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Argentine Construction Firms Struggle Amid Federal Cutbacks, 4,465 Cease Operations in a Year

By Bernadette Salapare | Jul 10, 2024 09:41 AM EDT

The federal government's decision to stop financing public works has caused 4,465 building companies in Argentina to close their operations in just one year. The crisis has also caused significant layoffs and a 10.66% fall in the total number of active companies in the sector.

(Photo : Pexels/Jerome Govender )

Impact of Federal Cutbacks on Construction Firms in Argentina

Official statistics confirmed on Monday, June 24, that Argentina entered a technical recession in the year's first quarter. Notwithstanding a strict budget campaign by libertarian President Javier Milei, who prioritized restoring fiscal order, job losses grew. Accordingly, most public infrastructure works have been halted by the newly elected libertarian President Javier Milei, who took office just a few months earlier in December. This has helped improve the state's finances on paper but has devastated construction activity, which dropped by 42% in March using official figures. At least 50,000 building workers are estimated to have lost their jobs between November and February.

In addition, 16,305 active companies, including subcontractors, were reportedly recorded by the Construction Industry Statistics Institute (Ieric) at the end of May. This marks a 10.6% drop over last year. Nevertheless, this does not mean that the companies not running are going out of business; instead, it suggests that they do not have any projects under active development. With a drop of 30.6%, the region of La Rioja saw the most significant year-on-year decline in active employers in May. On the other hand, San Juan was the only province to show a gain, a 4.5% rise over last year.

At the end of May, 355,618 registered construction workers were employed, a decline of 1.1% from April and 19.9% compared to the previous year.

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State of the Economy Under Milie

The government has experienced years of fiscal deficits, which have led to repeated defaults on sovereign commitments and tarnished its national reputation with international investors. Former critic and economist Milei said the nation must straighten its finances to prevent further damage.

His relentless dedication to reaching a budget surplus, which he has succeeded in, has helped him boost the market since he assumed office. However, the economy has suffered, and the number of people living in poverty and without homes has climbed. Bonds and stocks have surged strongly.

Milei's budget cuts have suspended state infrastructure projects and caused significant job losses in industries such as construction. Consumers have been hit hard by triple-digit inflation and the recession, which has decreased sales of products such as beef.

He argues that the economy will start to show signals of recovery and that strict fiscal therapy is needed. Yet, the INDEC statistics revealed that the year-over-year decline of 5.1% was more than the analysts projected, who expected a reduction of 5.25%.

Furthermore, data analysis reveals that public consumption fell by 5% yearly during the quarter, while private consumption dropped by 6.7%. 

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