, a city around 70 miles (115 kilometers) from Buenos Aires, says the measure is an "incentive" for local-based tourism.

He expected more holiday-makers from Buenos Aires to head to Lobos's popular lagoon, he said.

- 'No-one trusts peso' -

Most Argentines keep their savings in dollars and much of that is held outside the country, to protect from a peso that has proved highly unstable.

Argentines have little faith in their own currency and rely heavily on the US dollar for their savin...
Argentines have little faith in their own currency and rely heavily on the US dollar for their savings
RONALDO SCHEMIDT, AFP

But the 30 percent tax will also be applied to savings in a bid to prevent a currency flight.

According to the central bank Argentines are holding $43.7 billion outside the country, but that's $19 billion less than last year.

"No one trusts the peso," a 51-year-old housewife told AFP.

Argentina's currency has lost almost 40 percent of its value during the last year.

Argentina's economy is expected to shrink by around 3.1 percent in 2019, as inflation hovers around 55 percent, poverty near 40 percent and unemployment rising to 10.5 percent.

Fernandez's government has also said it will maintain the $200 monthly limit on dollar purchases initiated by Macri.

It remains to be seen how Argentines will react.

After the government increased taxes on agricultural exports, the Confederation of Rural Argentines announced plans to protest.

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