A report by the consulting firm Iván Carrino y Asociaciones (ICYA) suggests that Argentina could once again have single-digit inflation in 2031, based on the experience of 27 countries that had an annual evolution of prices in the economy of between 82% and 200% annually.
“In the joint analysis, the data indicates that the countries that managed to lower inflation achieved success in an average time of 9.5 years, or 9 years and 6 months. Projecting this figure to the Argentine case, we could say that, by the middle By 2031, the country will reach one digit of annual inflation that it will be able to maintain for at least the next three years, until 2034,” the report states.
The countries that were taken into account were: Ecuador, Sao Tomé and Principe, Sudan, Cambodia, Lebanon, Mongolia, Albania, Belarus, Jamaica, Peru, Romania, Turkey, Uruguay, Poland, Sierra Leone, Angola, Guinea-Bissau, Mozambique , Uganda, Russia, Israel, Mexico, Serbia, Moldova, Zambia, Ghana and Costa Rica.
Of all these countries, the one that took the least time to overcome inflation was Ecuador, dollarization in betweensince it took two years while the one that took the longest was Costa Rica, with a record of 27 years.
“We define a ‘successful disinflation process’ as one in which, after having achieved an inflation rate between 80% and 200% per year in a given year between 1980 and 2022, three consecutive years of an inflation rate are reached one digit,” the report explains.
Most of the countries that managed to lower inflation took a little more than nine years
It states that “the range of 80% to 200% was chosen to find inflationary ratios similar to those of Argentina (which ended 2022 with 94.8%) and, also, to exclude hyperinflations from the analysis, due to the evidence of that -paradoxically- it is “easier” to reduce inflation once hyperinflation is unleashed, as shown by the Argentine case of 1990″.
ICYA states that “a recent study by the International Monetary Fund (IMF) explains that, in Latin America, starting in the 1990s, inflation ‘was relegated to the history books’ in most countries.
“The study finds that the cause of success were the monetary reforms carried out by them, including Argentina, Ecuador, Chile, Peru, Mexico and Brazil, among others,” says the work.
Key elements of an economic plan to lower inflation
The elements that successful economic plans had in common were:
-A new narrow mandate for the Central Bank focused on the stability of the purchasing power of the currency.
-Independence and autonomy for the Central Bank, where the monetary body would not only set its objectives and shield itself from political pressure, but, in many cases, direct financing of the treasury deficit was “strictly restricted or directly prohibited by constitutional mandate in Chile, Colombia, Ecuador, Guatemala, Mexico and Peru, among other countries”.
-Finally, greater transparency, with central bankers forced to appear before Congress and before society for their measures, achievements and failures.
