Inflation in Argentina: What's It Like?
Lately, American talking heads have been obsessed with the U.S. inflation rate. No doubt most, if not all Americans, are shocked by rising food and fuel costs. So how is it that Argentina can suffer decades of higher and higher inflation and not cease to exist?
In 2023, Argentina's inflation rate is 114.5%. Since 2022 consumer prices have doubled. How does this economy and population hold out?
Argentinians Are Creative
Saving money in a bank is not on the minds of most Argentinians. Sitting in a bank account, they just watch the money's value decline. Psychologically speaking, the whole country is unsure of the value of goods and services which makes them uneasy. Folks in Argentina are wary of spending too much money when tomorrow is doubtful. These two factors create a mindset in the people that reflects a daily concern about inflation. Argentina has become an inflation culture.
Strategies to Ameliorate Inflation
- Stock Piling
- Short-term Loans
- Gardens/Livestock
- Barter/Swapping
- Negotiating Salary
- Black Market
If It's Cheap, Stock Up
During Covid, Americans stockpiled paper goods that were scarce. As they did so, the price went up.
However, everything in Argentina is pretty pricey considering the average wages. When something gets less expensive (special prices), the people stockpile. Cheap stuff is hoarded.
Argentinians think about stores of value. Many who can will buy generators. Fuel is something money-printing governments will subsidize knowing that it is key to keeping an economy from collapsing. However, at 3 - 4 USD per gallon, having a generator can provide for electricity, and as a durable good, it is an appreciating asset as Argentina experiences common black outs. These goods can command a significant future value. Witness, for instance, the price of used cars in the United States.
Cash-strapped Argentines have rooms or pantries designated for bulk storage. Here, they store canned food, dry goods, and dried fruit. When colleagues, neighbors, family or friends are in need, they share whatever they can. If you are in this group, you become confident in the generosity of those with whom you associate. Helping your neighbor is a manner of living evolving over many decades.
It's tough for Convenience Stores
Ice cream prices double in a month as Argentina battles inflation
Anna-Catherine Brigida for Thomson Reuters
Hide Your Money
If a struggling consumer is lucky enough to have U.S. dollars, he doesn't put it in the bank. When converting dollars to pesos, the consumer is exposing himself to rabid inflation. From the day he deposits his pesos at the bank, he loses purchasing power. So, most Argentinians seek U.S. dollars and hide their money - under mattresses, under floorboards, or where intruders are least likely to search.
Creativity in deciding upon a hiding place is paramount. Some consumers wrestling with rampant inflation have built strong boxes to fit in unusual places. Examples would be small ones topped off in U.S.dollars to fit in ac units and pouches hidden in boxing bags.
Short Term Loans Cover Peanuts
No - interest short-term loans are extremely popular. Not unlike the U.S. same-as-cash no-interest for a year loans, these loans are utilized slightly differently.
Recently, one professional woman in Buenos Aires claims she bought everything on installment and refuses to shop. She required a pair of shoes costing 20,000 pesos. Being afraid the price would be 25,000 pesos in the not-too-distant future, she negotiated four 500-peso payments. This is the rule rather than the exception.
Cash is gone for most in Argentina toward the end of the month. Basics are hardly affordable (public transport is a necessity with the cost of fuel.) Four in ten Argentinians live below their poverty line.
A bottle of jam costing $3.00 can also be financed at the grocery store. This is exceptionally helpful to the poorest. Purchased on time, this bottle can be paid off in one year at $0.25 a month.
To further exemplify the squeeze rapidly rising prices can cause, even store owners suffer from the unpredictability. Convenience store prices tend to be a bit higher because you pay for convenience. When inflation hits, convenience store price tags have an exceptional effect on consumers. Hence, a number of convenience store owners have gone bankrupt. The same is true of dollar stores.
Gardens and Livestock
Let's refer to the next citizen grappling with currency devaluation in Argentina as Bautista. Bautista has a cabbage garden. If he wants to make a stew, he can go to a neighbor and trade cabbage for tomatoes. Across the street he can trade cabbage for onions, while further up the street is Margarita, who has a lovely potato patch. In this way he can add a piece of stew meat (any kind) and local spice to create a rather delightful fricassee.
Other Forms of Trading
Swapping is another survival skill well-used in Argentina.
Let us say you have a couple pairs of boots but you need pants. If Diego, your buddy, has extra pants, he may be willing to trade for your boots.
Negotiate, Negotiate
Middle and upper-class professionals have one edge that is distinctive.
As inflation gallops, professionals whose skills are sought-after, negotiate new contracts. Employers have no problem renegotiating prearranged commitments. It has become a common practice.
Of course, the poorer communities have no such leverage. Labor is frequently the first to feel the effects of inflation. The poor must resort to evermore ingenuity to endure pernicious inflation. It is universal that the poor suffer the greatest.
Whether a leftist government that devalues its currency to hide its economic failures and to perpetuate corruption (sometimes endorsed by one or several strong men), or the rightwing government dazzled with the prospect of immense power (usually the only ones who can save the country?), and in support of a crooked apparatus, they both rob the people. The poor suffer immeasurably.
Argentine peso plunges after shaggy-haired rightist who admires Trump comes first in
primary vote
- DANIEL POLITI Associated Press
August 12, 2023, 9:31 PM
Currency on the Black Market
For the average Western reader, all that has been mentioned here may seem staggering. But wait! Whether in Europe or North America, what follows may temper your opinions of economics there.
A flourishing black market exists in Argentina. Most failing governments ignore it, as the black market is a pressure valve for the body politic. What is available in these markets is only limited by your imagination. And currency is another commodity to be traded.
Suppose you are lucky enough to have some disposable income. Rather than saving your pesos, you go to what is called the "cuevas" (the caves.) These are the illegal currency exchanges. The Argentine government sanctions "legal" currency exchanges, but fees, interest rates, and currencies are all controlled by the government. There is no advantage for most to use the official exchanges. The 350 pesos you can save are best kept in U.S. dollars known affectionally as "greens."
You may find it hard to believe, but U.S inflation rates are so low to an Argentinian that the country has scrambled for the last decade to obtain them.
Consider that you were able to hide the greenbacks. Suddenly, you need a thermostat for your heater unit. You have radiant floor heat, and the thermostat costs $34.57, a bit higher than expected (that's19,948 pesos). You spent all of your pesos on food and utilities/rent the minute you got your paycheck. What's the answer? Find your greens!
Take $32 out of your stash and go to a currency exchange. You will get your 19,948 pesos and race to the parts store to snag your thermostat. Notice, the dollars did not devalue anywhere near the peso rate, and which exchange you go to depends on the rate and fees for the transaction. In fact, if official demand is high, you may actually experience some appreciation. Between slowing down the effect of peso devaluation and the increased desire for American dollars, you will have experienced some, if not a lot, of appreciation. No wonder Argentinians crave the dollar.
"All the countries that have been dollarized ended up moving forward and stopped having inflation.”
-Franco Lesertessur, Argentinian 19 years old
Argentina Pegged to the U.S. Dollar?
While China's central bank holds more U.S. dollars than any other, the Argentine citizenry holds more greenbacks than any population outside the US, and hoarding U.S. currency is a way of life.
By the way, there are 3 descriptors for people who come from Argentina: Argentinian, Argentine, or Argentinean.
It's Worth A Nickel U.S.
Do you think Argentina's rate of inflation is bound to get higher?
It's Worth $5.71 At the Publishing of This Hub
The Latest News of Potential Change
Javier Milei is Argentina's political upstart, having won his party's presidential primary.
The basis of his candidacy is to tackle inflation and all that it tears down. He has recently visited with the IMF (International Monetary Fund) - apparently looking to convince them that if elected, he will do what needs to be done.
Milei also supports pegging the Argentine currency to the U.S. dollar as a way of controlling money printing. Other South American countries have done the same with good results.
His popularity stems from a public that demands change. All sectors of the populations seem to agree that something must be done.
Set Up a Free-Banking System
Sources
Gozzi, Laura (15March2023). BBC, https://www.bbc.com/news/world-latin-america-64960385
Gillespie,Patrick (15August2023). Bloomberg Markets Today, https://www.msn.com/en-us/money/companies/argentina-inflation-cooled-to-
113-before-election-price-surge/ar-AA1fjwRT
Ting, Inga (12 Apr 2023). NEWS, https://www.abc.net.au/news/2023-04-11/argentina-100-per-cent-inflation-crisis/102179458
Robert Plummer (16August2023). BBC,
https://www.msn.com/en-us/news/other/how-argentina-learned-to-love-the-us-dollar/ar-AA1fjWJ8
Racz, Eszter (21August 2023). Global Data, https://www.msn.com/en-us/money/companies/argentina-implements-grocery-price-controls-to-
help-temper-inflation/ar-AA1fytMS
Gilbert, Jonathan (18August2023). Bloomberg, https://www.bloomberg.com/news/articles/2023-08-18/argentina-fixes-oil-at-56-a
-barrel-to-put-inflation-in-check
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