The latest official data from the INDEC national statistics bureau has confirmed that Argentina is suffering from one of the worst inflation rates in the world: in 2022, prices increased by an almost unthinkable 94 percent.
The evolution of prices is dizzying. A litre of milk has increased by 320 percent since the end of 2019, cooking oil has risen 456 percent over the same period, with a kilo of sugar up 490 percent, according to a report from the specialised Abeceb consultancy firm.
"You stand in front of the shelves and you analyse prices as if you were choosing jewellery. It's nonsense. At the bakery, it’s nonsense. I hardly eat grated cheese any more, it's gone through the roof, almost 3,500 pesos [about US$20] a kilo, when a year ago it was less than 1,000 pesos," less than a third of the current price, said Julián Rattano, a 66-year-old retired chemist as he shopped in a supermarket in Parque Chacabuco, Buenos Aires.
Thirty-four-year-old Roxana Prado laments: "The price of milk, cheese, eggs, has nothing to do with anything. Last year I bought a maple [30 eggs] for 150 or 200 pesos [around US$1 at the official exchange rate]; today it's 700 pesos [US$3.88].
A mother of two children, aged six and nine, she explained that the family will not be able to go on holiday this year.
"My husband and I both work, but just thinking about the start of school and the expenses in March makes us shudder,” she said.
Argentina has recorded double-digit annual inflation rates for a decade, but prices have accelerated sharply since 2018, when hikes totalled 47.6 percent across the year. This was followed by 53.8 percent in 2019, with a drop to 36.1 percent in the midst of the pandemic in 2020, before rising again in 2021 (50.9 percent) and this year (94.8 percent).
The causes of inflation are multiple and vary in importance. Over the years, there has been a combination of expansionary policies based on fiscal deficits, partly financed by money-printing, classic demand-pull inflation and strong devaluations that have had a knock-on effect on prices. Recently, external factors have been added into the mix, such as the war in Ukraine, which put pressure on domestic energy and food prices.
In Argentina, inflation "also has very important sociological roots," economist Ricardo Aronskind, a professor at the universities of General Sarmiento and Buenos Aires, told AFP.
"From a certain level of inflation onwards, society begins to incorporate a systematic action of remarking prices, tariffs, salaries, rents into its behavioural patterns … according to expectations that are not always solid,” he explained. “Sometimes they are simply fantasies or rumours about what future inflation will be.”
In this context, some highly concentrated sectors of the economy can play with prices and "take home high profits," said Aronskind, while "wage earners and informal workers are systematically left behind by inflation."
Summer: hangover or respite?
Three consecutive months of relatively moderate inflation rates (6.3 percent in October, 4.9 percent in November and 5.1 percent in December), a summer with full beaches and a World Cup win has brought some recent calm to Argentines. But the storms of July, when two economy ministers quit their post and inflation hit 7.4 percent, remain fresh in the memory.
Economy Minister Sergio Massa says his goal is for Argentina’s monthly inflation rate to "start at three" percent in April.
Massa, at the head of a 'super-ministry' that the International Monetary Fund recently celebrated as having "actions that are beginning to bear fruit," is confident of a growth rate of "above five percent" last year (the forecast, delivered in October, was 4.5 percent year-on-year). And, in an election year, he hopes to be able to "fight inflation and organise spending without cooling the economy or making painful adjustments.”
Among other tools, Massa intends to extend his ‘Precios Justos’ price control scheme until July. Under the programme, the prices on 2,000 basic products have been frozen with a monthly increase of four percent allowed for 30,000 others.