Argentines protest against rising debt under Milei

Buenos Aires. Oscar drove two hours into town to be there. Together with hundreds of compatriots, the Argentine protested in front of the parliament in Buenos Aires on a sunny Wednesday in September. The demonstrators are in debt – and are demanding support from the government.

This year alone, Oscar has accumulated debts of almost a million pesos, the equivalent of more than 500 euros - and that's just to be able to buy food, as he emphasizes. And of course he also wants to pay back the loans. “But the high interest rates are a crime.” Previously, Oscar had to repay 200,000 pesos a month, but in September the amount rose to 400,000 pesos.

Too much for Oscar, who only works in construction for little money every month. And he is not alone: ​​For many Argentines, the cost of living has risen massively since the government of President Javier Milei, as announced, canceled many subsidies for electricity costs and local public transport. More than 20 million of the country's 46 million residents have officially recorded debts.

The inflation-adjusted loan volume has more than doubled since Milei took office at the end of 2023. The debt is particularly high in the so-called Conurbano, the suburbs of Buenos Aires, where Oscar also lives.

The number of people in debt alone is not initially a problem, says economist Hans-Dieter Holtzmann, who heads the Friedrich Naumann Foundation in Buenos Aires. On the contrary: the debt is even a sign of economic normalization after years of economic emergency - even by Argentine standards.

“The hyperinflation under the previous Peronist government had practically brought the credit market in Argentina to a standstill,” explains Holtzmann. The banks hardly granted any loans to private individuals and companies and thus hindered economic recovery.

Inflation has fallen significantly under Milei; This makes loans more calculable again. However, it remains high, which is why the cost of living continues to rise, making repayment more difficult. Within two years, the inflation-adjusted volume of loans with payments overdue by more than 90 days increased by almost 775 percent, explains Julia Irupé Arndt from the Centro de Estudios para la Ciudad (CEC), a partner organization of the Friedrich Ebert Foundation.

More than five million Argentines are among these late payers. “Younger age groups are particularly badly affected,” says Arndt. The central bank registers almost 1.6 million indebted people who are under 25 years old. Of these, 39 percent had major payment arrears.

While older Argentines are more likely to be in debt to banks and traditional lenders, younger people are more likely to borrow money outside the traditional financial sector. Loans are easier and quicker to obtain there, but are also significantly more expensive. And it is precisely these loans that are more often affected by payment defaults.

The quickest loans are probably available in Argentine supermarkets, as installment payments are a common option there. Lower middle class households in particular can continue to shop even after losing their job. “Payment arrears have increased significantly here since the end of last year as the impact of unemployment has increased,” explains Arndt.

Since Milei took office, there have been around 30,000 fewer registered employers in the country. Critics like Oscar accuse President Milei of a gradual de-industrialization of the country. “Milei ruined the workers,” says Oscar. So far this year he has only worked for five months. “Now I’m out of work and have to wait until they start a new construction project.”

But the truth is also: Many companies have to close because they are not competitive without government subsidies. And Milei had announced that it would abolish precisely these subsidies. In addition, relaxed import restrictions are changing the conditions of competition.

Many imported products are now cheaper for Argentinians than domestically produced goods and are therefore more likely to buy them. This costs Argentine jobs, but in the long term - at least according to Milei's logic - it should help on the way to economic recovery.

This is currently of little help to Argentinians who are acutely indebted. There are presidential elections in just over a year. And the opposition senses an opportunity to mobilize heavily indebted Argentines against Milei. In the coming weeks, 50 legislative initiatives on the current debt situation will be discussed in parliamentary committees.

Whether the opposition will be successful with this is doubtful. Whether the loan defaults become a permanent problem for Milei depends on its success in other areas of economic policy, says economist Holtzmann: “With increasing stability, increasing competition in the financial sector and increasing income recovery, the quality of the loan portfolio will improve, and part of the loan defaults should therefore be a temporary phenomenon.”

The International Monetary Fund (IMF) is not yet concerned either. The current debt corresponds to around eight percent of the gross domestic product (GDP), which is relatively low compared to other Latin American countries. Financial stability is therefore not at risk.

Nevertheless, Milei has now also commented on the topic - albeit with a sobering tone for those affected like Oscar. Loans are purely private decisions, said Milei; no one is forced to go into debt with a gun to their head. The president therefore sees no reason for government intervention, much to Oscar's displeasure: "At the end of the month it's simply not enough. It's not enough, it's not enough, it's not enough."