The CPI data from the INDEC for February inflation known last Tuesday forced banks and consultancies to recalculate financial market expectations for March and for all of 2023.
February inflation was 6.6%, or 115.3% annualizedincreasing from 6% in January and reaching the highest record since it was 7% in August of last year
The numbers of the consultants and banks, according to what iProfessional was able to find out, with data from the first half of March mark values ranging from 6.8% -the most optimistic- to 8 -the most pessimistic-.
In this regard, a recent report by the consultancy Portfolio Personal Investment highlights that: “Inflation began with a 6 ahead for the second consecutive month and this was the third month of acceleration after having reached a high floor of 4.9% in November last year”.
What is observed is that Argentina entered a regime of high inflation despite the exchange and price controls that this government applies.
One year ago, more precisely on March 15, 2022, the president Alberto Fernández announced that he was going to defeat inflation and the same step from 50% per year to more than 100% per year.
A year ago, Alberto Fernández announced that he was going to defeat inflation
Apparently, the Precios Cuidados program, with its latest remix Precios Justos, and the controls of the militants of La Cámpora, have not worked against a phenomenon of strictly monetary motives beyond the multi-causality that some Kirchnerist economists point out.
Perhaps that is why rumors spread in the business and financial world that Vice President Cristina Kirchner would be asking for the departure of Secretary of Commerce Matias Tombolini, a man who answers to Sergio Massa. The latest rumors indicate that the economist from La Cámpora Hernán Lercher, whom the vice president listens to, or perhaps another man from Massa’s economic team, could reach that position.
The dynamics of the inflationary process
To understand the dynamics that inflation took on in the last 12 months, it must be remembered that in March of last year it rose 6.7% per month, while the annual rate was 55.1%, setting a record at that time since April 2002 when it had reached 10.4% per month.
What is observed this year is a new regime in the inflation dynamics that in January was 98.4% and in February reached 102.4% in annualized terms, and? reached triple digits for the first time since October 1991when the Convertibility Plan governed the first government of Carlos Menem.
But the data that most worries analysts is the acceleration of core inflation that computes the increase in public services. This shot up to 7.7% monthly or 143.6% annualized in February from 5.4% in January; 5.3% in December and 4.8% in November.
This number also marked a record for the historical series that begins in 2017 and exceeds the 7.6% of September 2018, after the 25% devaluation of the peso on August 30 of that year.
February inflation was 6.6%, or 115.3% annualized
“Specifically, this jump would be strongly influenced by the increase in meat which, having concentrated from the second half of January, had a full impact on the CPI for February. Meat and its derivatives (weighting of 8.9% in the CPI, including chicken and pork) accelerated 19.2% from 3.9% in January and 2.7% in December, reflecting that the relative price of meat began to reverse. second half of 2022 caused by excess supply derived from massive slaughter”, highlights the report by Portfolio Personal Investment.
What the inflation data from last February left is that It becomes very difficult for analysts from consultancies and banks to be able to project future inflation in a year with PASO elections on August 13 and the presidential elections on October 22.
The average number of 6.2% monthly REM for February prepared by the BCRAwith information from banks and consultancies, was once again below observed inflation, which was 6.6% per month.
Inflation: 6-7-8 percent per month
In short, there is no doubt that inflation is faster than ever and suggests that between now and the end of the year, could travel in values that would oscillate between 6-7-8 percent per month, but the monetary issue reappears in the second half of the year. Double-digit monthly inflation should not be ruled out for some month.
What the February number also shows is that the kind of inflationary calm that Minister Sergio Massa had achieved in the first months of his administration would have ended and we must not rule out new inflationary pressures in the coming months.
Where could these pressures come from March onwards:
1) The monetary issue which could generate an eventual “soybean” dollar 3.0 in April/May.
2) The BCRA intervention in the debt in pesos to contain the parities of the titles in the face of sales by private investors that could intensify in the run-up to the election.
3) The quasifiscal Deficit, by a large stock of Leliq issued by the BCRA as well as by the interest rate that the monetary authority has now raised. This is the main expansion factor of the Monetary Base
4) The money demand that could fall in the middle of the electoral process.
The kind of inflationary calm that Minister Sergio Massa had achieved in the first months of his administration would have ended
Fernández government, with the highest inflation in recent decades
Next May 23 will mark 20 years since Kirchnerism came to power at the hands of Néstor Kirchner on May 25, 2003.
The most relevant data in these almost 20 years is that in his three years in office Alberto Fernández accumulates more inflation than what Néstor Kirchner, Cristina Fernández de Kirchner and Mauricio Macri had in their respective presidential terms..
Since he arrived at the Casa Rosada in December 2019 until February 2023, inflation accumulates at 320%.
This number exceeds 295% from the period 2015 to 2019 of Mauricio Macrito 180% of CFK’s second term, to 130% of his first term and to the 66% that Néstor Kirchner accumulated.
Average annual inflation in the last 20 years was 12% with Néstor Kirchner, 25% and 30% with CFK in his first and second terms respectively, and 40% with Mauricio Macri.
In the event that the projection of 60% established in the 2023 Budget is met, accumulated inflation would reach 540% throughout his term. But If we calculate 100% for this year, it would reach December with an accumulated 600%.
The government of Néstor Kirchner was, in macroeconomic terms, the best in Argentine history from 1930 onwards
If inflation similar to that of last year is confirmed, the presidential term of Alberto Fernández would be the one with the highest accumulated inflation in Argentina after Raúl Alfonsín, between 1983 and 1989, when there was hyperinflation.
But in this case it was a six-year term, therefore, what happened with Fernández is more serious.
If we take the average annual value in democratic governments, inflation in this period would only be exceeded by the 400% of the term of Raúl Alfonsín with hyperinflation and the 275% annual average of the government of María Estela Martínez de Perón, where the “Rodriguez”. Both were periods of strong devaluations and very pronounced macroeconomic imbalances and internal and external financing problems.
Why did some governments manage to lower inflation?
He The longest period of low inflation in Argentina was between April 1991 and December 2001with the validity of the Convertibility Plan and an accumulated inflation of 50%.
In that period there was a fixed exchange rate scheme of one to one of the peso with the dollar. So that it is understood: the value of the dollar remained the same for almost 10 years and there was no single free exchange market.
Despite all this, The BCRA ended almost without international reserves at the end of 2001 and this was one of the causes of the end of the Convertibility Plan together with the increase in the inflation and unemployment rates and the levels of poverty and indigence that reached historical records.
Double-digit monthly inflation should not be ruled out for some month
The other period of price, exchange rate, monetary and fiscal stability was that of Néstor Kirchner which began on May 25, 2003 with a dollar of 3 pesos and ended on December 9 with the same value of said currency. This was the only moment in Argentine history in which a government had a fiscal and commercial surplus throughout its entire term and a BCRA with positive equity.
These results serve Kirchnerism to demonstrate that the Néstor government was, in macroeconomic terms, the best in Argentine history from 1930 onwards and also allowed a government for the first time to cancel the debt with the IMF for some 10,000 million Dollars.
Rather than asking ourselves what are the causes of such a high inflation rate, the question one could ask is Why was inflation so low in Argentina between 1991 and 2001 and between 2003 and 2007?.
In this regard, it should be noted: the maintenance of a single and free fixed exchange rate scheme together with a balanced macroeconomy, a free price system, a free foreign trade market without interventions and a BCRA with positive net worth.
The inflation numbers from last February make it clear that the inertial inflation that Argentina entered since 2014 will be very difficult to reduce in the coming months and in a very complex local context and with a very uncertain international financial scenario where, apparently , the systemic banking risk for now remains.
