Inflation in Argentina reaches 160.9% in 12 months, and will end the year at the highest level since 1990

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Accumulated inflation in 2023 totaled 148.2%. The sectors with the biggest increases last month were Health (15.9%), Food and non-alcoholic beverages (15.7%) and Communication (15.2%). Argentine peso banknotes: accumulated inflation in 2023 reached 148.2%. Natacha Pisarenko/AP Inflation in Argentina reached 160.9% in the last 12 months, the country’s Statistics Institute announced this Wednesday (13). November’s results show that consumer prices rose 12.8% in the month, compared to 8.3% in October. The sectors with the biggest increases last month were Health (15.9%), Food and non-alcoholic beverages (15.7%) and Communication (15.2%). Accumulated inflation in 2023 is 148.2%, the highest annual result since the hyperinflation of 1990, when the year ended above 1,300%. On Tuesday (12), Argentina’s new Economy Minister, Luis Caputo announced a fiscal package with nine measures to try to contain the economic crisis affecting the country. (see details below) The adjustment was called the “Chainsaw Plan” in the press, in reference to the chainsaw that Milei displayed in the campaign for president and which symbolized what the candidate at the time wanted to do with public spending — cut them brutally . The measures aim to restore Argentina’s public accounts. In his inauguration speech on Sunday (10), Milei said that “there is no money” in the country and asked the population to prepare for difficult times before the situation improves. Economists interviewed by g1 state that Milei’s fiscal adjustment should actually follow the path of worsening inflation and activity rates, but they are part of a path to reduce the country’s deficit and accumulate international reserves. As the end of public subsidies, a devaluation of the peso’s exchange rate against the dollar and the unfreezing of prices of basic items are expected, the tendency is for inflation to gain strength in the coming months. Milei government announces measures to cut spending and devalue the peso Summary of the Motoserra Plan 1. Devaluation of the peso: US$1 will become worth 800 pesos; Today each dollar is worth 365 pesos. This includes a provisional increase in the import tax (called “Pais”, which is levied on dollar purchases) and withholding taxes on non-agricultural exports. What the minister justified: “We will adjust the official exchange rate so that the productive sectors have the appropriate incentives to increase production.” Regarding the increase in import taxes, he said: “In this way, we benefit exporters with a better price and equalize the tax burden for all sectors, no longer discriminating against the agricultural sector.” 2. Tenders: suspend new public works notices and cancel tenders that have not yet started. What the minister justified: “There is no money to pay for more public works, which, as we know, often end up in the pockets of politicians and businesspeople. Public works have always been one of the sources of corruption in the state and with us this ends. Infrastructure works in Argentina will be carried out by the private sector, as the state does not have the money or financing to carry them out.” 3. Reduce energy and transport subsidies: in practice, electricity and gas bills will increase, as will train and bus fares throughout the metropolitan region of Buenos Aires. What the minister justified: “Today, the state artificially supports very low prices for energy and transport tariffs through subsidies. Politics has always done this because this way it deceives people, making them believe that they are receiving extra money. But Argentinians must have already realized that these subsidies are not free, since they are paid with inflation: what they give you with the price of the invoice, they charge you with increases in the supermarket. And, with inflation, it is the poor who end up financing the rich. Furthermore, subsidies in the metropolitan region are an act of discrimination with the interior provinces”. 4. Reduce transfers to the provinces to a minimum. What the minister justified: “It is a resource that unfortunately in our recent history has been used as a bargaining chip to mediate political favors.” 5. Suspension of government advertising for one year. What the minister justified: “In 2023, between the Presidency and the ministries, 34 billion pesos were spent on advertising. There is no money for expenses that are not strictly necessary, much less to support, with taxpayers’ money, the media of communication that are created only to praise the virtues of the government in office”. 6. Public positions: do not renew employment contracts that are less than one year old. What the minister justified: “A common practice in politics is to incorporate thousands of family members and friends before a change of government to maintain their privileges.” 7. Cut in the government structure: reduce the number of secretariats from 106 to 54, and ministries from 18 to nine. What the minister justified: the idea is to reduce the number of commissioned positions. 8. Social: prioritize social projects that do not require intermediaries and strengthen programs such as the one that pays assistance to mothers with children. What the minister justified: “Due to this emergency situation that we are going to experience, the president asked us to focus fundamentally on the people who could suffer most from this.” 9. Replace the import system with one that will not require prior licensing information. What the minister justified: “Discretionality is ended and the transparency of the import approval process is guaranteed. In other words, anyone who wants to import will be able to do so, period.” “We are in the worst phase in our history,” said the minister, who said that Argentina spends much more than it collects — the fiscal deficit. “If we continue as we are, we will have hyperinflation.” The idea, he says, is to “neutralize the crisis.”

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