June 19, 2013
2012: the end of single-digit CoL
A summer week even quieter than usual with the presidential absence in Asia nevertheless contains a historic first — for the first time since being submitted to government manipulation in early 2007, INDEC has admitted to annual double-digit inflation, quantifying the 2012 rise in the cost of living at 10.8 percent. Not that INDEC is suddenly coming clean — the 10.8 percent figure is less than half the 25.6 percent average of all private estimates (as announced by opposition deputies from the safety of Congress) while the December inflation figure of one percent contained such contortions as food prices rising only 0.2 percent in order to absorb transport and healthcare increases (the main culprits for the highest INDEC figure in 31 months, weighing in at 3.8 and 2.2 percent respectively) without going through the roof. According to INDEC, the monthly shopping-basket for the typical family (two parents and two children) costs 719 pesos while a person needs to earn just 522 pesos in a month to remain above the poverty line.
There seems no reason to expect any deceleration in inflation this year and not only because there will be crucial midterm elections in spring. Inflation feeds the illusion of growth because nominal expansion of the economy can always be presented as the real thing. The state is a prime beneficiary — the so-called “inflationary tax” really is that because it swells government revenues, as well as punishing private incomes. Not that this erosion of purchasing-power automatically halts the consumer boom because with no faith in the peso and with alternative currencies restricted, the natural tendency of most people is to spend a money which is seen as having less value than almost anything it could buy. The surge of the “blue” dollar is both a symptom and cause of inflation — not as marginal in its impact as the fractional percentage of the informal exchange market within financial transactions might suggest because the global currency tends to be a benchmark for prices. Nor is there any sign of the monetary policies feeding inflation changing in an election year — the temptation to regard the Central Bank as one vast ATM is too great and the government can confidently be expected to finance its fiscal deficit by printing more money.
By any standards other than INDEC, 2012 marks the year in which Argentina edged out Venezuela to lay claim to the highest inflation rate in the region — will 2013 now see a bid for world supremacy?