inflation and the dollar
“The dollar is king in Argentina because the Argentine peso is disintegrating, particularly during the last month. A year ago, 180 pesos could buy a dollar on the widely used black market, now 298 are needed, “say the chroniclers who for fifteen days spoke of the inflationary phenomenon with economists, politicians, rural producers, real estate agents, hairdressers, taxi drivers, cashiers. , artists and street vendors and unemployed people and tell of their amazement at the Argentine habit of paying for purchases such as land, houses, cars and expensive works of art in cash and in dollars that they keep in old clothes, under the floor or in security deposits located in the basements and which are reached after going through up to nine doors.
The article cites that according to experts, Argentina is the country in the world with the most dollar holdings outside the US. So much, he emphasizes, that sometimes the dollars are thrown away by mistake, as apparently happened in a landfill in which tens of thousands of dollars were found.
“With the peso collapsing, prices rise to try to catch up. Many economists expect inflation, already at 64%, to hit 90% in December. It is one of the worst economic crises in decades, and that is saying a lot for Argentina,” says a passage, which asserts that in a world dealing with rising prices, “perhaps there is no economy that understands better than Argentina what it is to live with inflation”.
The country has lived with the phenomenon for most of the last 50 years, recalls the American newspaper, including a chaotic stage at the end of the 90s in which inflation reached an “almost incredible” 3,000% and in which Argentines ran to the stores to buy before the clerks arrived with their stun guns. “Now – he recalls – high inflation is back, exceeding 30% per year every year since 2018.”
The relationship of Argentines with money
“Argentines have developed a highly unusual relationship with their money: they spend their pesos as fast as they have them, buying everything from televisions to potato peelers in installments, they don’t trust banks, they rarely use credit and after years of constant price increases they have little idea How much does something cost?
The country is thus a case study of how people adapt to living in an economy almost impossible to imagine anywhere else in the world. Life is especially manageable for those with the means to run the system, but very hard for the rest, says the Times.
One of the testimonials is that of Juan Piantoni, from Ingot, a company that manufactures safe deposit boxes, whose business is flourishing. “We wonder how society allows this to happen”, says Piantoni, who believes that the country is on the eve of “a major crisis”, it is only enough for someone to “light the fuse”.
Poverty
“Typically, poor Argentines don’t have jobs with automatic pay raises or extra money to buy dollars,” leaving them to earn a few pesos while goods get more and more expensive, says the article citing the rate. official poverty rate of 37%, against 30% in 2016.
The Times recalls that Martín Guzmán resigned from the Ministry of Economy on July 2, in the following 26 days the value of the peso fell 26% and that President Alberto Fernández fired Guzmán’s successor (Silvina Batakis), who, like 20 others ministers before her, lasted less than two months in office.
Although the article says that some link the recent hyperinflationary blow to the rise in world prices, the war in Ukraine and problems in global value chains, it adds that “many economists believe that Argentine inflation is self-inflicted” since the country spends much more of what he collects to finance free or widely subsidized health care, universities, energy and public transport and to finance the deficit he prints more pesos.
the new minister
About Sergio Massa, the article states that “he took one of the most significant steps in years when he promised to stop printing pesos to finance the budget.” However, he clarifies, many Argentines “disbelieve that the country is ready to adopt the necessary difficult options.”
Argentines, the report continues, hope that the current situation does not lead to a disaster like the one in 2001, when there was a bank run.
Consumption
Noelia Mendoza and Carla Cejas are two other testimonies in the note, about the shortage of toilet paper. “I had never understood the bidet, until now,” says Cejas. Still another is that of Ignacio Jauand, a 34-year-old publicist who buys everything he can on credit, from his bed and clothes to a PlayStation 5 and a potato peeler, not because he cannot afford them, but because he is betting on the fall of the weight. “The last installment I paid for the television -he remembers- cost me two or three McDonald’s combos”, says Jauand, who explained to the envoys that “buying things is how you beat inflation”.
But the favorite purchase of Argentines is the dollar. The Central Bank of Argentina, cites the Times, estimates that Argentine households and companies hold outside the banking system the equivalent of some USD 230 billion in foreign financial assets, mostly in dollars, mostly in banks abroad but also hidden in different places in the country.
Source: Ambito
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