Government to cut welfare after IMF request to “exclude ineligible recipients”

Over 154,000 Potenciar Trabajo recipients - more than 11% of the total - could have their payments cut for failing to complete an online identity check

by Lucía Cholakian Herrera
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Social Development Minister Victoria Tolosa Paz announced yesterday that 154,441 recipients of the Potenciar Trabajo (Empowering Work) welfare program would be cut off for failing to verify their identities in an online form. 

The form was carried out through the government’s Mi Argentina app between November 22 and January 6. Social movements said the survey could exclude people who don’t own a phone or can’t access the internet. Around 87% of the Argentine population uses the internet, according to official statistics. 

Potenciar Trabajo is a cash payment to working-age adults who are in poverty, at risk of becoming poor, or work in precarious informal jobs. Holders are required to finish their studies or take part in community projects and activities in exchange for receiving the payments.

For those who did not complete the form, the payment will be reduced by 50% for the coming month and cut entirely after 60 days. In a press conference in the Casa Rosada, Tolosa Paz said: “If there are sectors willing to protest because they believe we were not comprehensive enough, I just want to let you know there’s a complaints desk to do so.” 

In November 2022, Tolosa Paz said that the Ministry would cut welfare payments to 200,000 recipients after initial data suggested they may not be eligible for the programs they were receiving. As a response, leftist social movement coalition Unidad Piquetera and the Social Economy Workers’ Union (UTEP) held protests outside the ministry. After a series of meetings with Tolosa Paz, the ministry agreed to check each individual’s Potenciar Trabajo eligibility via the online form.

Of those who completed the form, 67% were women and most of them were young. Of the women who responded, 60% were mothers with children under 18. The decision comes amid an economic crisis, with poverty at 36.5% and extreme poverty at 6.8%. 

More cuts to come

The cuts to Potenciar Trabajo come after the government’s March renegotiation of its agreement with the IMF, which requires a primary fiscal deficit of 1.9% this year. The deal also includes cutting utility subsidies and adjusting pension and retirement benefits. In the Washington-based institution’s third review of the program released in December, Potenciar Trabajo was mentioned six times.

“Improving the quality and targeting of social spending is also required,” read the report. The IMF praised the country’s efforts to “improve the governance of Potenciar Trabajo and exclude ineligible recipients, with a rapid audit of all recipients to be completed by January 2023.” 

“Over 20,000 ineligible recipients have already been removed, with further reductions expected during the course of next year,” the report added.

The government has told the IMF it plans to cap Potenciar payments for recipients who also receive other kinds of welfare with a view to pushing them back into the formal labor market. That could involve diverting more funds to the Puente al Empleo (Bridge to Employment) program, which aims to shift informal workers into the formal labor market, the government told the Fund in a memorandum.

In 2022, AR$322.6 billion was earmarked for Potenciar Trabajo, while this year the government will increase the figure to AR$591 billion, a 4.9% increase in real terms. That doesn’t necessarily mean cuts are off the table – under-implementation of budget allocations is a common way of carrying out austerity measures.

According to Congress’s Budget Bureau, much of the trimming to reach the projected deficit will be in welfare programs, the budget for which was trimmed by 2.8% in this year’s budget. Projected expenditures in food policies will drop 24.5% and the Progresar scholarships will be slashed by 23.6%. Pensions will also be cut.

Moreover, the pension system could also be affected structurally as a result of the IMF program: the international lender’s report said it was planning to study ways to “strengthen the equity and financial sustainability” of the pension system. 

“Early diagnostics have narrowly focused on identifying the fragmentation in the system, particularly the relative generosity of the multiple special regimes for different occupations,” the agency wrote.

However, according to the IMF, such a reform “will only be plausible after the elections.”

By Lucía Cholakian Herrera and Facundo Iglesia

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