Ah, Argentina, where things increase in price by not by 5 or 10 percent, but anywhere from 40 to 300 percentage points.
The new year brings with it a new series of rate, tariff and tax hikes. And with it, an increase in Argentina’s arch nemesis, inflation.
Unfortunately for the Government, its estimate of 18% inflation for 2017 is now looking dubious. Increases in rates and tariffs have prompted a number of private firms to revise that figure to between 23 and 25%.
Sounds kind of like last year, when President Macri’s original estimate of 20-25 percent inflation clocked in closer to 41 percent.
“We corrected our projection upwards because of the announcement of increases in regulated prices: in January, gas, and in February, electricity and pre-paid medicines,” said economic head of Elypsis, Gabriel Zelpo, according to El Destape.
January’s inflation now looks set to clock in at about 1.8 perecent. This is because of increases in gas, ABL (Lighting, Sweeping and Cleaning) and the monotributo tax.
February, meanwhile, will likely be worse, with many firms bracing for 2 percent inflation. An expected increase of about 35 percent in electricity prices will play a role here, as will a 6 percent increase in the price of pre-paid medicine. Increases of between 15 and 50 percent in the price of toll booths will also inflate the peso, according to La Nación.
These figures reflect one of the Government’s biggest challenges: decreasing inflation while also cutting back on heavy state subsidies of gas, electricity, petrol and other services. For example, let’s look at electricity. As noted by Pablo Fernández Blanco in a piece for La Nacion, “despite the 2016 increases, today users pay approximately 30% of what it costs to produce electricity.” The Government would like to take this figure to 50%, though that will depend on, yep, inflation.
The biggest headache, however, will come with the paritarias, in which public-sector wage increases are negotiated between unions and Government. The Government is very keen to stick to the Central Bank’s aim of no more than an 18 percent increase in salaries (inflation, of course, is a vicious cycle. Spending more on wages means it costs more to produce things, which pushes up the price of goods; which, in turn, pushes up wages again.) But if inflation surges to over 20 percent, that will make life very difficult for your average person living in Argentina, who is already having a tough time, what with all this inflation and all.
The state of inflation these days? Unfortunately, there’s really no place but up, for now.