Inflation in Argentina has reached a staggering rate of 254.2% in the span of 12 months, making it one of the highest interannual variations in the world. The official statistics institute, Indec, reported that in January, the inflation rate slowed down to 20.6% compared to the 25.5% in December. This decrease indicates a positive trend, and Economy Minister Luis Caputo has predicted that inflation will continue to decrease in the coming months of February and March.
The consumer price index for January aligns with the estimates made by the government regarding inflation. The ultra-liberal government led by Javier Milei had anticipated a rate of around 20% given the context of “stagflation” – an economic stagnation accompanied by high inflation. This situation was acknowledged by the president himself shortly after taking office.
The devaluation of the peso by 50% in December, along with the release of nearly all prices in the economy and the initial adjustments to transport and public service tariffs, has contributed to the monthly inflation rate remaining close to the historical record set in February 1991, which stood at 27%.
The sectors with the highest increases in January include goods and services (44.4%), transportation (26.3%), communication (25.1%), and food and non-alcoholic beverages (20.4%).
Despite the slight slowdown in January, economist Hernán Letcher has stated that there is little cause for celebration considering the high levels of inflation. In December, salaries only increased by less than 9%, and in January, they rose to approximately 15%, still below the inflation rate.
The government’s focus on fiscal, monetary, and exchange rate measures is aimed at reducing inflation. According to Milei, wholesale inflation is already decreasing. However, the impact on everyday citizens is evident. Elsa González, a 74-year-old retiree, revealed that she can no longer afford certain foods like cheese and meat due to increased prices. Ramón Zamudio, a 70-year-old janitor, stated that he has had to reduce his medication intake due to rising costs.
Economy Minister Luis Caputo remains optimistic about the future and predicts a further decrease in inflation in February and March. He believes that the government’s actions will be successful in achieving this goal.
The government’s efforts to deregulate the economy with the intention of reducing the role of the State, lowering inflation, and achieving stability have faced challenges. Milei, in his two months in office, issued a mega decree that brought about changes to norms and laws. These changes included a labor chapter, the implementation of which was temporarily suspended by the courts. He also proposed a comprehensive “Bus Law” containing over 600 articles. However, after intense debates in Congress, the proposal was ultimately unsuccessful.
To achieve the “zero deficit” goal committed to the International Monetary Fund (IMF) this year, Caputo has announced that he will adopt other executive measures. These measures aim to reactivate a credit program worth US$44 billion (R$218.75 billion).
In response to the high inflation rate, the CGT, the country’s primary trade union federation, organized a 12-hour general strike in January. They have also announced their intention to request an 85% increase in the minimum wage, which currently stands at 158,000 pesos (US$179.5, R$892).
The official statistics institute, Indec, has revealed that the basic food basket is priced at 285,561 pesos (US$324.5, R$1,613), while the total basic food basket is priced at 596,823 pesos (US$674.7, R$3,354). These figures highlight the challenges faced by everyday citizens in affording basic necessities.
Overall, Argentina continues to grapple with high inflation rates, and the government’s efforts to stabilize the economy are met with mixed results. However, the slight decrease in inflation in January offers some hope for the future. It remains to be seen whether the government’s measures will be successful in achieving the desired long-term stability and lowering inflation to more manageable levels.
