Argentina ended 2023 with 211.4% year-on-year inflation and has surpassed Venezuela (193%) as the country with the fastest rising prices in Latin America. The consumer price index (CPI) was 25.5% in December, more than double any other month last year; and the highest figure in a single month in three decades. The increase reflects the blow of the change of Government in Argentina, which went through the last month between large and rapid increases, while the new Executive led by the far-right Javier Milei promoted a 50% devaluation of the peso and the release of some fixed prices. The jump in the CPI has not been a surprise. “A number below 30% would mean that the success achieved is resounding,” Milei had said this Thursday morning. Since he took office on December 10, the president has clung to hyperinflation to defend his fiscal adjustment.
The increases in December have been led by goods and services, which increased 30%; health, with an increase of 32.6%; and transportation, with 31.7%. Food prices skyrocketed 29.7% in the last month. Many sectors had scheduled increases agreements with the previous Peronist Government and were released after Milei's victory. As is usual in Argentina, the index published for December is already starting to get old. In January, for example, private health insurance announced increases of around 40% and public transportation in the city of Buenos Aires and its metropolitan area rose by 45%, a rate that the Government plans to increase each month according to evolution. of the CPI.
Milei has entered all-or-nothing territory. This week, Congress has begun to debate in specialized commissions the law that the Executive has named “Bases and Starting Points for the Freedom of Argentines”, in which the Government promotes a profound reform of the Argentine State in more than 600 articles. From money laundering, a pension reform and the sale of public companies, to prison sentences for protesters who block streets or the approval of a new express divorce regime, the Government has entrusted its entire adjustment plan to the monumental law that he sent to Congress is approved almost without concessions. The calls for its approval have already escalated to threats.
Argentina announced this Wednesday an agreement with the International Monetary Fund for it to unlock $4.7 billion that the country will use to pay its debt with the organization itself. The Government thus revived an agreement that the last Peronist Government promoted in January 2022 to pay the loan of 44,000 dollars requested by the conservative Mauricio Macri four years earlier. The IMF celebrated the “ambitious stabilization plan” promoted by Milei, but warned that it will turn off the tap if it does not see a “continuous and lasting implementation” of the fiscal adjustment. “To the extent that the law does not pass, the measures will be tougher,” the Minister of Economy, Luis Caputo, warned on Thursday night, stating that Milei had had the “courage” to take “shock measures.” and that society had accompanied him with the vote. “The question is whether politicians are going to rise to the occasion,” he concluded.
Whether Argentine society will support price increases as part of the Government's fiscal adjustment remains to be seen. But Milei has managed to maintain some popular support. According to a report by the consulting firm Escenarios, which surveyed some 2,150 cases between December 20 and January 10, the Government has the approval of 39.3% of the population, more than triple the 11.3% with the that Peronism left him in December. Other surveys, such as that of the consulting firm Opinaia, give Milei a popularity of 35%, much lower than the 55% with which he came to the Government, but about five points higher than his hard vote, the 30% he obtained. in the first round before winning the second round on November 19.
Argentina has committed to the IMF to accumulate net reserves of 10 billion dollars in 2024 and to bring its fiscal deficit, which closed 2023 at 3%, to a surplus of 2%. And the organization, which has followed Milei's line by announcing that the Argentine economy “will get worse before it gets better,” has also asked him to lower the tone of the discussion and seek consensus for the reform law in Congress. “There are aspects of this bill that have important fiscal implications and, as such, we hope that the authorities will continue to build political support to advance this bill,” IMF Communications Director Julie Kozack said Thursday morning. , at a press conference in Washington.
The IMF is not the only headache for the Government. This Thursday, the New York judge who sentenced Argentina to pay compensation in favor of the investment funds that claimed for the nationalization of the state oil company YPF has rejected the Argentine request to extend the payment period. Argentina was sentenced to pay 16,099 million dollars in March 2023, and the new Government has argued that, between inflation “which is approaching 200%”, the negotiation with the IMF and the “inability to access international markets of capital”, will not be able to meet the demand. Judge Loretta Preska has responded that despite “sympathizing with the magnitude of the challenges” in Argentina, the Executive demonstrates that it has not taken measures to face the payment and that it does not have an established schedule to do so.
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