In a disconcerting economic turn, Argentina finds itself grappling with a resurgence of inflation, reminiscent of the dark days of 1991. In August, the consumer price index in the South American nation soared by a staggering 12.4 percent, a distressing record that has not been witnessed since February of 1991, thereby rekindling unsettling memories of economic turmoil from the past. The implications of this surge in consumer prices loom large, as it promises to cast a profound shadow over Argentina’s upcoming presidential race, scheduled for October 22.
The government’s INDEC statistics agency unveiled the grim statistics, revealing that Argentina’s annual inflation rate has skyrocketed to an alarming 124.4 percent. The dire situation has placed the ruling centre-left coalition on the defensive, compelling them to grapple with economic headwinds in the run-up to the pivotal general election.
For years, Argentina has been ensnared in the quagmire of spiralling inflation; however, the harrowing twist arrived in August as it marked the first instance in over two decades that the monthly inflation rate scaled the precipice of double digits. This phenomenon is anticipated to persist into September, according to leading economists, exacerbating the country’s economic woes.
Economy Minister Sergio Massa, in the wake of the escalating inflationary crisis, finds himself engaged in a fervent campaign to convince the Argentine populace to elect him as their next president. However, defying expectations, Javier Milei, a self-proclaimed “anarcho-capitalist” and right-wing populist, has remarkably disrupted Argentina’s political landscape. His seismic impact was demonstrated last month when he secured the highest vote tally in the national primaries, positioning him as the frontrunner in this high-stakes political race.
The release of the disquieting inflation figures prompted Patricia Bullrich, the presidential candidate for the main opposition coalition, to assert, “It’s the number that summarises the tragedy left by Massa.” Recent polls corroborate this sentiment, depicting Milei leading the electoral charge, with Massa trailing in second place and Bullrich in third.
The rampant inflation crisis largely stems from the government’s substantial devaluation of the local currency, the peso, by nearly 20 percent following the tumultuous August 13 primaries. Martin Kalos, a distinguished economist and director at local consultancy Epyca Consultores, elucidated, “The acceleration [of inflation] is the pass-through of the devaluation.” Kalos also underscored that the inflation rate could have been even higher, but the devaluation only captured 15 days of August, hence setting the stage for further economic turbulence in September.
The soaring inflation rates, particularly pronounced with food, have exacerbated the hardships faced by Argentine citizens. Food prices surged by 15.6 percent in August, with certain beef cuts experiencing price hikes as high as 40 percent, as reported by INDEC. The stark reality likely exceeded these official figures, as consumers grappled with the grim spectre of surging food costs.
Diego Ponti, a livestock analyst for AZGroup, a local consultancy, offered insights into the surge in beef prices, attributing it to a confluence of factors, including a prolonged period of frozen beef prices despite the inflationary backdrop.
The mounting economic pressure has affected the daily lives of ordinary Argentines, exemplified by Mariela Suchowieski, an 18-year-old student who expressed her plight, stating, “We don’t even buy beef anymore. We buy it once a month and we divide it up bit by bit. Everything is very expensive.”
Suchowieski’s sentiments resonated with many attending a rally for Javier Milei in La Plata, where hundreds gathered to support his radical proposal of adopting the US dollar as Argentina’s official currency, an idea that has gained substantial traction amid the prevailing economic uncertainty.
In this environment of economic disarray, Milei’s popularity continues to surge, and discontent with the political establishment runs high. Juan Pedro Aquino, a 61-year-old citizen, vented his frustration, attributing the country’s woes to politicians’ proclivity for printing money, a sentiment echoed in Milei’s rallying cry.
This widespread discontent poses a unique challenge for Economy Minister Sergio Massa, who must navigate the delicate balance between addressing the crisis he was unable to alleviate as a minister and offering hope for a better future as a presidential candidate, as astutely noted by economist Martin Kalos.
As Argentina hurtles towards its pivotal general election, the spectre of inflation looms large, casting an ominous shadow over the nation’s political landscape and economic future.
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