Argentina accumulated in the last 25 years an inflation 17 times higher than the regional average

Photo Ivan Cachanosky
Ivan Cachanosky

Lic. in Business Administration. Master in Applied Economics of the UCA. PhD in Economics from the UCA.

URGENTE 24– Libertad y Progreso reported on the volume of a problem that has haunted Argentina since time immemorial and that has grown in recent years by leaps and bounds, at a rate that in the region is only surpassed by Venezuela. It is an astronomical inflation: “If each point of inflation were equivalent to 1,000,000 km, in the last 25 years Argentina would have traveled a distance equivalent to that which exists between Earth and Pluto,” they point out. Meet the report.

Libertad y Progreso conducted a survey about the increase in prices in Argentina and found that the country between 1995 and 2019 accumulated an inflation of 5,297%, 17 times more than the regional average.

If in 2020 the recovery was expected to begin with a new government, the coronavirus pandemic disrupted all plans and accentuated a period of recession and a drop in GDP that brings with it the increase in inflation rates, among other economic indicators.

The latest inflation data for the month of September sets up a cumulative 22.3% to date and is nothing new. By the end of the year it is expected to be 40% and 2021 generates growing concern.

To account for the magnitude of the inflationary volume in Argentina, the Foundation proposes a curious proposition. “If each point of inflation were equivalent to 1,000,000 km, in the last 25 years Argentina would have traveled a distance equivalent to that between the Earth and Pluto.”

On the other hand, “the rest of the regional countries (excluding Venezuela) would only reach an intermediate point between Mars and Jupiter (6% of the route that Argentina makes). The only exception is Uruguay, which would reach Jupiter (11% of the route that Argentina does) ”.

“Rates are still low, so regulated prices are growing at a much slower rate and, as we already know, this is unsustainable over time. In addition, the stock of remunerated debt (Leliqs and Passive Passes) already amounts to $ 2,592,208 million, representing 109% of the monetary base. Specifically, paid debt is another monetary base. In addition, increasing remunerated debt is equivalent to future issuance, in a context where the demand for money begins to fall and the pressure on prices will be greater ”, expressed Iván Cachanosky, Chief Economist at Fundación Libertad y Progreso

Beyond the metaphor, it is important to ask why there is such a difference. Problems of high inflation and hyperinflation have had several countries, but since 1995 none of the countries in the region, except Argentina, has exceeded 36%. In other words, the chosen date eliminates any hyperinflation episode that could generate noise in the comparison. The big difference is that the region learned the lesson of inflation and Argentina did not.

Our country has fiscal imbalances that have accumulated around 60 years with a fiscal deficit (with the brief exception 2003-2008). To a large extent, these deficits have been financed with monetary issuance, generating the unwanted inflationary impact. In other words, for decades in Argentina public spending has been greater than income and the difference is financed with the monetary issue, generating a destruction of the value of the peso.

In summary, it is urgent to reduce the fiscal deficit so that the emission needs are lower. Otherwise, Argentina is not far from “traveling to another galaxy,” the report concludes.