The surprising devaluation of Argentina’s currency in August, a day after the primary elections, pushed the South American country’s already high inflation to its highest level in little more than three decades, leaving a very bleak picture for the coming months.
The consumer price index (CPI) was located in August at 124.4% at an annual rate, reported this Wednesday the National Institute of Statistics and Censuses (Indec).
In the eighth month of the year, consumer prices grew 12.4% compared to July, showing a strong acceleration with respect to the average monthly rate of 6.9% that had been registered up to July.
The monthly jump reached in August was, in fact, the largest since February 1991 (27%), two months before Argentina adopted the “convertibility” regime between the peso and the US dollar after the hyperinflation of 1989-1990.
Price increases in Argentina were widespread
The greatest increases occurred in food, with an increase of 15.6% in relation to July and 133.5% in interannual terms, a worrying figure, since it has a direct impact on the value of the basic food basket measured by the line of indigence.
There were also strong increases in health (15.3%), mainly due to increases in the prices of medicines, and in equipment and home maintenance (14.1%).
Devaluation blow in Argentina
Although high inflation is a phenomenon that has been going on for years in Argentina and prices have already been rising more strongly in recent months, the jump recorded in August is directly linked to the abrupt 22% devaluation that the Argentine peso suffered on December 14. August.
The day before, Argentina had held primary elections with a view to the October presidential votes and in them the most voted force was La Libertad Avanza (far-right) in a three-thirds scenario – along with the opposition coalition Together for Change (center-right). and the official Unión por la Patria (Peronist)-.
The sudden devaluation in the official exchange rate, which the Government of Alberto Fernández attributed to a demand from the International Monetary Fund (IMF), immediately translated into an increase in the value of the dollar in the parallel quotes followed by many sectors of the economy. to set prices on all types of goods and services.
“Prices had already been showing an acceleration since the second half of July, but there was an additional change in dynamics after the jump in all exchange rates on August 14. This meant that, comparing the last week of the month against the same week in July, there was an increase of 14.7%, much higher than the average figure for the month,” observed the consulting firm C&T in a report.
The devaluation blow and its expansive wave on inflation moved the Minister of Economy and candidate for president, Sergio Massa, to establish agreements to freeze prices on food, fuel and health services, for example, and to suspend increases in public service rates. , seeking to moderate inflation rates in the coming months, which will be marked by the general elections in October.
According to official data released this Wednesday, in the first eight months of the year, inflation has already accumulated an increase of 80.2%.
The monthly slowdown in inflation is expected in September
According to the calculations of various private consultants, the August jump leaves a “carry-over effect” of between 4 and 5 points for the September inflation index, with rates forecast for this month of between 8.5 and 10%.
For Lautaro Moschet, an economist at the Libertad y Progreso Foundation, “the devaluation gave a jump in the nominal value of the very important economy that will probably persist between now and the end of the year.”
“To make matters worse, expectations of new devaluations will continue to put upward pressure on inflation projections and by the end of the year we will be over 150%,” said the expert.
If this forecast materializes, it will be the highest rate registered in Argentina since the hyperinflation of 1989-1990 and will far exceed the rate of 94.8% registered last year.
With information from EFE.
