A worker pushes a cart in the central market of Buenos Aires (Argentina).Juan Ignacio Roncoroni (EFE)
Inflation in Argentina has exceeded all speed limits and shows no signs of stopping. Prices rose 12.7% month-on-month in September and 138.3% last year. That’s a very high figure, a record in the last three decades, but possibly lower than that of the coming months as the recent collapse of the peso in parallel markets puts price makers on the accelerator again. The government has ordered police raids on illegal currency trading venues and imposed new restrictions on permitted markets. The result was a Thursday of relative exchange rate calm, followed by four days of public holidays, allowing us to catch our breath after a week of hectic bullfights, during which the limit of a thousand pesos for a dollar was exceeded in the informal market.
September’s gains were led by apparel (15.7%), culture and leisure (15.1%) and food and non-alcoholic beverages (14.3%), which grew above average. This last figure is a blow to the government because it is the one that leaves the most in the pocket, especially among families with fewer means who spend a large part of their income on food. On the contrary, the areas with the least progress were education (8.1%) and housing, electricity, gas, electricity and fuel, whose tariffs were frozen by government order.
Salaries and pensions have fallen due to this price increase, despite the tax benefits and extraordinary bonuses granted by the Argentine government on the eve of the October 22 elections. The measures, heavily criticized by an opposition that denounces that they extend tax cuts, have a clear electoral goal: regaining votes that will allow Economy Minister and official candidate Sergio Massa to continue in the Casa Rosada election campaign.
Milei, the candidate with the most votes in the August primary, remains the favorite for the general election. On election day, the ultra-liberal economist will be 53 years old and is happy about a victory in the first round. He needs 45% of the vote, or 40%, ten points ahead of the runner-up. The polls rule out that possibility and predict that there will be a second round of voting on November 19 between the two most voted voters, but the fact that they did not foresee Milei’s victory in the primary increases the uncertainty.
Arrests
Also for campaign reasons, Massa has tried in recent days to halt the rise in the exchange rate through new restrictions on permitted markets and police raids on illegal foreign currency buying and selling outlets. “I said, ‘I would rather lose the election but send those who play with Argentines’ savings to prison.’ Yesterday there were already six detainees. Prepare to see the naked misery of those who speculate,” the Peronist candidate said this Thursday during an election rally.
Two of them were arrested with nearly $100,000 in cash on Florida Street, the main commercial street in downtown Buenos Aires where tourists and Argentines come to sell or buy foreign currency at a price almost three times the official price amounts. Another man was arrested in the Belgrano neighborhood with $400,000 tied to his legs and stomach with duct tape.
For a few days now, the money changers or small trees have disappeared from Florida Street. No one is shouting “change, change” to the pedestrians circulating there amid a heavy police presence. However, it is possible to find them by walking a few blocks away, and in other parts of the city the activity continues as usual. “Before they turn me into dollars, I’ll turn myself into dollars,” one young man says to another in line at an exchange office in the Colegiales neighborhood. Both believe that the peso’s days will be numbered if Milei becomes president.
133% interest rate
Faced with this uncertain horizon, many Argentines have opted to eliminate local currency fixed-term deposits, even as the central bank tries to maintain their attractiveness. Shortly after the inflation data was known, the monetary unit ordered a further increase in interest rates up to 133% per year.
The statements made by the candidate of the right-wing extremist party La Libertad Avanza against the national currency, whose value he equated with excrement, were branded as irresponsible by Massa’s entourage and the conservative candidate Patricia Bullrich. He also received a wake-up call from private banks. Argentine President Alberto Fernández went a step further, condemning Milei for “public intimidation” as his words caused the peso to fall further this week. Fernández claims that Milei sought an economic policy effect that favored the main proposal of his electoral program, the dollarization of the economy. Fernández’s complaint was added to an earlier lawsuit filed against Milei by Bullrich for calling her a “bomb-throwing bully” and accusing her of attacking kindergartens as a teenager.
The legalization of the campaign has not changed Milei’s stance. In the last election debate, he repeated his attacks against Bullrich, whom he called a “murderous tyrant.” This Wednesday he accused the president of leading a political persecution against La Libertad Avanza. “They are trying to ban the political force with the most votes in the August elections because they know that we are just a few points away from winning the October elections and ending their government of criminals forever,” said the Ultra candidate at a press conference.
Milei once again attacked the peso and emphasized that his comments were aimed at the common good of Argentines. “Or do you want to be lied to?” Are they for those economists who tell them: “No, please be responsible, stay in pesos” while saving in dollars? “Come on, let’s leave the hypocrisy aside,” he argued during his appearance.
The economist gave the example of a person who saved a thousand pesos in 2001, when the value of the Argentine currency was pegged to the dollar. If that person chose to save in U.S. currency, he would keep the thousand dollars today; If he had chosen the local currency, these thousand pesos would only be enough to buy one dollar. His simplified explanation allows us to understand why many Argentines view dollarization positively, despite warnings from within and without that it would be ruinous for the population.