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ECONOMY | 02-08-2019 17:48

Salaries in election spotlight, as inflation continues to hurt consumers

Inflation has risen 17.2% above than registered salaries since last May, new INDEC data reveals.

For most Argentines, recent economic reports on the country’s salary growth show a citizenry with falling purchasing power, as inflation continues to outpace wages. 

While total registered salaries rose 3.6 percent in May, real salaries actually fell 0.3 percent due to Argentina’s runaway rate of inflation, according to a report by the INDEC national statistics bureau issued Wednesday.  

“Last year, the truth is that the crisis was not foreseen, so inflation accelerated when salary negotiations had already closed,” Matías Ranjerman, the chief economist for economic-research firm EcoLatina, told the Times this week. “Then, the trigger didn’t happen, the separation of speculated salaries was late and it caused a very important loss of purchasing power.”

A trend in falling purchasing power has been observed over the past year. While registered salaries have risen 40.1 percent since last May, inflation ballooned by 57.3 percent over the same period, a difference of 17.2 percent, according to INDEC. For unregistered salaries, the bureau indicates the difference was 25.3 percent.

Further fuelling the loss of Argentines’ purchasing power is an increase in public utility tariffs, which have surged 550 percent since 2016, according to a recent EcoLatina report.

Coupled with a deacceleration of relative prices over the next year, the country is facing a situation where it will not be possible “to sensibly lower inflation while prices are corrected, making it impossible to increase public subsidies,” the report warned.

Victor Fernández, 60, who owns an umbrella shop on Avenida Independencia, said that while Argentina has always had inflation, the country’s speculative economy with the dollar is “absolutely disconcerting.”

“Everything I sell is imported, and it has to go whenever there is inflation,” Fernández said. “All the merchandise I have I buy in dollars, and I sell it equivalent to the dollar… Despite the increase in the dollar, prices remain the same because they’re within the margin that’s always been fixed.”

‘Compensate’

Economic concerns, which have dominated campaigning for the upcoming election in October, came to the forefront again last week when Alberto Fernández, presidential pre-candidate for the Kirchnerite grouping Frente de Todos, vowed to “compensate” salaries through negotiations, as well as increase retirement funding by 20 percent. 

“This is the way to impose activity in the Argentine economy,” Fernández told the opposition El Destape radio station, adding that if elected he would “ask businessmen and unions to return to compensating salaries as a basic condition to shift the economy.” 

“It seems to me that it’s a statement that has to do with the electoral campaign,” Ranjerman said of Fernández’s plans. “It’s not something practical.”

In the same interview, Fernández also stated he would help pay for salary subsidies by stopping interest payments on the Argentine Leliq, seven-day “liquidity notes” issues by the Central Bank. 

An economic advisor for Fernandez later walked back the statement to Bloomberg, saying the presidential candidate meant lowering interest rates for the Leliq rather than a full default.

“To lower interest rates implies an acceptance of a new rise in the dollar,” Ranjerman said. “In this context of volatility, the truth is that whatever increase in the dollar would be very contractive for the economy.”

“The cost of lowering them in this context of pressures is very, very high. It’s so high because it’s a tool, and it serves the government to have interest there. It’s a business for the banks, nothing more. It has to do with the objective of maintaining the exchange rate.” 

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Lucas Robinson

Lucas Robinson

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