For once, Argentina jumped on a world trend with experience in the matter: inflation and global economic instability is the number one public enemy of the world economy. Of course, when the last measurement of the CPI showed a rise of 7.4%, it is almost the OECD average, but for a whole year (Germany, in that month had 7.4% year-on-year, for example). In our country, year-on-year inflation measured 71% but projections already give 92% only if the average of the first seven is repeated in the last five months of the year: 5.6%.
Of course, this could turn out to be an optimistic view: the rest of the year could look more like the first four months, which would ease the pressure on the Government on the eve of an election year, but also be a mirror of the last two months, with which that the 100% annual barrier would be easily broken.
guilty. In all cases, there is a consensus that two factors pushed inflation to the highest records in 40 years: the energy shock accelerated by the Russian invasion of Ukraine and the monetary tsunami with which all countries tried to compensate for the drop in activity productive during the long year of the pandemic.
This panorama was strengthened in Argentina with the serious imbalances with which the economy entered the pandemic and the restrictions with which the government coalition marked the field for economic policy.
In the last 75 years, only 20% of annual inflation was in the single digits. Also, according to data from the World Bank, since 1960, the country lived 22 years in recession (36% of the total). The income per inhabitant has practically stagnated in the last 20 years and the total GDP has increased since 2012 by an average of 0% against the “Chinese rates” of the exit from convertibility.
Throughout recent history, at least for the last half century, the inflationary scourge has been accompanied by initiatives to quell its momentum with more defeats than victories in that proclaimed fight. The President’s bombastic statement in March to start a “war” against inflation soon became one more frustration in this saga of diagonals to try to control it without resorting to adjustment measures.
magical passes. The sequence of resources varied from price indexes “without meat”, in the 70s, when it was an essential product for the family basket; the “patriotic drawing” of the INDEC figures, during the intervention of Guillermo Moreno, exchange control to generate a cheap dollar, export and import traps, to guarantee food supply at a subsidized price and the flattening of public service rates; to cite some of the attempts to control the inevitable. An unsustainable effort to put the economy back on the track of normality.
For George Hill, economist of IDESAthe reason for this persistence is that in all governments (Peronists, radicals alone or in alliance and even military) “Far from having cracks or differences, there was a robust consensus: that the State spend more than its resources. And that was chronically financed with debt or with issuance and that is why we had recurrent inflation”.
The fiscal deficit was another characteristic of the Argentine economy but it dates back to the dawn of Independence. There were always holes to cover, whether due to war, internal conflicts or difficulty in appropriating rents. Something similar to what happened in the rest of the region, but which is under review. Even the fractious Bolivarian regime is converging to the inflationary rates of the rest of its neighbors: Last July, the year-on-year rate was 137%, but the rate accumulated since January was 48%. Only two points separate the fateful prophecy that the Argentine economy was going to “Venezuelanize” (46%, according to INDEC for the rise in the CPI since January). In the opinion of Eduardo Levy Yeyati, dean of the School of Government of Di Tella University, “Latin America learned to hate inflation (and contain it) because it understood that it created poverty (and overturned governments) and Few today recognize that it is the other side of many of the benefits that are demanded from the State (subsidies, dollar and cheap credit, protection, transfers without funds”.
plans. In Argentina, the implementation of lasting stabilization plans were few, but they ended up imploding due to their own intrinsic weakness. The Gelbard plan of “inflation 0” ended in two years with the explosion of the “rodrigazo” (1975). The Austral was, perhaps, the first to try to tame the inflationary horse with a comprehensive approach (disappointment, exchange control and modification of expectations) but ended up succumbing to fiscal lack of coordination and union harassment, which led, after four years to return to high rates of inflation and a brief hyper, in 1989.
The other, lasting and that is still proving discussions due to its side effects and the conditioning factors it faced, was convertibility (1991), which lasted until 2001. The economist Juan Jose Llach, Deputy Minister of Economy in the first section of the plan, analyze the root of endless inflation: “trying, from political power, to validate the population’s desire for consumption without accompanying them with adequate incentives for production.” In his optics, lThe cases that are studied as models of are Spain in the ’70s, Israel in the ’80s, Chile in the ’90s and South Africa, already in the 21st century. “What they had in common was achieving agreements to maximize price stability, reducing current consumption to maximize consumption in the medium and long term”, he stresses. And these examples lead him to think that it is very difficult for Argentina to sustainably reduce inflation without a minimum of agreements conducive to fiscal and, within this framework, also monetary discipline.
Apparently, there is no magic, but neither is a recipe for economic technocracy. Alice Knightprofessor and former Dean of Economic Sciences at the UCA sees an explanation in the non-acceptance of limits. “The budget constraint is a limit. The ‘no’ always ends up being a ‘maybe’, or it depends… individually we think that we have more rights than obligations and that goods, even if they have costs, should not have a price”, he reflects. This is what Levy Yeyati observes with concern in the festival of euphemisms to disguise nominating the tariff correction. “I do not see a demand for reduction of subsidies. On the contrary, with this marginal cut, many speak of a tariff increase. But neither for a pension reform or reduction of exemptions”, he concludes. The battle against inflation is difficult, but war is an almost impossible mission in this context.
