Argentina in the "storm" of inflation

Life has never been easy for the residents of Nueva Pompeya, a low-income neighborhood in the south of Buenos Aires, Argentina. Before the Covid-19 pandemic hit, Gimena Páez, 43, a resident of the neighborhood, eked out a living as a street vendor. Then she was forced to sell everything in her house when the Argentine government imposed strict social distancing measures to prevent and control the pandemic. Now, Páez spends most of her time trying to find a way to support her 11-year-old daughter.

Amid soaring inflation, finding enough food for herself and her daughter has become a daily challenge for Páez. “Sometimes I don’t eat so I can save some food for my daughter in the evening,” Páez told the Associated Press. “It’s painful not to be able to give my children what they need.”

Sharing the same concerns as Ms. Páez, Susana Martínez, 47, is also trying to save as much as possible. She often wonders how long the current situation will last. Recently, Martínez developed carpal tunnel syndrome. The pain forced her to see a doctor. “The doctor gave me a prescription and said to buy it. I said I don’t have enough money. I can only use the little money to buy milk for my daughter,” said Ms. Martínez.

Inflation is a problem that many countries are facing. However, in Argentina, it is a particularly serious problem, disrupting the lives of the people of this Latin American country. Argentina ranked second in the World Bank's ranking of countries with the highest food inflation in the world last year, with an inflation rate of 107%.

Lebanon is the country with the highest inflation rate of 352%. Recently, the National Institute of Statistics and Investigations of Argentina (INDEC) announced that the consumer price index (CPI) in this country in April increased by 8.4% compared to the previous month and increased by 108.8% compared to the same period last year, the highest level in more than 3 decades. According to INDEC, inflation in Argentina is continuing to accelerate strongly.

Faced with runaway inflation, Argentina's central bank was forced to raise interest rates to 97%. Policymakers hoped that raising interest rates to 97% would encourage investment in the country's currency. The high inflation has caused money to flee peso investments, causing the currency to lose 23% of its value against the dollar since the beginning of the year.

Argentina’s economic woes have been exacerbated by the impact of a severe drought on the country’s largest foreign exchange earner, the crop and livestock sectors. President Alberto Fernández’s administration is struggling to contain the country’s soaring inflation rate, but most of the measures taken have been ineffective.

According to a study by Argentina's Institute for Social, Economic and Public Policy Research, food prices rose an average of 10.5% per month in the first four months of the year in small stores on the outskirts of Buenos Aires, where most of the poorest residents shop.

The AP news agency said that the inflation rate in Argentina will certainly be an important issue in the presidential election in October. According to CNN, after the incumbent President Fernández announced that he did not intend to run for re-election last April, Argentine Economy Minister Sergio Massa was considered a potential candidate for this position.

Ahead of the election, Mr. Massa's biggest priority is to stop the peso's depreciation and rein in inflation. The outcome of Mr. Massa's campaign will depend on the effectiveness of his measures to control inflation.

LAM ANH

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