Argentina has inflation of a dictatorship, which will continue with Milei but with another model

Argentina ended 2023 with the highest inflation in the world, 211.4% annually, and is on track to repeat triple digits in 2024; but this time under the Libertarian Government Javier Mileiwho aims to eradicate the model of authoritarian regimes in Latin America to bring it to that of “free countries”.

That is, at least, what the director of the consulting firm Econometrica, Ramiro Castiñeira, considers, in which he says that ““Argentina has inflation levels and an economic policy of a dictatorship, like Venezuela, like Cuba”so, in his opinion, “It is a consequence of having copied the economic model that is only applied in dictatorships, such as prohibitions and stocks that restrict the level of activity and lead to an inflationary process.”

The economist states that “Argentina copied the dictatorships”because the Peronist administrations applied exchange controls, price controls, and foreign trade controls, as non-democratic governments do on the continent.

Instead, Milei looks for “copy the economic policy of free countries”he says, since the new president presented a megadecree and a ‘omnibus law’ that deregulates the economy and achieves fiscal balance.

Castiñeira not only compares Argentina’s inflation with the three digits suffered by Venezuela and Cuba, but they are countries in which the official data is also doubted, as happened with those released by the official Argentine statistics institute during the Administration. by Cristina Fernández (2007-2015).

Monthly inflation in December rose to 25.5%, due to the strong monetary issue that the Central Bank made to finance the fiscal deficit, in a context of negative net international reserves.

In addition, the so-called ‘honesty’ of prices at the end of the electoral campaign and the 50% devaluation of the value of the peso carried out by the Milei Executive as soon as he took office, on December 10, had an influence.

After this devaluation, prices in Argentina rose by 1% daily.

But the consequent depreciation of only 2% per month of the official exchange rate, below the projected inflation, is moderating the rise in prices, as Castiñeira explains, at the cost of the loss of exchange competitiveness, and now the inflation runs at 3/4% weekly.

“Prices are slowing down”says Castiñeira, because he observes in the first two weeks of January a “Noticeable slowdown” of inflation, which led him to lower the monthly projection to 20.5% – 50% between December and January – and he expects it to continue decelerating in February.

Their expectation is that the Government will continue to step on the rate of depreciation of the official exchange rate and take advantage of the opportunity to release it in the second quarter, when agricultural exporters liquidate the dollars from the gross harvest.

All in all, for 2024 it predicts inflation of 235.9% for Argentina.

Milei has said that monetary policy is two years behind, so the monetization of the fiscal red during the last two years of Alberto Fernández’s Presidency (2019-2023) will be reflected in high inflation in 2024 and 2025.

Castiñeira distinguishes Milei’s high inflation in that it will include the release of prices contained by the previous Peronist government, a 150% repressed inflation in the controls of the exchange market, public service rates and fuel.

“The Executive is proposing to dismantle the current economic model that led us to the current economic and social collapse,” in a country that exceeds 40% poverty and going towards “another economy of this century“, said.

If the decree of necessity and urgency (DNU) and the Law of Bases and Starting Points for the Freedom of Argentines, renamed by the press and public opinion as ‘omnibus law’, the first proposals from the Milei Executive, are approved, the path is consolidated; But if not, Castiñeira agrees with the president that the country is heading towards hyperinflation.

Whether I achieve it or not, in 30 days Milei did “a lot” to disarm the “corporate, quasi-fascist economic model that copied dictatorships” for one where freedom counts, concludes the economist.