Inflation falls to single digits in Argentina, but citizens’ pockets continue to suffer

The ultraliberal government Javier Milei shows as an achievement the progressive deceleration of the inflation, the biggest economic problem Argentina and that he proposed to eradicate since he assumed the presidency in December.

But Lidia Pacheco continues to search every week for the few vegetables that are usable among the waste of a Buenos Aires market and no longer buys the yerba mate with which she prepared the traditional infusion of the South American country, one of those that suffers the highest rates of inflation in the world.

“Food is still expensive. I don’t have enough money and I live on vegetables.”Pacheco, 45, told The Associated Press. The income that the woman obtains from the sale of used clothes is barely enough to survive and she must go three times a week to an open-air fair located in the Central Market to take the vegetables and fruits that the sellers throw into a container. “Here I am saved,” He added while carrying some bags with remains.

Leonardo Buono, who was shopping at a nearby stand, said he stopped consuming beef. Claudia Luna pointed out that she has become a “deal hunter” and who walks long distances to find the cheapest business. For her part, Alicia Almeida must exchange every month the reais she saved in Brazil, her native country, to cover the costs of the supermarket and the rent for her home in Buenos Aires.

“It still feels expensive… I don’t know how the people who live here make ends meet,” said Almeida, a 24-year-old student.

In April, Argentina registered an inflation of 8.8% while the interannual variation was 289.4%, The National Institute of Statistics and Censuses reported on Tuesday.

The data pleased the authorities because it is the first time in six months that the inflation rate is in single digits.

The April figure was below the eleven% of March, the 13.2% of February and 20.6% January, with which the Milei government confirmed the trend towards price deceleration that it promised to undergo this year.

The Ministry of Economy attributed the progressive slowdown in prices to the orthodox economic stabilization program, whose pillars are fiscal balance, the cleaning up of the Central Bank’s balance sheet and the implementation of deregulation and cost reduction measures for the private sector.

He added that, in less than five months, the country managed to transition from a “with unanchored expectations and a high risk of hyperinflation, one that has generated the conditions for the reappearance of long-term mortgage credit”.

But Argentines can hardly join the government’s joy after years of constant overheating of prices and collapse of their income.

Other buyers consulted by AP recognized a drop in the prices of some foods such as sugar, drinks and appliances in the last two months, but they noted that this has not had a significant impact on their pockets, since other expenses, such as Public service rates have skyrocketed.

“I work in a refrigerator delivering cold cuts and something is noticeable; I look at the bills and what was expensive last month has now gone down.”said Miguel Padulo, 68 years old. “But I take care of myself all the time, I turn off the lights that are left on in my house, I work 12 or 13 hours and look for the best price”he explained.

Despite having forced himself to tighten his belt, Padulo was optimistic because “Milei was lowering inflation in five months”.

The price reduction that merchants implemented in certain sectors takes place at a time when Argentines consume the bare minimum.

In April, retail sales of small and medium-sized businesses fell 7.3% while they accumulated a drop of 18.4% in the first quarter of the year. Compared to March, they rose by 1.6%according to the Argentine Confederation of Medium Enterprises.

Signs of slowdown abound. Between January and March, the consumption of beef—once a sacred food in Argentina—was 17.6% lower than the same quarter of 2023, due to the increase in its value.

Economist Camilo Tiscornia attributed the collapse of the population’s purchasing power to the fact that Argentina has not grown for more than a decade.

“Their GDP (Gross Domestic Product) is more or less the same as 11 years ago. In these conditions it is very difficult for people’s purchasing power to improve sustainably and I would tell you that in the last five or six years it has been falling,” explained Tiscornia, from CT Economic Advisors.

The analyst pointed out that the price controls and subsidy policies implemented by the previous government of Alberto Fernández (2019-2023) to preserve a certain level of purchasing by the population were “distortions” unsustainable and that the Milei government decided to open prices in search of greater economic efficiency.

“But your purchasing power, even though inflation is falling, is severely damaged. Because they are telling you things that had been swept under the rug for several years and you also have the effects of the economic recession… people are very hard hit,” noted the economist.

The purchasing power of the average salary fell by twenty% in February compared to the same month of 2023, which is the latest data available, Tiscornia indicated. Meanwhile, the drop in the first three months of Milei’s government was 16%.

Shortly after assuming the presidency, Milei launched a plan to sharply cut spending that included thousands of layoffs in the public administration and the suspension of infrastructure works. In turn, he reduced subsidies to public transportation and the energy sector, resulting in increases in train and bus tickets and electricity, gas and water rates.

According to analysts, Argentines will be able to improve their purchasing power when the economy reactivates.

Along with that of Haiti, the Argentine economy was one of the hardest hit in the region in 2023, with a contraction of 2.5% of its GDP. About 41% Of the more than 46 million inhabitants of the South American country are in poverty and international organizations predict that the economy will fall more than 3% this year.

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