“The Friday begins the war against inflation in Argentinawe are going to put an end to the speculators,” said the president, Alberto Fernandezhours before the INDEC reported that the rise in prices in February was 4.7 percentthe highest of the last year, and that the category of food and beverages showed possibly the greatest increase since the outbreak of convertibility, with 7.5 percent.
The Executive cannot find a way around the issue of prices, which after the lack of exchange control at the beginning of 2018, it took a leap from the step of 25-30 percent to 50 percent. In 2018, the Indec price index closed at 47.6 percent and in 2019 it was at 53.8 percent. In 2020, thanks to the sudden curb on supply caused by the pandemic and extraordinary price control measures, inflation fell to 36.1 percent, but last year it was back to 50.9 percent.
Macri’s “heavy inheritance”
From the ruling party they remember that very high inflation is not the same as 10 percent growth and job creation, as was the case last year, than with a drop of 2 percent or 2.6 percent, as happened in 2019 and 2018, respectively. Anyway, persistent inflation and in particular the rise well above the general average of food and beverageswhich defines the line of indigence, has been draining political capital from the Government and, above all, it has long since become the first concern of Argentine society.
Another facet of the same phenomenon: days ago the City of Buenos Aires reported that in that district the basket of indigence rose in February by 10 percent monthlya fact that should set off alarm signals in all official offices.
On this occasion, Fernández alluded to the situation of extraordinary price increases at the international level that were unleashed after the war in Ukraine. “Every time we believe that the situation is in order, everything starts to get complicated again. The biggest economic complication that the world suffers is a tremendous fight for food. Prices fly around the world. It is very difficult for us to recover from the inflation of those who preceded my mandate, which we thought we were beginning to resolve, but now it is unleashing again with all ferocity,” he said.
Going forward, there are few objective factors that allow us to expect a moderation in price increases. The first of these is, according to Minister Guzmán’s opinion, the “tranquility” effect that the agreement with the IMF may have, by clearing up to some extent the short-term exchange rate horizon. In addition, it will be necessary to see what effect the new measures prepared by the economic team will have.
In the other side, several elements complicate the disinflation strategy: the international prices of hydrocarbons, metals and food will continue to put pressure on local values. Also, the goal of reducing the fiscal deficit agreed with the IMF requires rate increases and limits state intervention with subsidies or compensation that can soften the impact on domestic prices. And above all, the Inflationary inertia already plays by itself and there do not seem to be strong solutions at hand. For March, the increase in rates, the rise in gasoline and the increase in prepaids impact inflation. There is strong price pressure on flour and derivatives and seasonality in the education sector.
Inflation data for February
The inflation last month reached 4.7 percent, the highest number since March of last year, when it reached 4.8 percent. Above these values are still the peaks of 5.9 and 6.5 percent per month in September 2019 and September 2018, respectively. In the first semester, inflation accumulates 8.8 percent and in twelve months it stands at 52.3 percent.
The Food and Beverage category had an increase of 7.5 percent, the highest since the INDEC series that begins in January 2017 and possibly also the highest since the outbreak of convertibility. In the Metropolitan region, the increases in the item are particularly influenced by fruits, which increased their price by 10.4 percent; vegetables, with 32 percent, and meat, with 5.7 percent.
The second item in increases was transport, as a result of the 9 percent increase in fuel prices and the increase in vehicle prices. Meanwhile, the segment of home equipment and maintenance increased its prices on average by 4.4 percent. “For the sixth consecutive month, a significant increase was observed in the category restaurants and hotels, adding 4.3 percent, after in September and October it registered approximately 4 percent each month, in November 5 percent, in December 5, 9 and in January, 5.7. The increases in the last six months reach 33 percent and in interannual terms they add up to 64.1. The tourism season and the implementation of the Pre-Trip Program, was ‘taken advantage of’ by agents of the sector that marked prices both in October and November”, indicates the CEPA.
In the case of health the rise of 3.6 percent is explained by the increase in medicinesto which part of the impact of the 9 percent increase in prepaids in January is added. Clothing showed an increase of 3.4 percent and in year-on-year terms, the increase in the item amounts to 67.2 percent. Below the general average appear housing, water, electricity, gas (2.8), alcoholic beverages (1.7), education (2.6), recreation and culture (2.3) and communication (1.6 percent). ).