As Argentina inflation nears 300%, climb in prices slows a bit

By Thomson Reuters May 14, 2024 | 6:09 AM

By Miguel Lo Bianco and Juan Bustamante

BUENOS AIRES (Reuters) – Prices in Argentina are climbing, despite positive signs of a deceleration, with the embattled South American country’s annual inflation rate set to edge closer to 300% when the government reveals the latest data on Tuesday.

Shopkeepers and consumers said that although monthly inflation readings have slowed since a peak over 25% in December, the change has yet to be fully felt on the ground. The inflation rate is set to edge back under single digits in April for the first time in six months.

“No matter how much the inflation rate goes down, which is what everyone says, it is not reflected here because look, there are items that should have gone down but haven’t,” said Sandra Boluch, 50, a fruit and vegetable seller in Buenos Aires.

She said her store had been forced to raise workers’ salaries because their rents had increased, while input costs of things like plastic bags had gone up, all feeding back into the sticker price for carrots and apples.

“These (prices) increase a lot and then that’s reflected elsewhere. Where? In the merchandise,” she said. “Transportation is more expensive, diesel prices go up, everything goes up. So no matter how much we try to reduce prices, we can’t.”

The government of libertarian President Javier Milei, which inherited a major economic crisis, has touted its success in lowering monthly inflation, which has declined this year since Milei took office on Dec. 10 and sharply devalued the local peso currency, unleashing an initial inflation surge.

Milei has pushed a tough austerity campaign with cost-cutting and looked to soak up liquidity in the market, which has gone down well with investors, and has helped boost the government’s fiscal position and propelled a rally of equities and bonds.

“He generated a monetary austerity shock, stopped injecting pesos into the economy, and gave a strong signal of fiscal austerity,” said Eugenio Mari, chief economist at consultancy Libertad and Progreso Foundation.

That economic medicine has also hit salaries and economic activity hard, though Mari said things should get better.

“A sharp drop in real wages implies a drop in aggregate demand, a drop in consumption and, obviously, a drop in economic activity. But the interesting thing is that now, with the drop in inflation, the door is open for real wages to recover.”

Ofelia D’Aquino, 65, a retiree in Buenos Aires leaving a supermarket, said he didn’t yet feel the inflation slowdown. Retirees, along with public sector workers, have taken the biggest hit from Milei’s austerity.

“Prices are still expensive and we Argentines have very little purchasing power,” he said.

“We hope that this great crisis, that our sacrifice, serves some good and we get out of this. We deserve it, all of us and the generations to come.”

(Reporting Miguel Lo Bianco and Juan Bustamante; Writing by Nicolás Misculin; Editing by Leslie Adler)