Argentina recorded its biggest increase in prices last year since 1991, when the nation was recovering from hyperinflation, according to official government data.
Consumer prices rose 53.8 percent in 2019, Mauricio Macri’s final year in office, the INDEC national statistics bureau said Wednesday. Hardest-hit over the last 12 months were healthcare (up 72.1 percent), communications (63.9 percent), home equipment and maintenance (63.7 percent) and food (56.8 percent).
In December alone, prices rose 3.7 percent, INDEC revealed. Patagonia suffered the highest increases, registering a rate of 4.2 percent in the final month of 2019.
The figure means Argentina has one of the highest rates of inflation in the world, surpassed only by crisis-stricken Venezuela and Zimbabwe. It also underlines the extent of the economic problems facing President Alberto Fernández, who took office on December 10 after defeating Mauricio Macri in the presidential election.
During Macri’s 2015-2019 administration, a currency crisis and spending cuts to subsidised public transportation and utilities triggered soaring inflation.
The problem also looks set to continue for some time too – the Ecolatina consultancy firm predicted on Thursday that inflation in January will come in at around 3.4 percent, while predicting that 2020 will see a rate close to 40 percent. Prices in 2018 rose 47.6 percent, according to INDEC’s consumer price index (CPI).
Economic turmoil was one of the deciding factors in the October 27 election, in which Fernández, a Peronist, soundly defeated his pro-market predecessor Macri, who famously campaigned on a vow to bring down inflation to a “single digit” by the end of his first term.
Argentina has been in recession since 2018. Gross domestic product (GDP) is expected to have shrunk by 3.1 percent in 2019, following on from a 2.5 percent decline the previous year.
The peso is down 69 percent since the start of 2018, the most in emerging markets. The economy is poised to contract in 2020 for a third straight year.
Meanwhile, the country has a public debt of US$335 billion, about 90 percent of GDP, with US$44 billion owed to the International Monetary Fund (IMF).
In the coming months, the Casa Rosada and the Economy Ministry will seek to reach an agreement with the IMF and private bondholders that will delay debt repayments for around two years, according to reports.
Fernández, a former Cabinet chief under both Néstor Kirchner and Cristina Fernández de Kirchner, has said Argentina has the will to pay off its debt, but not the means.
To date, the Fernández administration appears more focused on kickstarting economic growth via consumer spending than cooling prices. Since taking office, the Central Bank has trimmed interest rates and sought to provide cheaper credit to small- and medium-sized businesses. However, the institution’s chief, Miguel Pesce, said recently that slowing inflation is one of the bank’s objectives and the government has frozen prices on some staple food items through a re-launched version of Precios Cuidados price controls scheme.
On Thursday, the president asked Argentines to help his government keep an eye on prices through the Precios Cuidados scheme.
“Beating inflation needs you. Tell us who increases prices and breaks agreements,” he wrote on Twitter.
Fernández will also try to control runaway inflation through his much-trailed “social pact” with businesses and unions to moderate price increases as well as salary increases.
According to political analyst Carlos Fara, these measures will serve “to save time and somehow lead the expectations of society and economic agents.”
“For a government that has just taken office, it is very important to put certain initial rules on both economic agents and the demand of the unions to calm the inflationary spiral a bit,” Fara told the AFP news agency. “But if structural problems are not resolved, long-term inflation problems will not be resolved.”
Inflation is a recurring problem in Argentina, which has suffered two hyperinflations in its recent history: in 1989 (3,079 percent) and in 1990 (2,314 percent).
Under former president Fernandez de Kirchner, who now holds the vice-presidency, the country posted inaccurate data on inflation and growth rates, after INDEC’s credibility was compromised by government officials.
Despite an official data blackout in 2014 and 2015, a range of private economists’ inflation estimates during that period showed no consensus as high as 53 percent. Last year’s inflation even outpaced price increases during Argentina’s historic crisis in 2002, when prices rose 26 percent, according to the IMF.
On the streets of Buenos Aires, porteños seemed far from surprised by the data.
“We Argentines are quite used to these ups and downs,” said shopper Carmen Re, 65. “We simply cannot compare last year’s prices with this year’s, because it is impossible.”
The new head of the ANSES social security agency, Alejandro Vanoli, put the blame for the rate firmly at the door of Mauricio Macri, describing the former president’s handling of monetary policy as “lousy.”
“It has to do with macroeconomic policies that were absolutely inconsistent,” the former Central Bank chief told journalists at the Casa Rosada.
“Policies of absolute liberalisation and financial debt generated exchange rate weakness and external deficits that led us into a crisis,” he added.
Speaking to Radio La Red, Buenos Aires Province Production Minister Augusto Costa said the “inflationary process” pre-dated Macri, though he argued the Cambiemos leader had “enhanced” the problem with a “bad diagnosis.”
He added that there was no chance of Argentina experiencing hyperinflation under Fernández, despite speculation from economists such as Javier Milei and Diego Giacomini to the contrary.
“The conditions for hyperinflation are not present,” said the ex-domestic trade secretary.