Uruguay and Argentina among the ten countries worldwide with highest inflation

Sunday, January 8th 2012 - 05:36 UTC

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President Mujica has warned familias about growing indebtedness and ‘plastic credit’

Inflation in Uruguay was not only far above target domestically but also figures among the ten highest in the world, and in Latam only behind Argentina and Venezuela

Uruguay ended 2011 with 6.8% inflation, above the target range of 4% to 6%, which nevertheless completes a seven year period below two digits, the longest since stats started back in 1939.

However Uruguayan economists are divided as to the future approach: some believe it’s not so important the actual percentage increase but the fact that the acceleration of prices is under control. They argue that in a global volatile environment it’s not necessarily advantageous to strictly implement “monetary policy”.

Although monetary policy helps contain prices it also slows the economy and job creation, and helps an increase in imported goods and services because a stronger currency (and cheaper dollar) means Uruguayan goods (particularly with a high component of local costs) can loose competitiveness.

The other school believes it’s time to begin cutting government expenses, containing the budget deficit and salaries’ agreements so as to give monetary policy more flexibility. Anyhow they consider the current monetary policy “too expansive” and President Jose Mujica in his daily radio chats has warned families about over spending, “plastic credit” and increased indebtedness.

But in spite of the debate in Uruguay the fact is that before the rest of the world and even in Latam, Uruguay with 6.8% inflation ranked poorly out of 71 countries: eighth highest inflation at world level and third in Latam.

Venezuela leads (for the sixth year running) with an inflation of 27.6% (mainly food and textiles) followed by Argentina and including Bolivia. However Argentina’s data is questioned because the official index is 8.8%, but the so called Congressional index signals 22%, and is the reference for salaries, the private sector and judicial rulings.

Panama and Brazil (6.5%) missed the first ten, but figure in positions 11 and 12. Other rankings in Latam include Guatemala with 6.1%; Ecuador, 5.41%; Paraguay, 4.9%; Chile, 4.4% and Colombia, 3.73%.

Categories: Economy, Energy & Oil, Investments, Argentina, Brazil, Latin America, Mercosur, Paraguay, Uruguay.

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ChrisR
The fiscal drag of the government employed Uruguayos is the root cause of the problem.
While people are employed by the government they do not contribute to the country in the form of income tax: and yes, I know they pay tax, but WHO pays their wages to pay the tax - the employed do, no-one else.
What is really needed are a few lessons from Brasil in encouraging manufacturing and other wealth producing industries / sectors. Every 10% reduction in goverment employees WHO ARE GAINFULLY EMPLOYED IN THE PRIVATE SECTOR (and yes I know that is difficult but think it through) means a 20% reduction in fiscal drag.
The UK are going the way of Uruguay and it is costing the actual productive workers their savings growth, if they can save at all.
I know this will be very unwelcome by goverment employees but it needs facing.
Jan 08th, 2012 - 02:55 pm 0
ElaineB
I think the UK government are making a lot of job cuts. It is part of the reason for the protesting that we have seen from time to time recently. They had to move away from New Labour's spend, spend, spend policies and whilst it is painful, the majority accept NL policies were unsustainable. If you borrow, you have to pay it back. NL borrowed to pay for their populist policies and now we have to make cuts to continue paying our loans and to keep our reputation as a good credit risk. One area that will see huge cuts is the public sector.
Jan 08th, 2012 - 03:23 pm 0
ChrisR
2 ElaineB

I wish it were the case that cuts were being made but you only have to look at public spending.

It should have been going down by now and in fact, it is still going up!

Difficult to understand that if cuts are being made and even Osborne has admitted that 'cuts have yet to take effect'.
Jan 08th, 2012 - 06:25 pm 0

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