Argentina ended 2023 with annual inflation of 211.4%, the highest since the hyperinflation of 1990.
This was the first measurement carried out by the government of President Javier Milei, who, in his shock plan, signed a 50% devaluation of the peso at the beginning of his term, last month, and wants to deregulate the economy as much as possible.
According to the National Institute of Statistics and Census (Indec), the consumer price index increased 25.5% in December compared to the previous month.
This strong increase in prices is linked to the so-called “sincerization” of prices after the departure of Peronist Alberto Fernández from the presidency. In the previous government, Economy Minister Sergio Massa – who faced Milei in the presidential elections – adopted a policy called “fair prices”, restricting the increase in the most basic products.
Shortly after the announcement of the first economic measures by the Milei government, in December, the Central Bank argued that the beginning of the price liberalization process was “an indispensable requirement to advance in the reversal of fiscal and external imbalances”, due to “marked distortions in relative prices” which, according to the issuing institution, aimed to “repress and delay” the “inflationary consequences of the State's deficit policies”.
In December, the most notable increases occurred in miscellaneous goods and services (32.7%), health (32.6%) and transportation (31.7%).
Furthermore, the prices of food and non-alcoholic drinks increased by 29.7%, with some products – such as wheat flour, rice and sunflower oil – becoming more than 50% more expensive, which is extremely worrying due to their impact on the value of the basic food basket, a key indicator for measuring the poverty rate, which in Argentina is around 45%.
The Milei government had already warned that monthly inflation rates of 20% to 40% could be recorded by February, but he guarantees that, with the shock fiscal plan that he announced a few days after taking office, he will avoid hyperinflation of 15,000% per year.
The president himself stated in an interview this Thursday (11) that, if monthly inflation approached 25%, it would be “a tremendous success” and that Caputo should be “congratulated”.
The government's plan is to achieve fiscal balance this year and thus end the monetary issuance that Argentina has resorted to until now to finance the deficit. In fact, he also acknowledged this Thursday that “sooner or later” he will fulfill his promise to close the Central Bank. This is how Milei believes that, in 18 to 24 months, he will be able to tame the inflationary beast.
Inflation of 211.4%, left by the disastrous government of Alberto Fernández, is the highest in South America, above that recorded by Venezuela (193%), and the worst in the country in the last 34 years.
The hyperinflation of 1989 and 1990, which drove the consumer price index to 3,079% per year in 1989 and 2,314% in 1990 and maintained very high poverty rates among the population, something similar to what is happening today, remains in the memory of Argentines.
Hyperinflation led to an early presidential transition between Raúl Alfonsín (1983-1989), the first president in the country's return to democracy, and Peronist Carlos Menem (1989-1999), who would later implement his convertibility policies (the famous dollar- “one-to-one” weight).
In 2001, in the midst of an explosive economic crisis, street protests caused the death of 39 people and the resignation of then president Fernando de la Rúa (1999-2001).
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