Tuesday, August 20, 2019

Inflation in Argentine

Argentina is in the grip of another economic crisis. Its currency plunged, hitting an all-time low against the United States dollar. This followed the defeat of the pro-market president, Mauricio Macri, in presidential primaries on Sunday. 

In 2018, inflation hit its highest level since 1991, spiking to 47.6 percent. It is running at over 50 percent this year, alongside growing poverty, unemployment and resentment on the streets that resulted in a decisive primary win for the opposition candidates, Alberto Fernandez and his populist running mate, former president Cristina Fernandez de Kirchner.

In June, INDEC reported that the cost of the "basic food basket" - a figure used by the government to measure poverty - had increased 58 percent over the last year for a family of four. In the aftermath of Monday's sharp devaluation, the cost in pesos of imported produce such as bananas and avocados spiked because importers pay for them in dollars. And butchers said prices for beef (which increased 67 percent from May 2018 to May 2019) went up seven to 10 percent, with another hike anticipated in the near future. Media have reported that the prices of flour, oil, pasta and rice - among other goods - have risen or are likely to do so in the future. The increased price of material used to package food is also driving costs up.

The government suspended its goods and services tax (known as the impuesto al valor agregado or IVA) on a list of products it considers essential - including bread, milk, oil, pasta, sugar and rice. The IVA is typically 21 percent. It also announced a 90-day freeze on petrol prices to mitigate transportation costs.

Leo Bilanski, president of the National Association of Business Owners for the Development of Argentina, doubted the government's measures would make much of a long-term difference. "It might cut the price these days, but the prices are going to keep going up." Bilanski underscored the gravity of the situation. "On Friday, the bag of flour cost 900 pesos [$16.41]. And on Monday, it was between 1,250 and 1,350 pesos [$22.79 and $24.62]," he said. "It went up 40 percent." He noted that the cost of a kilogramme of bread is expected to go from 80 pesos ($1.46) to 105 to 120 pesos ($1.91 to $2.19) this week. 

"On Monday and Wednesday, peppers cost 1,500 pesos [$27.35] a crate. [On Friday] they cost 800 to 1,000 [$14.59 to $18.24]," said Rodriguez, veg seller . "Sales are down, and our products - you either sell them, or you throw them out because they go rotten. People don't have money."

"Every time that I see that the dollar has gone up and I see that I have to tighten things even more, it causes me a lot of anguish," said Silvia Echeverria, a retired doctor.


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