The Ghost of Hyperinflation

The Minister of Finance, Nicolás Dujovne, announced last September 17th before the legislature, in the framework of the budget presentation of 2019, that next year’s inflation will be 23% and the dollar will be located in the 42 pesos; Although the US currency reached 40.40 pesos and, according to the portfolio run by Dujovne, the annual inflation of 2018 will be at 42%.

On the other hand, the president of Argentina, Mauricio Macri, said in a speech on August 29th that Argentina should move towards a balance in public accounts because it can not spend more than it enters because, if not, there would be an increase in the depreciation of the currency and the country would have to take a debt greater than the 30 billion dollars already ordered from the International Monetary Fund (IMF).

He had also assured in 2015, when the price rise was at 40%, that if it assumed as the first representative the percentage of the increase of the goods would be below the two digits. However, Macri explained last July 19th, in a live video on his Instagram account, which had “underestimated the inflationary inheritance of the previous government.”

However, the economist and director of Libertad y Progreso, Aldo Abram, said the state “is dedicated to issuing bonds to buy dollars and finance public spending, so the peso costs less and there are fewer pesos. The resolution is that the Central Bank of the Argentine Republic (BCRA) begins to use its reserves in order to maintain the value of the ticket.

Moreover, he warned that hyperinflation “can be generated in a few weeks because people want to get rid of the money because there is strong economic uncertainty, then the currency is depreciated even more, as happened during the mandate of Raúl Alfonsín in 1989.”

“Hyperinflation can be generated in a few weeks,” warns Aldo Abram.

On the other hand, Abram pointed out that the crisis at the end of 1980 “happened because the government had shifted the use of the funds of the BCRA to manage an excess of expenditure, until the bank broke and the extreme rise of the costs broke down.”

At that time, inflation was recorded at 5000% in the month of June so, according to historian Gustavo Álvarez, supermarkets “increased the amount of each product in the time it took to walk from the gondola to the box.”

However, Charo Rosario López Marsano, co-author of the book “A Historical Outline: Society, Economy, and Politics in Contemporary Argentina”, emphasized that after the assumption to the presidency in 1983, “Alfonsín found an economy in recession and the minister at that point, Bernardo Grinspun, aimed at reindustrializing the country and not paying the external debt, which was 45 billion dollars; But the IMF opposed and pushed through the debt to carry out a neoliberal program.”

In addition, Alvarez detailed in his essay “Voices of Democracy” that in 1985, “after a meeting between Grinspun and an envoy of the international entity, the official was replaced by Juan Vital Sourrouille, who implemented the Austral Plan, which removed four zeros from the peso, installed the austral as a ticket and was based on containing the price increase of the goods, located at 688% in 1984, through the freezing of tariffs and salaries.

Contrary to Alfonsín’s ideas, the Economist remarked that in 1986 “inflation was 82% and 175% in 1987 because, as the state banned the increase in the amount of services, Argentina printed Australes to provide the difference between what the user paid and the actual cost of electricity or water.”

Three years after its designation, Sourrouille promoted the Primavera Plan whose objective, according to Alvarez, “was to appease the crisis by means of an increase in tariffs and salaries, and then to stop both elevations”. Abram added that “the project launched in 1988 meant a failure because it maintained an excess of spending in the 400 state companies and the BCRA broke; Thus, hyperinflation was generated in 1989”.

In its last national chain, on May 23rd 1989, Alfonsín confirmed that it would offer the anticipation of the delivery of the power to the President-elect one week before, Carlos Saul Menem, but that the country would have to face an economy of war until the election of the new President, with elections held on July 8th of that year, six months before the originally scheduled date.

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