The economic team took a breather when INDEC announced the figure of the rise in the CPI in October: 6.3%. The figure was not surprising, despite the fact that if it were repeated for twelve months it would confirm inflation of 108%, but the inertia with which it threatened to continue heralded another path. Taking the last twelve months, the CPI rose 88%, a rise that has not subsided since the first quarter of the year and 76.6% in the first ten months of the year.
The future. The projections for all of 2022 indicate that the only way for it not to be registered as a year of three-digit inflation is for it to repeat this figure (6.3%) in November and December. Any alteration in the components with the highest weight in the family basket would blow up this desire. But it is not just another concern, it is the key piece so that the unstable equilibrium mechanism with which Sergio Massa’s management is surfing the wave of devaluation, product of monetary excesses during two years of pandemic, does not collapse.
However, what is worrying for a look further removed from the situation is the distortion of relative prices due to having inflation at various speeds. That is, there are products that were behind the average and others that were ahead. In the latter case, there is talk of “price cushions” or preventive remarks, an accusation that the Secretary of Commerce on duty raises from time to time when he tries to explain the root of the overflow of prices. It is the conspiracy theory that ignores monetary and fiscal causality, to point to the cartelized behavior of many companies, which seek to anticipate eventual controls and restrictions of all kinds.
History backs up many of those ghosts to contextualize these suspicions. But the greatest threat continues to be the pressure of accumulated delays: the items that, due to obstacles, maximum price policies, authorizations that are delayed or being tied to the anchor of an artificial exchange rate, were relegated. mWhile inflation was 40-50%, the intensity of the decoupling was different, but with 100% per year and many doubts about the behavior of the variables in the near future, the anxiety to correct is much greater.
Without remedy. A recent study of IDESA revealed that private medicine is 15% behind in its reference prices, which makes it difficult to repay its costs and, above all, threatens to erode an essential service and that worldwide faces the dilemma of rising costs. Between 2020 and 2021, years of the pandemic, private medicine prices rose 62% against inflation of 105%. But this year, private medicine prices will end up adjusting 114% when inflation will be 100%. A race with different speeds that, depending on when the photo is taken, is more or less fast.
The Economist George Hill, headed by this Cordovan institution, explains that the delay is due to the special sensitivity aroused by the sector that hits squarely at the costs of the middle class, which also has a special regulation in an intricate skein that interconnects the public sector, the private benefits through union social works and prepaid. In his opinion, this sector falls within the logic of trying to put a ceiling on inflation through price agreements, such as the current “Fair Prices” ignoring the monetary cause, which in turn is fueled by the black hole in the tax system.he.
The health sector is made up of 1,500 public hospitals, 4,000 private clinics and sanatoriums, and 20,000 clinical analysis and imaging centers; while medical professionals reach 200,000 and nurses a similar number and that constitute 75% of their costs.
“There is a conceptual error and it is to believe that price agreements on some products slow down inflation. Because inflation is the sustained increase in all prices and with the agreement on some, the only thing that is achieved is that there are temporarily some products that are a little cheaper ”, he details. In his analysis, the downside is that even these prices eventually keep rising. “Since 2013 prices have been taken care of and we always had high inflation. The risk of insisting on these formulas is clear: that inflation worsens instead of decreasing ”, he concludes.
The costs. In a recent study carried out by the Department of Economics of the UADE, the costs show a great difference in their behavior and are already incorporating the results of restrictive measures, such as the stocks, the increase in the interest rate and the exchange rate gap. . Fausto Spotornochief economist of Orlando J. Ferreres & Associates and director of said Department, observes that, in general terms, the CPI had been growing above the cost of production measured by the UADE, but since last August, the annual increase in costs had been almost 70.5% and retail inflation 78.5%. “These numbers are general averages, and many of the variables that were a little below inflation are starting to drop,” he explains. Thus, it can be seen that while some basic inputs for production, such as fuel oil, rose 94% or logistics costs, 85%, all in the last twelve months, others more tied to the “official” dollar, show a considerable delay since it grew 39% in the same period.
Within the framework of the policy of “Fair Prices”, Spotorno does assign a chance to the announced convergence to 4% of the products in the agreed basket, but considers that lowering the general CPI two points in three months will result in something “unlikely”.
always the dollar. Finally, the exchange rate equation will end up defining the fate of this stage. As recognized by the Vice Minister of Economy himself gabriel rubinsteinthe external imbalance that forces us to live with an exchange gap, restrictions on foreign trade and, in particular, a suffocating trap for importers, have a real threat: a new edition of the Rodrigazo. It made reference to the honesty of the economic variables that in 1975 put an end to Gelbard’s experiment of “0 inflation” which, coincidentally, resorted to maximum prices and multiple exchange rates to combat an unstoppable rise in prices. Also at that time there was war (in 1973, that of Yon Kippur in the Middle East) that unleashed the rise in oil prices and the increase in domestic costs, but the race for joint ventures that tried to anticipate inflation, the flight of the peso and the risk of falling into hyperinflation It marked Argentina’s economic history with fire.It was from that moment that the dollar became the great thermometer of financial health and the peso as a unit of measurement ended.
The efforts to scratch the pot of reserves trying to add inflows of extra funds (the IDB, the renewed swap with China, to name a few examples) or postponing some payments (such as the Paris Club or the International Monetary Fund itself) are measures that help buy time before the next season’s heavy harvest begins to settle, in the second quarter of next year. The expectation for a “Soybean II dollar” increases as the drain of currency from the Central Bank continues: about US$ 1,500 million per month and the weather is advancing or postponing decisions. Perhaps the terms of the traditional saying about the climate and the Argentine economy should be changed: perhaps a good harvest by itself is not enough to save us, but a bad one could sink us.