A man walks in front of a clothing store in downtown Buenos Aires, on January 12, 2022. LUIS ROBAYO (AFP)
The Argentine economy does not stand.
Accumulated inflation during 2022 reached 94.8%, the highest annual rise since the hyperinflation of 1991. The CPI rose 5.1% last December, 0.2% points more than in November.
The data is bad news that hides a consolation prize: the government of the Peronist Alberto Fernández had set itself the goal of avoiding at least a three-digit CPI, as was predicted in the middle of last year after the resignation of Economy Minister Martín Guzmán.
Since then, his successor, Sergio Massa, has imposed a strict system of maximum prices, moderated issuance and promoted positive interest rates to neutralize the collapse of the peso against the dollar.
Massa promised 60% inflation by 2023,
Last year was a via crucis for the Argentine economy.
The country initially suffered the impact of Russia's invasion of Ukraine, which sent food and energy prices skyrocketing.
In the middle of the year, local factors complicated what was already complicated: the Argentine CPI rose 7.4% in July, amid the turmoil that caused the departure of Minister Guzmán, responsible for signing the agreement with the IMF to postpone payments for 45,000 millions of dollars.
The fratricidal fight between the president and his vice president, Cristina Kirchner, hindered any consensual economic policy.
That mark in July was the highest for a single month since 2002, when the corralito crisis collapsed GDP by 10.9% and, through devaluation, the CPI for April rose 10.4%, before falling to 0 .1% in December.
The forecasts for this year comfortably exceeded 100%, a psychological barrier that the Government managed to keep closed.
“If we continue on the descending scale of inflation, as we have been seeing in the last quarter,” said the government spokeswoman, Gabriela Cerrutti, this Thursday, “and the parity [salaries] continue to work and more and more people join the job formally, we are on the path marked out by the president and the Minister of Economy”.
The cost of keeping the CPI in check has been a slowdown in economic growth.
Activity in October fell 0.3% compared to September.
The good start to the year will allow us to end December with a rise in GDP that will be around 5%, but which is expected to be close to zero in 2023. The underlying issue is that Argentina is not solving its structural problems.
The causes of inflation are multiple.
The South American country does not have enough dollars to pay for its imports and discretionally restricts access to foreign currency.
To sustain the value of the peso, Argentina maintains the exchange rate behind with a split market in official and blue: 187 pesos per dollar in the first and 360 pesos per dollar in the second.
The official price works as an anchor for imported products, but the local market calculates its costs in the blue dollar, which is at the end of the day what it costs an Argentine to get the currency on the black market, the only one he has access.
At the same time, the Government finances the fiscal red with issuance, because since the default decreed by Mauricio Macri in 2018 the country has no access to international credit markets.
The combination of fiscal deficit, issuance and lack of dollars generates all kinds of distortions.
Argentines have adapted to living with them, without agreement on solutions.
The former president of the Central Bank during the macrismo, Guido Sandleris, recalled this Thursday that inflation in 2022 was the highest since the hyperinflation of the early 1990s, prior to the convertibility of the peso with the dollar.
"The root cause," he said, "is that the government pushed the issuance-financed deficit to unsustainable levels."
The Casa Rosada promised a year ago before the IMF to reduce the primary fiscal deficit (prior to paying interest on the debt) to 1.9% of GDP in 2023, until reaching equilibrium in 2024. It will be a tough challenge for government.
This year that begins there are presidential elections and there is nothing more unpopular at the polls than a fiscal adjustment that cools the economy and impacts the salaries of the electorate.
Maintaining the purchasing power of workers is at the top of the concerns of the Peronist government.
The Minister of Labor, Kelly Olmos, said this Thursday that they will seek that the increases in payrolls do not exceed 60% "to converge towards the scheduled level of inflation plus some point of recovery."
Massa anticipated that her goal for April is a CPI “with a three ahead”, a goal that seems increasingly difficult to meet given the inheritance that she will receive from the year that has just ended.
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