With an economy minister as presidential candidate, and now with an economist as president, the issues that dominated Argentina's election campaign – such as inflation, the dollar, employment or foreign exchange restrictions – continue to be ever present in speeches and the media.
The following are some of the hot topics most discussed in 2023, which will surely remain high on the political agenda in 2024.
1. Inflation and prices: from regulated to free and 'voluntary'
According to data published by the INDEC national statistics bureau in November, the year closed with an inflation rate of 160-percent year-on-year.
The December figure will be disclosed in mid-January, but consultancies already estimate an annualised rate above 200 percent, boosted by sharp increases and “more honest” prices this month. In December it is expected that prices rose between 25 and 30 percent, and according to comments by such economists as Orlando Ferreres to PERFIL, in 2024 it could reach 300 percent.
As a mechanism to attempt to contain the hikes, the Precios Justos (Fair Prices) price-control programme had several stages in 2023. In May the programme tried to reach neighbourhood shops, with a similar agreement with supermarkets.
However, retailers assured that those products were nowhere to be found, particularly outside Buenos Aires. They even reported shortages.
The last stage of the programme, to last until December 31, ended the practice when the “more honest” prices started after December 10: in a week the price of some basic foods rose by over 150 percent.
On December 26, the Argentine Chamber and Federation of Supermarkets announced in a release stating that, after meetings with authorities from the Secretariat of Commerce and Consumer Defence, they would “voluntarily and temporarily” apply a 20-percent discount in the prices of 20 products in the basic food basket for 60 days.
In addition, starting in January, the reduction in subsidies and the estimated 40-percent increase in private health insurance will push rates upwards.
2. The dollar and dollarisation
The year started with the official dollar at 184.12 pesos and the parallel “blue” rate at 347 pesos. By the last week of December, the official dollar was over 826 pesos and the “blue” over 1,025 pesos.
There were two great devaluations in between: on August 14, the day after the PASO primaries, the former economy minister and then candidate Sergio Massa authorised a 22-percent rise in the value of the official exchange rate, which went from 299.51 to 364.60 pesos. On December 12, two days after Javier Milei’s inauguration, new Economy Minister Luis Caputo announced that the official dollar would go from 400 to 800 pesos – that is, a 100-percent rise.
Regarding the possibility of shuttering the Central Bank and dollarising the economy – and given the doubts that those two promises in Milei’s campaign have been left behind – Caputo ratified that “it’s clear that they can’t be the starting point, but they can be the arrival point."
3. Employment, salaries, poverty and destitution
According to the latest INDEC report, dated September, poverty affects 40.1 percent of the population, and destitution 9.3 percent. For the prestigious UCA Social Debt Observatory, in the third quarter poverty reached 44.7 percent of the population and destitution 9.6 percent.
One of the most relevant topics within these figures was the “infantilisation of poverty”: according to the same source, it affects 62.9 percent of the country’s children. Another reality is that many people, albeit employed, are poor.
Unemployment dropped to 5.7 percent in the last quarter of the year, but while prices rose by 160 percent year-to-year, salaries in the recorded private sector grew by 144 percent, and in the non-recorded sector by 97.6 percent.
The loss of purchasing power of salaries was also reflected in a significant reduction in the number of retail sales. According to the Argentine Confederation of Medium-Sized Enterprises, in November sales fell by 2.9 percent compared to the previous year, which is explained especially by the decrease in demand for food and beverages.
4. Money printing, interest rates, foreign exchange restrictions and Leliqs
Ever since he was inaugurated, President Javier Milei announced that one of his priorities would be to solve the “Leliq issue”, the liquidity notes issued by the Central Bank tendered by private or state banks, so far used by banks to hedge fixed-term deposits, as they offered yield rates similar to 28 days. The Central Bank applied this instrument to reduce the amount of pesos in circulation.
The Leliq issue, whose solution the Government believes should be the step prior to the elimination of foreign exchange restrictions, is related to their number: every time it was necessary to print more money to pay for the interest accrued, which helped feed into inflation.
As a result of inflation, the government is assessing the printing of 20,000-peso and 50,000-peso notes, while it reduced interest rates for fixed-term deposits to 110 percent.
The Alberto Fernández administration, after several claims by banking institutions and shopkeepers, decided to issue a 2,000-peso note, so far the largest denomination in Argentina. It had also updated the interest rate, which until its current modification was 133 percent and became the highest in the world.
5-Fiscal deficit and IMF debt
One of the topics faced by the Government before it was inaugurated was the possibility of renegotiating the debt, terms and rates agreed on with the IMF.
As stated by President Javier Milei, the agreement is “fallen” and the body sees the members of its administration “as heroes” for proposing to arrive at zero deficit. The head of state also asserts that there is a possibility of a new disbursement for Argentina, something Caputo later denied via his X social media account.
In December, the Government paid a maturity to the tune of US$920 million, for which it resorted to an extraordinary loan from the Development Bank of Latin America and the Caribbean (CAF). Combatting the deficit is still the Government’s main concern, something it used to justify the elimination of subsidies, the suspension of public works and other measures announced and contained in Urgent Decree 70/2023.
Without a doubt, the terms in which it intends to solve the “public emergency in economic, financial, fiscal, administrative, social security, tariff, health and social matters” decreed until December 31, 2025 will be up for debate in 2024.
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