There has been a lot of talk about inflation recently, with almost half the countries in the world reaching double-digit rates in 2022. In Argentina, it spiked to 94.8%, the highest since 1990. The figure put the country fourth in the world.
As policymakers struggle to deliver immediate solutions, the battle against inflation in Argentina is led mostly by consumers, who by now have learned to cope with this chronic problem.
Food and beverages: less quality, less quantity
It was food prices, with a 95% yearly increase and a 4.7% monthly climb in December, that contributed most to the increase. In November, Economy Minister Sergio Massa announced a price agreement program called “Fair Prices”, which froze the value of some 1,400 products in supermarkets, most of them foodstuffs.
However, those products are not available in small shops and grocery stores – where Argentines buy between 65 and 70% of food products – despite several complaints and requests for hearings from their federations to the Commerce Secretariat. This meant inflation was worse in poorer neighborhoods, where there are no supermarkets.
“In September, flour rose by 125% in small shops, while it was 20% in supermarkets and hypermarkets,” said Vanessa Ruiz, vice president of the Grocers Institute in Córdoba. She says that families adapt differently – for instance, buying on the stores’ credit, a common practice in grocery stores around the country, decreased after they installed card readers, especially during the pandemic. “Now, people use credit cards,” says Ruiz. The Grocers Institute’s research center reported that, one way or another, 84% of their surveyed clients had to finance their food purchases.
Ruiz adds that higher prices didn’t stop people from going to grocery stores. However, consumption habits have been shaped dramatically by inflation in recent years. According to the Grocers Institute, “during the last eight years, we observed a shift towards secondary and tertiary brands (2014/2015), after that a replacement of protein-based foods by carbohydrates (2016/2017) and since 2021, we have been going through the most painful stage: the reduction or suppression of food intake,” Ruiz said.
“We observed a recent and abrupt decrease in meat, fruits, and vegetable consumption,” she added.
The government provides a food card known as Tarjeta Alimentar to those receiving state benefits such as pregnancy or disability allowance and cash transfers for low-income families (Asignación Universal por Hijo). According to the Grocers Institute’s research center, 72% of customers in Córdoba’s convenience stores bought food with the help of at least one of these programs.
The Devil can’t wear Prada anymore
Clothing prices rose the most of any category, soaring by a record-breaking 121%. Virtually no salary rose as much, meaning Argentines need to get creative just to get dressed. “From a pair of socks to a bathrobe. Everything went up by more than 100%”, says Roxana Grano, 55, an employee at a women’s clothing store in Buenos Aires.
After 35 years there, Grano knows her clients well. “The same people that used to buy [high-end] pajamas now buy super cheap ones. The consumption level decreased,” she said.
Néstor Pardo, the owner of a menswear store, said that it has become increasingly rare for a client to buy a whole suit. “They used to buy the coat, the shirt, the pants, the shoe, the belt… Now, it’s common that they only come for the coat, for instance.”
Pardo said that “rises happen monthly, constantly” and that he sees no sign of them stopping, even though the Economy Ministry launched a “Fair Prices” program for clothing last October.
Teddy Karagozian, president of clothing company TN&Plantex, said that for the price of clothing to come down, the government needs to reduce taxes. “Value-added tax is 55% of every garment’s price,” he told Ámbito Financiero last March. “Almost 20% [of consumer prices] are made up of rents and a percentage goes to financial intermediaries, be it cards or Mercado Pago.”
Karagozian added that logistics is very expensive and, since there are relatively few clothing manufacturers in the country, major brands import most of their products.
Housing, and the non-compliance with the Rental Act
The 2020 Rental Act regulated rents by indexing them to inflation and average salary increases, ensuring it would always remain below annual inflation. However, homeowners anxious about reduced rental income have fought the Act hard. Shortly after it was passed, some turned to renting their flats through Airbnb, or forcing tenants to sign illegal contracts with price increases every three or six months, instead of one annual, standard increase.
“Housing is a right, and it shouldn’t be regulated by the real estate market,” Gervasio Muñoz of renter advocacy group, Inquilinos Agrupados (Organized Tenants), told the Herald. “And, if the law was actually enforced, people who rent would pay rental increases lower than annual inflation.”
So many causes, so few solutions
The government believes inflation has multiple causes. “Inflation requires Argentina to walk a path that includes fiscal order, trade surplus, reserve accumulation and an interest rate that increases peso operations,” said Economy Minister Sergio Massa last November. “Nobody can magically solve a structural problem,”
In reflection of this, the government will not resort to a shock program. Instead, they are implementing a series of measures to reduce monetary emission and the fiscal deficit, fostering a positive interest rate, reserve accumulation and price agreements to better “coordinate the expectations” of economic agents. Through this program, Massa is hoping for a slow but steady reduction of inflation that would see the monthly rate drop below 4% by April.
With a seemingly never-ending struggle with inflation, Argentina reached a 32-year record last year. During his budget presentation in 2021, then-Economy Minister Martín Guzmán had projected a 33% price hike for the entire year, which now seems utopic. His untimely resignation last July amid political turmoil further disturbed the economy, stoking a steep price rise that hasn’t been fully resolved.