Concepción M. Moreno
Buenos Aires, Jan 11 (EFE). – Argentina closed 2023 with an inflation rate of 211.4% year-on-year, the highest since the hyperinflation of 1989-1990, 34 years ago.
The National Statistics and Census Institute (Indec) reported that consumer prices rose 25.5% in December, an acceleration of 12.8% from the previous month, while the year-on-year increase reached 251.3%.
The government of Javier Milei, which took office on Dec. 10, warned in its first weeks that monthly inflation could reach 20 to 40% between December and February.
The president assured that this was part of his fiscal “shock” plan to avoid hyperinflation, which aimed to deregulate the economy.
The announced plan included cuts in public spending and subsidies, non-renewal of hundreds of government employment contracts, downsizing of ministries and government secretariats, and a 50% devaluation of the official dollar-peso exchange rate, among other measures.
The government claims that the rise in inflation in December was related to what it calls a “price showdown,” referring to the belief that prices were “capped,” meaning that the previous government’s economic policies had kept them artificially low.
In December, after the announcement of the economic package, the central bank maintained that price liberalization was “indispensable to advance the reversal of fiscal and external imbalances.”
The emissary blamed said imbalances on the “marked distortions in relative prices” that intended to “suppress and delay” the “inflationary consequences of the State’s deficit policy.”
However, the Confederation of Labor (CGT), Argentina’s main labor union central, criticized the harsh adjustment in December.
“The fiscal and monetary adjustment plan announced by the government will cause a strong acceleration of the inflationary process that will dynamite the purchasing power of workers’ salaries,” the CGT said in a statement.
Steep rise in goods and services
In December, the most notable increases were in miscellaneous goods and services (32.7%), health (32.6%) – as a result of increases in medicines and fees charged by private medical companies -, and transport (31.7%).
In addition, food and non-alcoholic beverages increased by 29.7%, with some products – such as wheat flour, rice, and sunflower oil – increasing by more than 50%.
This data is worrying because it shows an impact on the family food basket, a key indicator for measuring the poverty rate, which is around 45% in Argentina.
Milei pointed out in a radio interview on Thursday that if the monthly inflation figure approaches 25%, it will be “a great success” and we should “call (Economy Minister Luis) Caputo and congratulate him.”
He plans to achieve a balanced budget in 2024, ending the money printing that Argentina has used to finance the deficit.
Milei believes his measures will “tame” inflation in 18 to 24 months.
The inflation rate of 211.4% is the highest in the region, above that of Venezuela (193%) and among the highest in the world in a tough battle with Lebanon.
It is also the highest seen in Argentina in 34 years, since the hyperinflation of 1989 and 1990, which remains engraved in the memory of Argentines.
Then, Argentines saw the price index rise by as much as 3,079% annually in 1989 and 2,314% in 1990, maintaining very high poverty rates among the population.
Then, hyperinflation led to a change of presidents between the radical Raúl Alfonsín (1983-1989) and the Peronist Carlos Menem (1989-1999), who would later implement neoliberal policies and convertibility (the famous “one to one” dollar-peso).
This last policy also failed in the late 1990s and early 00s, leading to an explosive economic crisis.
In 2001, street protests over the country’s financial and social situation led to the deaths of 39 people and the resignation of the late radical president Fernando de la Rúa (1999-2001). EFE
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