In the first four months of the Government of Javier Milei and Luis Caputo, by the Palacio de Hacienda, were characterized by the December devaluation and the liberalization of the markets, where registered salaries experienced a cut of 15.2% in real terms, while prices in the most concentrated sectors of the economy increased 24% above the Consumer Price Index (CPI). This loss of wage purchasing power acted as an anchor, decreasing consumption and economic activity.
One of the first measures taken by Milei and Caputo fe the increase in the official exchange rate by 118%. This devaluation caused a sharp increase in prices in December, raising the CPI to 25.5%, with increases in food prices of almost 30% monthly and a peak of 11% weekly. Besidesthis measure pressured the increase in the PAIS tax rate to 17%, especially affecting imported products and contributing to the 54% increase in wholesale prices. This increase in prices was directly transferred to salaries.
Not everyone did badly
However, other areas were more favored by these actions, according to the latest CIFRA situation report. The report maintains that “prices of concentrated groups increased 24% above the CPI” during the first four months of government.
“The acceleration of prices within the framework of the December devaluation and the belief in economic deregulation as an effective allocator of resources, led to a new frustration in which the case of prepaid medicine was not the exception, but the rule” , warns the document.
And he adds that, “If we look at the period between the third quarter of 2023 and the first quarter of 2024, the highly concentrated branches increased their wholesale prices by 14.4% above the CPI.” “It is a process similar to the loss of salary in relation to the CPI, both during the Milei government and in the general period that began in December 2015. Between December 2015 and the first quarter of 2024, the oligopolistic branches increased their prices by 40.1% above the CPI,” stated the CTA Center.
Cifra pointed out that the case of health “is not an exception, but the norm,” and highlighted that when a devaluation or price increase occurs such as what occurred after the pandemic, “concentrated groups accelerate the transfer of these increases to prices, generating a relative advantage that they seek to maintain when the distribution struggle begins.
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The Cifra report also highlighted that there has been a “deep economic recession as a result of the strong devaluation in December, the severe fiscal adjustment and the deregulation of the markets.”
However, compared to other relative prices, salaries have a long way to go to recover what was lost in these months. Cifra noted that between December 2023 and March 2024, real income decreased by 15.2%. During that same period, cumulative inflation was 90%, resulting in reduced consumption and a collapse of economic activity.
In this sense, the report stated: “The official perspective that a rapid economic recovery can go hand in hand with a slowdown in inflation seems more of a political necessity than an accurate economic analysis.since the expansion of private consumption will require a recomposition of real income, which will intensify the distribution struggle and make it difficult to slow inflation.”
Source: Ambito
