When Laura, a 28-year-old Argentine in marketing, was allowed to pay in dollars in Buenos Aires, she did not hesitate. Following the recent salary update due to inflation, the company where it operates has confirmed that wages were still very low compared to the rest of Latin America where the company operates. For this reason, the directors offered the employees two options: salary dollarization and fixed maintenance or collecting in pesos and updating every six months for inflation. “I do not know anyone who has chosen to continue to pay in pesos,” he told todaytimeslive.com.
Inflation worries various governments around the world, but Argentina is experiencing pressures that are far from what any European country is experiencing. With a 9.8% increase from Spain to Germany last year and its historic high of 7.3% a year since the country reunited, inflation is troubling, but it does not look like Argentina over the years.
In December, Argentina closed annual inflation at 50.9%, the highest in Latin America after Venezuela. The inflation record was set in 2019, the last year of Mauricio Macri’s government, and when the index ended the year at 53.3%. The National Institute of Statistics and Census released its inflation rate for March this Wednesday: 6.7% last month, the highest record in two decades. Economists forecast 55% of annual inflation by 2022, though if it maintains last month’s record it could exceed 73.5%.
The general rise in world prices is due to the pandemic and the economic consequences of the Ukraine war. Argentina is not exempt from what is happening in the world. According to the World Bank, in 15 of the 34 countries classified as advanced economies by the International Monetary Fund, inflation exceeded 5% in December 2021 last year.
But this country adds its own ingredients. “Argentina has a recurring problem with the dollar deficit. When you look at the long series of inflation over the last 50 years, you find correlations with the exchange rate. That is, if you run out of dollars, it puts pressure on the exchange rate, and if you devalue it, it goes directly to prices, “Hernan Letcher, director of the Center for Argentina’s Political Economy, told todaytimeslive.com.
The lack of dollars in circulation is more in line with the flight of capital abroad: Argentines have almost $ 420,000 million outside their national financial system, similar to Argentina’s $ 460,000 million in 2021 GDP. This is an issue that is. Congress has been debating since the ruling coalition, all front-line senators, introduced a bill that would remove financial secrets for evaders who have taken dollars abroad.
But he also responds to the fact that those Argentines who have a savings margin usually convert the difference in pesos into foreign currency. This is the easiest way to relax or save money on home renovations so that your savings do not lose value.
Another factor that affects prices is the high monetary issue. Putting more money into the economy from the state to reactivate the economy, especially during a pandemic, has an impact on prices, which ends with the destruction of the value of the Argentine peso.
“Today it will be impossible to renew once in three months. The current situation in the country forces you to update prices every month. “If you do not have the muscle to pay for all your products, unfortunately you choose to blink and cross your fingers so as not to lose,” said Juan, 34, who heads three Buenos Aires gastronomic establishments.
Inflation affects the poorest sectors, many of them unemployed or informally, but also with middle-class registered jobs and small entrepreneurs who are forced to update prices on a monthly basis. “Investing in a country with inflation is quite tiring. Prices change from month to month and the cost of financing your customers depreciates every week, which goes unpaid,” said Santiago, 33, a local brewer.
Argentina is full of parallel lanes and illegal channels through which the economy rotates. One of them is buying and selling foreign currency. Argentines who have a currency that is constantly depreciating are saving and thinking in dollars.
Lorena, a middle-aged woman, is one of many who are responsible for receiving pesos and exchanging dollars for a private apartment in the Palermo area. The mechanism is simple, every time someone wants to exchange money, Lorena writes on WhatsApp, is asked how much she has and she usually answers the value of the parallel dollar. The transaction is as simple as frequent, without documents or bank records.
Due to the restriction on the purchase of dollars imposed by recent governments, known as “exchange shares”, which only allow some Argentines to exchange a maximum of $ 200 per month, the gap between the value of the official dollar and the parallel dollar is so called. The “blue dollar” is 73%. Although the agreement with the International Monetary Fund, which was supplemented by an increase in the international price of grain due to the war in Ukraine, improved the situation, the value of the dollar on January 27 this year exceeded 112%.
The fall in prices led to an absurd jump in food, as it happened to lettuce leaves in February, which pushed its price up by 72.7%. For this reason, when price increases are felt, it is the sellers of small stores themselves who advise consumers on what to buy to store in the closet. Meanwhile, products such as oil and tuna cans have become a luxury item for some time. Large supermarkets choose to set alarms on them and place them at the cash registers to prevent theft.
This leads to each Argentine using a small amount of speculative behavior at every daily expense: they buy more than they need in the event of a price increase or its exhaustion, and some even think about how to take advantage of the opportunity. Increase in demand.
On the other hand, there are those who, in order not to waste so many hours of the day in reporting and doing internal economic analysis, spend everything. What they have and what they do not. “Yes, it’s not worth the money anymore,” they say. They borrow in 12 installments a year with credit cards, suggest that annual inflation will lower prices, and buy subscriptions to paper newspapers with access to discount cards in just hundreds of businesses, ranging from mattresses to ice cream parlors.
The picture is not very different for small investors. “We have a lot of dollarized value for imported and domestic supplies Goods. “As long as the official exchange rate is moving in a predictable way, it will not create chaos for us,” Santiago said. The problem is how much it hits the big jumps, that’s where everything falls apart, ”adds the local producer in the country, where he talks about all the economies.
Both accelerated inflation and the ever-latent threat of possible sharp devaluation, which bridges the gap between the official value of the dollar and the parallel, are forcing small local investors to increase profit margins to reduce the risk of oversupply. By selling below the cost of production, a practice that also ends with further increases in the prices of items.
Working in Argentina is not a guarantee of poverty alleviation. For more than half a decade, the real wages of Argentines have not stopped. Today, every Argentine who earns in pesos earns less than he did six years ago in his equivalent dollars. In November 2015, when Cristina Fernandez de Kirchner left the presidency, the average wage of registered workers (ripte) was equivalent to $ 1230. The average salary in 2021 is equal to 37% in 2015, estimated at $ 461.
For this reason, many middle-class workers have chosen to add new jobs to jobs they already had in order to maintain the standard of living they had ten years ago with one job. “I work every day, Monday through Monday, to be able to pay fixed costs. During the pandemic, I had to spend some savings to make a living. It makes it very difficult to plan and design,” Mariano said. Private wood and steel worker.
But daylight hours have a limit. “I have as many hours as a teacher, I can only try to improve myself by reducing costs,” said Maria Laura, a 54-year-old university professor.
In the second half of 2021, in the context of economic recovery and job creation, poverty fell to 37% of the population, which is more than three percentage points lower than the level recorded in the first half of 2021. While the expansion of the economy ended the three-year recession with a 10.3% increase in the middle of last year and allowed 1.8 million jobs to be created, informality and the loss of real wage value due to constant price increases mean quality of life. Continues to fall.
The most obvious consequence of living in one of the world with the highest inflation is breaking not only the confidence in investing in the country, but also the ability of the middle class to predict life expectancy and popular sectors. “When it comes to work, I realize I have to catch everything that seems to be overused in the face of the uncertainty that I do not know if the economy will stop or it is going to explode,” Mariano said.
In Argentina, the debate, ostensibly buried by the collapse of the neoliberal governments of the 1990s, has taken center stage in recent weeks: dollarization. The possibility of resolving inflation by changing the Argentine peso to the dollar or adopting a monetary system are scenarios that seemed unthinkable a few years ago.
But the solution seems to be worse than the problem. Argentina will not only lose control of its currency, but for some economists it is technically impossible. “Dollarization does not make sense for Argentina. It is not enough dollars for dollarization. If you tried to do that today, you would start with a 100% devaluation. It would mean the already low wages of Argentine workers. There is no dollarization in Argentina. – says Lacher.
“I do not think my situation is the most difficult because I have the privilege of graduating and getting a job,” said Malena, a 27-year-old public sector professional. “But the reality is that nonetheless, things are getting more and more difficult. It ‘s no longer a question of being able to save or give yourself some taste, but of being able to make a living from what you’re earning.”
Source: El Diario
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
