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Argentina's Poverty Risks Quadrupling, World Bank Says

Argentina risks quadrupling its poverty level as the economy stalls, the World Bank says.

Those living on $4-$10 per day, or 33 percent of Argentina's population as of 2012, are vulnerable to falling into poverty in the case of an adverse shock, according to the World Bank's 2015-2018 report on the South American nation. The poverty rate for the country's 43 million people may increase to more than 40 percent from about 11 percent, it said.

"Strengthening macroeconomic resilience, improving the business environment, and boosting investor confidence will be critical to fostering investment and expanding and sustaining the employment thereby generated," the report said.

Argentina defaulted on its international bonds July 30 after a U.S. judge blocked a $539 million interest payment until the government pays so-called holdouts from a 2001 default in full. South America's second-largest economy contracted in the first quarter while the annual inflation rate is about 40 percent.

The greatest vulnerability to poverty arises in periods of economic crises or prolonged sluggish growth, which reduces employment and earnings and limit the ability of the government to finance social programs that directly support the poor, according to the World Bank report dated Aug. 7 and made public last week. The institution approved lending Argentina as much as $4.8 billion through 2018 as the nation's reserves dwindle.

Economy Ministry press official Jesica Rey didn't respond to an e-mail from Bloomberg News seeking comment on the report.

Biggest Concern

About half of the 2,400 people interviewed in a Sept. 2-9 Management & Fit poll said Argentina's economic conditions will be worse or much worse in the coming months. Fifty-two percent considered employment as their main concern, the Argentine consulting firm's survey showed.

Argentina will receive $1 billion to $1.2 billion per year in loans for social development, the Washington-based lender said Sept. 9 in an e-mailed statement. The World Bank's IFC will also invest $1.7 billion in export-oriented private companies ranging from agribusiness, energy and infrastructure to financial institutions.

The World Bank and IFC loans are aimed to increase the number of people eligible for health care to 50 percent in 2018 from 28 percent, boost drinking water access to 92 percent from 83 percent in northern Argentina and expand secondary school completion in rural areas to 65.5 percent from 61.5 percent.

Other goals include reducing freight transport in northern Argentina, decreasing transit time in Buenos Aires and Rosario, and raising the gross value of agricultural production of 80,000 small- and medium-size farms.

The World Bank's IBRD total exposure to Argentina is $5.89 billion, with disbursements totaling $701.2 million this year.

[Source: By Camila Russo, Bloomberg, NY, 19Sep14]

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