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Argentina recorded 12.4% inflation in August, the highest for a single month since 1991

2023-09-13T20:15:22.498Z

Highlights: In August, the CPI registered a jump of 12.4% compared to July, the highest price increase in a month since 1991. The CPI jumped driven by the devaluation of the peso after the defeat of Peronism in the primaries. The inflationary jump is a blow to Massa's presidential candidacy a month and a half before the general elections. The Argentine currency lost 18% of its value against the dollar in just one day and accumulates a depreciation close to 50% so far this year.


The CPI jumped driven by the devaluation of the peso after the defeat of Peronism in the primaries. The year-on-year increase climbs to 124.4%


The government of Alberto Fernández has lost the war it declared against inflation. In August, the CPI registered a jump of 12.4% compared to July, the highest price increase in a month since 1991, when the South American country left behind the last hyperinflation in its history. In the last year, in which the reins of economic policy have been in the hands of Economy Minister Sergio Massa, year-on-year inflation has climbed to 124.4%, a record figure in the last three decades.

The inflationary jump is a blow to Massa's presidential candidacy a month and a half before the general elections. The August data, released by the Institute of Statistics and Census (Indec), becomes a weapon in the hands of his rivals, the far-right Javier Milei, and Patricia Bullrich, of the conservative coalition Together for Change.

Food has led the increases, with three points above the average. Among them stands out the great increase in meat, more than 30% in just one month. The largest denomination bill circulating in the country, 2,000 pesos (about 5.5 dollars in the official quotation), is not enough for anything in the butcher shop. The kilo of strip of asado, one of the most popular cuts in Argentina's grills, is around 3,000 pesos (about 8 dollars) in many stores in Buenos Aires, when a year ago it cost less than half. It is a significant fact for the most carnivorous country in the world, in which the per capita consumption of beef amounts to 54 kilos per year, ten times more than in Spain.

Increases above average inflation have also been recorded in the health sector (15.3 per cent) and household equipment and maintenance (14.1 per cent). On the contrary, the most moderate increases were those of communications (4.5%) and alcoholic beverages and tobacco (8.5%).

For months, Argentine inflation moved in values ranging between 6% and 8% monthly, but the sharp devaluation of the peso after the primary elections of August 13 pushed the figure one step higher. The Argentine currency lost 18% of its value against the dollar in just one day and accumulates a depreciation close to 50% so far this year. Despite the efforts of the Government, the devaluation was transferred to the prices of a large part of the shops.

Argentina has the second highest inflation in South America, behind only Venezuela (422% year-on-year). Its inhabitants are accustomed to living with constant price increases, but the younger generations have never seen them skyrocket at such speed. In the days after the devaluation, the supply chain was paralyzed and some businesses stopped selling due to lack of prices. When the new listings arrived, most products had increased by more than 10%.

The rise in the CPI in August was even greater than the 10.4% recorded in April 2002, when Argentina was going through the serious crisis of the corralito after the end of the convertibility system that tied the value of the peso to the dollar during the nineties.

The inflation figure has not taken Massa by surprise. The economy minister and candidate has made announcements in recent weeks aimed at easing the new blow in the pockets of the population. First, he threw a lifeline to those most in need: two extraordinary bonuses worth the equivalent of $80 each for workers earning less than 400,000 pesos (about $1,100) and for retirees with the lowest pensions. This week, he has proposed tax benefits to those at the top of the labor pyramid. Workers earning less than 1.7 million pesos per month (about $4,650) will not pay income tax.

Massa seeks to recover ground after the defeat suffered by the Peronist alliance Union for the Fatherland in the primaries, where it came in third with 27% of the vote after La Libertad Avanza de Milei (30%) and Together for Change (28.3%). Peronism seeks a comeback for October that will allow it to at least play a second round against Milei, favorite in the polls. To win in the first round the law requires obtaining 45% of the votes or 40% with an advantage of ten points over the second.

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Source: elparis

All news articles on 2023-09-13

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