World Bank: poverty could reach 44% in Argentina

World Bank claims that more than one-third of Argentina’s population could be hit by economic shocks

Approximately 33 percent of the country’s population — or those living on between US$4 and US$10 per day — is vulnerable to falling into poverty if faced with adverse economic conditions, the World Bank said in its 2015-2018 Country Partnership Strategy (CPS) report for Argentina.

The multilateral organization estimates there is a poverty rate of about 11 percent in the country, but has highlighted that Argentina should “focus on the need to sustain social gains achieved in recent years and expand social inclusion in an efficient and sustainable manner.”

The World Bank report, published for internal use in August of this year thus echoes warnings made by the United Nations Development Program (UNDP) about stalling social progress in the region.

Vulnerable populations, for the purposes of social policy, are those who have made it out of poverty but do not enjoy economic security like the middle class does. They live on an average US$4 to US$10 a day and risk being clawed back under the poverty line by economic turmoil, recession or volatility.

The UNDP recently warned that that up to one-third of Latin America is at risk of being clawed back in to poverty as the region’s economies face slowing growth rates.

The report praises the country’s recent economic policies, noting that “economic growth during 2003-2013 made Argentina one of the top two Latin America and Caribbean performers in terms of poverty reduction and improvements in shared prosperity.” But it also adds that the country’s most vulnerable populations have historically stemmed from the “economy’s exposure to adverse economic shocks, which reduces employment and earnings and limits the ability to finance social programmes supporting the poor.”

The very same report adds that economic activity rallied in 2010-11 but has since slowed, fiscal accounts are under pressure as a result of expenditures outpacing revenues and that a worsening trade balance has lead to a deterioration of external accounts.

Despite action by the government to tighten monetary policy and restrict some spending, a low debt-to-GDP ratio, the World Bank is anticipating that in that the short-term a “prolonged slowdown is more likely than a deep economic rift” as a result of sluggish economic performance, continued inflation, dropping international reserves and continued uncertainty over the holdout debt saga and reduced economic growth in China and Brazil.

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The Rising Cost of Freedom

We are finding that the cost of freedom seems to be increasing lately. Terms like free trade or free choice have been misleading since they all come with a price, which international marketers pay in terms of preparing their shipments, scrutinizing their customers, and conforming to government regulations of tariffs or taxes. They pay ofr it when subsidies are reduced and markets are opened further, resulting in more intense competition.

Now prices are going up when international marketers have to file special paperwork or comply with security guidelines, which slow down the flow of merchandise. Every time a shipment is delayed, international transactions are less profitable and the subsequent business dealings become less competitive. Customers talk about unmet expectations and domestic firms point to the vagaries of itnernational markets.

We are all paying a higher price due to global terrorism, which has permeated the global marketplace. In most instances, terrorism is not an outgrowth of choice but rather the lack of it. Terrorists may succeed in reducing the freedom of others but not in increasing their own. The prinicpal choices played out between those exercising terrorism and those exposed to it are those consistent with economic theory of return on investment. When terrorists select targets in response to governmental implementation of anti-terrorism policies, the harder targets are likely to motivate them to go for easier ones. Increased protection of past targets may result in attacks on new and unexpected targets that are more likely to succeed. Similarly, if terrorists can no longer enter a country, they may attack that country’s symbols and representatives abroad. If embassies are then more secured and fortified, terrorists may attack that nation’s individuals and companies.

Who is typically most affected by terrorist acts? Attacks aimed at business, such as the infamous bombings of U.S. franchises abroad do not bring MNCs to their knees. The local participants, the local employees, the local investors and the local customers are affected most. Who can protect tehmselves against such attacks and who can afford to protect targets? Only the more wealthy countries and companies can. They have the choice of where to place etheir funds, with whom to trade, and whether to hold the enemy at bay through a security bubble created via exports, a franchise, or a wholly owned subsidiary. The poor players do not have any choices and ther alternatives are not improved by any gruesome act. The local firms, the nations with economies in development, and the poor customers continue to be out there, exposed to further acts of terrorism without the ability to influence events.

But international marketing can enable the disenfranchised to develop alternatives. As suggested by Prahalad and Hammond (2002), multinational firms can invest in the world’s poorest markets and increase their own revenue while reducing poverty. With support from shareholders and the benefit of good governance, marketers can, and should continue in their role as social change agents. It should be kept in mind that international marketing has value maximization at its heart. If it is worthwhile to fulfill the needs of large segments of people even at low margins, then it will be done.

 

FMP 3: Promoting Freedom and Building Bridges

In a global setting, freedom can take on many dimensions. Privileges and obligations that are near and dear to some may well be cheap and easily disposed of by others. The views of one society may differ from views held in other regions of the world. Such differences then account for misunderstandings, surprises, and long-term conflicts. Continue reading