People make purchases in a wholesale supermarket in Buenos Aires.Juan Ignacio Roncoroni (EFE)
Inflation in Argentina grows at an unprecedented rate in three decades.
In the second country in Latin America with the highest price increase, only behind Venezuela, the CPI rose 7% in August compared to July, according to data released this Wednesday by Indec, the public statistics institute.
So far this year, prices have increased by 56.4% and the year-on-year jump was 78.5%, the highest since 1991. Private consultants predict that inflation in the South American country will touch the 100% barrier at the end of year.
Clothing and footwear (+9.9%) and electrical appliances and other household goods (+8.4%) led the price increases last month, followed by food and non-alcoholic beverages, which increased one tenth above average.
The resignation of Martín Guzmán as head of the Ministry of Economy on July 2, his replacement by Silvina Batakis for less than a month, and the subsequent assumption of Sergio Massa generated enormous political instability that was reflected in a significant devaluation of the peso and in significant price increases in both July and August.
The Government knows that the CPI data will also be high in September, but it is betting on a slowdown in the last quarter of the year that will drive away the ghost of hyperinflation and allow some optimism for 2023, when Argentines are summoned to the polls to elect the next president of the country.
The fiscal adjustment measures announced in recent weeks —such as the progressive withdrawal of energy subsidies for households—, the increase in bank interest rates and the accumulation of international reserves are some of the strategies designed by the new economic team to reduce the price escalation.
In his meeting with the authorities of the International Monetary Fund, Massa promised this Monday to meet the fiscal deficit goals of 2.5% of GDP for this year and 1.9% for 2023 agreed in March as part of the agreement of restructuring of 44,000 million dollars of debt with the international organization.
The devaluation pressure has been reduced in the last two weeks thanks to the announcement of a new credit of 3,000 million dollars from the Inter-American Development Bank and the almost 2,000 million dollars that have entered the agricultural export sector thanks to a favorable exchange rate baptized as a "soybean dollar" that allows agricultural producers and exporters to obtain 200 pesos for each dollar, instead of the 140 of the official exchange rate.
These announcements have also had a positive effect on the informal exchange market, where the peso has recovered ground against the dollar, thus affecting the price of those products linked to the US currency.
Economists warn that inflationary inertia makes it almost impossible to stop it quickly and the international context does not help either, so they disbelieve the sharp reduction that the Government foresees for 2023 and that it will reflect in the Budget project that Congress must vote on the upcoming weeks.
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