Spiralling inflation and a plummeting peso have left the economy unravelling at an accelerating pace.
In times like these in Argentina, prices are one thing you cannot guarantee.
Ask Diego Barrera and Claudio Cayeta, who own a small aluminum and glass shop in the Buenos Aires neighbourhood of Palermo.
The business partners spent two weeks last month navigating a virtual paralysis because of the volatile economic situation gripping the country, unable to source the material they needed, and as a result unable to quote prices to their customers.
“Our providers won’t give us anything because the [United States] dollar goes up every day, so they don’t want to lose money,” said Barrera, 43, whose stock has dwindled as the uncertainty around them climbs.
“I understand because the same thing happens to me,” he said. “I’ve already lost money on the prices that I quoted some of my customers.”
This reality has become alarmingly common in Argentina, with its economy unravelling at an accelerating rate. The rising value of the US dollar is actually a measure of the plummeting value of the Argentinian peso, which sank by as much as 25 percent on the black market over the month of April. On April 25 it hit a record low, grazing 500 pesos for one US dollar at the unofficial rate, the one that is most often used as a benchmark for average Argentinians because currency controls limit how much they can buy at the official exchange rate.
With inflation at more than 104 percent over the last 12 months, according to official statistics, it is increasingly difficult to know what anything is worth, let alone budget for everyday items. Food prices alone jumped an average of 10 percent in March over the previous month in the Greater Buenos Aires region — fruits and vegetables around 15 percent; eggs 25 percent.
Raw materials, like the ones Barrera and Cayeta work with, are also impossible to predict, because the prices rise and fall with the value of the currency. The price of glass went up 10 percent mid April, said Barrera, and his provider advised him of a second increase by the same amount two weeks later.
All of this has fuelled a climate of political instability during an election year. The deeply unpopular President Alberto Fernandez formally announced he would not seek re-election, and later blamed the depreciating currency on rumours and speculation driven by right-wing politicians.
In a tweet, Economy Minister Sergio Massa said he would use “all the tools of the state to order this situation”, and that included redefining the terms of a controversial agreement with the International Monetary Fund (IMF) to pay back a $44bn loan.
After the Central Bank of Argentina intervened and traded bonds on April 25, a move contrary to its agreement with the IMF, the unofficial exchange rate plummeted to 460 pesos per one US dollar. Argentina also announced that it would start to pay imports from China with the yuan, rather than the dollar, a move that will help safeguard its greenback reserves.
But on the street, the damage from the volatility has already been done.
‘Hunt for the best price’
“Don’t ask me how it is that I adapt, but somehow I manage to do it,” said Emiliano Espindola, 47, as he mixed feta cheese with spices, tomatoes and cucumber in the back of a Middle Eastern take-out shop. He’s a cook in Belgrano, an affluent part of Buenos Aires where, he noted, people were perhaps insulated from the financial volatility of the week. But not him, a worker, who commutes an hour and a half each way by bus from the outskirts of Buenos Aires so he can provide for his adolescent daughter. Espindola will pick up odd jobs as a construction worker to make ends meet.
“I’m just always on the hunt for the best price, but at the same time reducing my costs,” he said. “In general, the economic pain is across the board. The cost of the bus ticket goes up every month. And let’s not even talk about groceries. One week you have one price, the next week you have another.”
For Yolanda Gonzalez, a 53-year-old nurse and the main breadwinner in her home, the solution is cutting back on the number of meals her family eats. They can’t replace their clothes, and they limit their outings to ones that are free, such as a sunny afternoon in the park, with the traditional yerba mate infusion as a companion. “You work 24 hours, and it’s not enough, you work 30 days and it’s not enough,” she said.
Argentina has spent most of the last 12 years either in a recession or stagnant, said economist Martin Kalos, a director at the Buenos Aires-based firm EPyCA Consultores.
The latest figures from 2022 show poverty afflicts nearly 40 percent of the population, and one out of every two children live under the poverty line, according to the national census collector. This crisis is one that dates back four decades, with the gradual erosion of the country’s productive capacity, and the widening gap between rich and poor.
“Argentina needs to urgently recover its growth, but first it needs an economic stabilisation that it hasn’t been able to achieve,” said Kalos. “Argentina’s inflation rates are not only above 100 percent, but they are moving faster, and we don’t know how close they will get to 130 or 150 percent in the next year.”
Argentina’s government has turned to price-fixing schemes to try to soften the blow of ravenous inflation, hammering out deals with big grocery store chains. But even these programmes have their limitations — supply varies from store to store, and smaller grocers are outside of the price-fixing agreements, and have to stock their shelves at wholesalers, making it impossible for them to compete with the cheapest price on offer.
The incessant rise of prices means that cheaper brands of products are flooding the market.
Victoria Alcober holds out a handful of “unofficial” cigarette packets that she started offering at her small grocery store in the city of Ensenada, about one hour from the capital of Buenos Aires. It was her own clients who alerted her to the packs, which cost about one-third the price of the bigger, better-known brands.
“As a merchant, you have to go looking for them because it’s what people are buying today,” she said. “There are a lot of alternative brands that they’re using now because of all the price increases.”
Argentinians are also looking for political alternatives. Presidential and legislative elections will occur in October, and the deepening recession has resuscitated radical positions, including ditching the peso altogether and using the US dollar as official tender, a proposal that is pushed in particular by libertarian candidate Javier Milei.
Barrera, the glass store owner, is deeply frustrated and exhausted by day-to-day financial uncertainty and the inability of the political class to rein in the chaos. But he fears that such extreme positions as the dollarisation of the economy will only make matters worse, and he worries that good leadership alternatives will not materialise. “The iron is hot now,” he said. “They know they’re going to get burned.”