2024-01-02 23:21:10
In recent months, there has been a public discussion about whether or not Argentina is heading towards hyperinflation. It is evident that we have not reached it. Those of us who had the misfortune of experiencing one or more of the previous three that the country experienced know the degree of impoverishment, stress and social dissolution to which it leads. A few years ago, in Venezuela, the “traps” implemented by the dictator Hugo Chávez broke and more than 80% of Venezuelans ended up in poverty.
In Argentina, reality data shows that the management of Alberto Fernández and Sergio Massa created a hyperinflationary process. If we look for inflation rates or equivalent values of free dollars (at today’s prices) like those of recent months, we will find that they only occurred before or after hyperinflation. That is, if one hasn’t exploded yet, we are heading towards it.
Fortunately, the change of government created a pause in the acceleration of this process. On the one hand, the current administration sought a rapid elimination of excess spending that had to be financed with the Central Bank (BCRA); which allowed us to stop broadcasting for it. In this way, the machine stopped working red hot, as it had been doing to “put money in people’s pockets” for the elections.
On the other hand, voters elected President Milei to put order in the public accounts and change the course of Argentina, with the expectation that it will be a normal country. That hope made it possible to contain the growing flight of the peso, with which people sought to defend themselves from the scam of a BCRA that took away purchasing power to finance the excess expenditures of the previous government.
This decrease in currency demand was also helping to accelerate the fall in the value of our currency. Unfortunately, the destruction of the purchasing power of the peso that has already taken place will take up to four months to be reflected in the total prices of goods and services. So, even if things are done very well from now on, high inflation will last until the first quarter of 2024, at least; although then it will tend to go down faster and faster.
So the political leadership has an unavoidable commitment to the voters, to change the course of Argentina. The taste of the medicine needed to cure oneself may not please the opposition; but it is necessary to take it. Oh, and it’s not worth adding water so it doesn’t taste so bad. A very diluted medicine loses its healing capacity and there is no time for childishness.
The patient is in a terminal state and, if he is not given the correct treatment that guarantees that people see the change in model he demands, he will die. The flight from the peso will return and they will be responsible for us going to hyperinflation and, in this chaos, we cannot rule out the return of the demands of “Let them all go”, in the face of a leadership that shows that it prefers to defend its own and others’ corporate interests, in rather than the demands and well-being of an enormous majority of Argentines.
Aldo Abram is an economist. Director of the “Freedom and Progress” Foundation.
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