How families in Milei's Argentina sank deep into debt

[MilHojas]

How families in Milei's Argentina sank deep into debt

Stagnant incomes, coupled with a cost of living crisis, have nudged household finances in Javier Milei’s Argentina to the brink.

www.batimes.com.ar

 

[carride]

I am happy to see another resource translate Argentina “librería“ as “Stationery Store” instead of “paper store” or worse “a bookstore”.
Though they still misspelled it using the often swapped word “Stationary”. It is difficult for me to convince some people that is what many of us know as the small town paper, pens, greeting cards, and etcétera store. If they even exist anymore now that there are super size office supply stores.

Andrea, a 32-year-old mother who declined to give her surname because she felt ashamed of her predicament, tried to reinvent herself by starting a catering business after the stationary shop where she worked shut down.

Still it is disturbing that they allowed predatory digital wallets and banks to create this situation.

"The total effective financial cost [of a loan from Mercado Pago] stands at 1,375 percent,"

Teenage debtors

The offer of credit, with few conditions attached, has also sucked in workers from the gig economy, with the platforms for which they work sometimes acting as their lenders.

Their rates start at 260 percent annually, quadruple those of banks, with the payments deducted from the workers' earnings.

Milei has rejected any responsibility for the situation.

"Did they have a gun to their head to make them do it [take out a loan]?" he asked curtly in a recent interview.

 

[LuckyLuke]

I recently had the misfortune of submitting blueprints for a rental property I purchased a few years back only to be told that it was "overbuilt" for the size of the lot and to kindly remit $11,361,000 in penalties. The architect was speechless. I was given the option of paying it in 12 monthly installments at 84% APR, over $1,000,000 per month. Mind you this is the same government that issues an IPC of only 2-3%.

Banks paying 22% on a plazo fijo but charging 87% TNA on credit card should be reined in. Obama's credit card act of 2009 was a huge step in consumer protection.

 

[FrankPintor]

I recently had the misfortune of submitting blueprints for a rental property I purchased a few years back only to be told that it was "overbuilt" for the size of the lot and to kindly remit $11,361,000 in penalties. The architect was speechless. I was given the option of paying it in 12 monthly installments at 84% APR, over $1,000,000 per month. Mind you this is the same government that issues an IPC of only 2-3%.

Banks paying 22% on a plazo fijo but charging 87% TNA on credit card should be reined in. Obama's credit card act of 2009 was a huge step in consumer protection.

Were the calculations done correctly? Here we have both a minimum and a maximum percentage of the surface area that can be built on.Your architect should really have known that.

Easy solution, maybe... take the roof off part of the house, maybe 1-2 rooms, and declare the space as a "quincho", they\re worth only half the "value" of living space in the calculation.

 

[LuckyLuke]

Were the calculations done correctly? Here we have both a minimum and a maximum percentage of the surface area that can be built on.Your architect should really have known that.

Easy solution, maybe... take the roof off part of the house, maybe 1-2 rooms, and declare the space as a "quincho", they\re worth only half the "value" of living space in the calculation.

Howdy Frank,

I appreciate your response. Neither architect on the team knew about any such limit here and claimed the penalties are not published anywhere. The planos department said either architect could have easily stopped by and simply asked in person. It was an enormous disappointment. We were almost 100 square meters overbuilt. The primary reason for the large fine was because it was presented as a multifamily property. The penalties are 70% less if it's a residence. It would have been just as costly to vacate all the units and attempt to declare it as a residence (which is hard to justify having 6 kitchens). All in all a painful lesson in trust.

 

[dlish]

and to kindly remit $11,361,000 in penalties

Can someone help you fix it the connected way … ie gift the right guy $2,000,000 to make the problem disappear?

 

[Rich One]

Milei stated that the debt of individuals is an agreement between private parties . No one put a gun to their heads to assume loans.
Twenty million Argentinians assumed private loans, some are over 180 days delinquent .
Some congressmen believed the government should intervene and use funds that belong to us that didn't borrow, to pay the delinquent debts of those that won't pay their loans ??? Fair?

 

[LuckyLuke]

Milei stated that the debt of individuals is an agreement between private parties . No one put a gun to their heads to assume loans.
Twenty million Argentinians assumed private loans, some are over 180 days delinquent .
Some congressmen believed the government should intervene and use funds that belong to us that didn't borrow, to pay the delinquent debts of those that won't pay their loans ??? Fair?

The government is complicit -- 100% in what is occurring. Imagine you, an ordinary citizen, is still reeling from 211% annual inflation during Alberto's final year. Then comes Milei and he almost immediately does the following:

Devalues the currency by 40% to address the "atraso cambiario".
Removes subsidies on all utilities & transportation
Cancels the Ley de Alquiler - thus removing the 3 year term and 6 month adjustment (which heavily favored the tenant)
Removes the ceiling on tuition increases on all private schools
Removes the ceiling on rate increases for all private health insurance

Now before we even proceed, take a look at the above items. Do any of them look discretionary to you? Rent, utilities, transportation, tuition, insurance?

We haven't even begun to address opening up the country to imports and how it affected small business revenue and private sector unemployment.

We haven't included all the canceled public works projects, the effect on the the construction material supply chain, and public sector unemployment.

We haven't included the 9 government ministries and 200 odd public offices he shut down.

We haven't included the reduction in co-participation payments to the Provincias and how it affected them.

We also haven't even begun to address how the Treasury / Central Bank purposely non-renewed peso denominated debt instruments to vacuum up "excess" pesos in circulation - thereby driving up local bank lending rates.

We also haven't addressed the Central Bank lowering it's benchmark interest rate, thereby reducing the yield on all plazo fijo's.

Now, Milei has the bald-faced audacity to come out and say it's not his fault ordinary citizens took out loans to keep up with their monthly costs.

 

[Rich One]

Considering all the above important issues mentioned by @LuckyLuqe would like to know why the People haven't taken action similar to what ruined president De La Rua, before he escaped in a Chopper .

 

[LuckyLuke]

Considering all the above important issues mentioned by @LuckyLuqe would like to know why the People haven't taken action similar to what ruined president De La Rua, before he escaped in a Chopper .

De La Rua resigned from a full blown currency crisis and state sanctioned robbery of private savings. That has nothing to do with today's economic reform where we have a stable dollar rate and largely dismantled CEPO.

What support Milei has lost through economic malaise he has gained by the sheer lack of an organized political opponent. Both the PRO & PJ party have a public image problem after the disastrous presidencies of both Macri & Alberto and Cristina's conviction, but it's not to say another outsider like Milei wouldn't sway voters.

Regardless of who wins the election, what this article highlights is that the economic blow would have been much more severe were it not for household debt cushioning it. Now, we get to see that with rising debt delinquency comes the next leg down as households run out of credit and become disqualified from accessing any other credit lines.