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Argentina's 2017 inflation expected to reach 19.7%, reveals Central bank poll

Saturday, November 5th 2016 - 10:00 UTC
Full article 22 comments

Argentina's consumer prices will rise by 19.7% in 2017, according to a central bank poll of 56 economists published this week, a slight drop from median expectations in last month's survey but still higher than the central bank's target. Read full article

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  • Marti Llazo

    And 19.7 percent inflation is something to be proud of?

    Maybe if you're used to 40 percent.

    25-28 percent is closer to realistic.

    Nov 05th, 2016 - 01:11 pm - Link - Report abuse 0
  • Skip

    Yeah yeah Fred. We get it, you hate Argentina.

    Nov 05th, 2016 - 02:00 pm - Link - Report abuse +2
  • CapiTrollism_is_back!!

    All I know is that my once a year vacation while still fairly long at a healthy 6 days could have been longer had inflation this year not been so high. There is still a chance I can add 4 days and have an amazing 10 day yearly holiday, but that depends on bonuses.

    Nov 05th, 2016 - 02:44 pm - Link - Report abuse 0
  • shackleton

    Any economists reading this..? Please explain this paradox....

    How is it that - since Macri “floated” the peso a year ago there has been inflation of at least 40%, yet the Peso remains more or less where it was after the devaluation, around 15 to the dollar, despite the dollar gaining against virtually all other currencies. When I compare the cost of basic goods here to (for example) South Africa (a similar economy in many ways) and find them to be 50-100% higher in Argentina - why hasn't the value of the peso gone way below 20 if not 25..? It seems to defy all economic logic.

    Nov 05th, 2016 - 03:10 pm - Link - Report abuse 0
  • CapiTrollism_is_back!!

    The Peso has actually gained in value significantly over the last few months, as has Argentine GDP, because having accumulated 20-25% inflation (both prices and salaries, though obviously prices more than salaries) since the currency has been stuck at 15, means the currency has de facto revalued 20%. For Argentines prices have gone up, but for foreigners the whole country has become 20% more expensive since you still get the same amount of pesos as 9 months ago yet prices are significantly higher.

    Nov 05th, 2016 - 03:28 pm - Link - Report abuse 0
  • Marti Llazo

    “......50-100% higher in Argentina - why hasn't the value of the peso gone way below 20 if not 25..? It seems to defy all economic logic.”

    That is right -- defies conventional logic. But the dollar is freely exchanged now. And the strength of the dollar here helps only those using dollars to buy goods outside the country. Argentine goods remain way too expensive to be competitive (except for agro, which is market driven, although the agro dollars have the effect of being able to buy less and less here inside the country, so the purchasing power of the peso is way down ). And all this talk about coming big reductions in inflation ... mostly pipe dreams.

    Nov 05th, 2016 - 03:48 pm - Link - Report abuse 0
  • ElaineB

    @ Skip. I don't think it's Fred. He left Argentina and throws stones from D.C. He was never that articulate either. JMO

    Nov 05th, 2016 - 04:34 pm - Link - Report abuse +1
  • DemonTree

    @ shackleton
    I don't understand it either. If the price of everything else in pesos has gone up, why has the price of dollars stayed the same?

    @ Capi
    Does that mean you actually do have a job, if you're expecting a bonus? :)

    Nov 05th, 2016 - 04:48 pm - Link - Report abuse 0
  • chronic

    OldBag/ozzer: You're collectively (and severally) clueless.

    ML doesn't hate rg - just its behavior.

    Nov 05th, 2016 - 05:38 pm - Link - Report abuse -3
  • shackleton

    @ CapiTrollism_is_back!!

    “The Peso has actually gained in value significantly over the last few months, as has Argentine GDP, because having accumulated 20-25% inflation”

    Your “facts” are all totally wrong -

    1) the peso has NOT gained in value, it has stayed the same
    2) Argentine GDP has fallen in the past year, and will continue to fall next years
    3) Inflation over the past year has not been 20-25%, it has been 40-50%.

    Are you Cristina in drag..?

    Nov 05th, 2016 - 06:28 pm - Link - Report abuse 0
  • CapiTrollism_is_back!!

    You obviously are utterly clueless about how real economics work.

    Go back to school.

    The Peso has gained in value. There are more ways than one a currency can gain or lose value, the nominal number on the exchange rate just being one of them.

    Again let me make it simple for your small memory. I make 100 pesos and it takes me 100 pesos to eat.
    You make 10 pounds. 10 pounds gets you 100 pesos when you visit argentina.
    I get 10 pounds for my 100 pesos.

    A year later, prices in Argentina have risen 50%. My salary was increased 50%. Which means I make 150 pesos and must spend 150 pesos on the same products from a year ago.

    You still make 10 pounds and get 100 pesos for them... but now you need 150 pesos.
    I give my 150 pesos, so now I get 15 pounds, since the rate has not changed.

    So for you, Argentina a year later is much more expensive.

    For me foreign countries including yours are cheaper than a year ago.

    In the international market, a devaluation lowers the GDP weight of a country. But inflation within a country reflates it. That is why is called INFLATION!!

    If the currency of that country keeps trading at the same value without reflecting the internal price and wage inflation, that economy's weight in the world economy is in fact increasing.

    Simple.

    Nov 06th, 2016 - 12:12 am - Link - Report abuse -3
  • DemonTree

    @ Capi
    That can't be quite true, since you said you may have to cut your holiday short due to inflation. I'm guessing wages are not truly keeping pace with prices in reality.

    What I don't understand is why the peso is gaining value. Argentina is in recession right now, and normally inflation ought to affect the exchange rate. In fact it would appear to be better for the country if it did as you could get more money from tourism and exports, and people would stop going to Chile to buy things cheaper.

    Anyway, if the peso is up and the pound down, now would be a great time for you to visit the UK. :)

    Nov 06th, 2016 - 01:15 am - Link - Report abuse +1
  • Marti Llazo

    Argentina thrives on an inflated sense of worth. We see here a belief that an economy based not on the production of goods and services but on the printing of ever-larger denomination bills backed by high-interest indebtedness is the path to increased national wealth. The house-of-cards euphoria is typically short-lived, and often ends with the dawning realisation that the party is over and no one will lend them any more money.

    Nov 06th, 2016 - 02:58 am - Link - Report abuse +3
  • CapiTrollism_is_back!!

    Like i said, i kep the example simple. Of course wages never really keep up with high inflation, and of course the real numbers are more complicated. The point was to illustrate why it is that Chileans and other latins find Argentina so expensive, why other foeingers find it a bit overpriced, and why Argentines still find many overseas things cheaper.

    Nov 06th, 2016 - 06:09 am - Link - Report abuse -2
  • ElaineB

    TTT, the over-pricing you refer to has a lot more to do with the fondness of Argentines to nick as much money off tourists as possible. You know there are local prices and tourist prices for the same goods and services. They even display the prices that way in some provinces. If tourists are happy to part easily with their money, you can't really blame the locals. I suspect they find things so cheap they don't mind a little local 'taxing'.

    Nov 06th, 2016 - 07:27 am - Link - Report abuse +1
  • Marti Llazo

    Part of the appearance of high prices here for tourists, other than the usual gouging, involves one of the things Argentina has become famous for: comparatively high levels of taxation.

    Why, just the other day, an article here on the topic explaining how the tax portion of a hotel or restaurant bill can be up to 40 percent. Not unlike the civilised countries, but rather uncommon in Letrine America :

    http://www.lanacion.com.ar/1950121-los-impuestos-clave-en-los-altos-precios-de-hoteles-y-restaurantes

    Observe the “ Eco-tourism tax” in addition to other taxes. And then reekie complains that people are taking their holidays in Chile and Uruguay and leaving the argie tourism business in the dumps.

    According to this article's citing of the Instituto Argentino de Análisis Fiscal : the tax component for large hotels is about 39.3% of the final bill to the consumer. For small hotels, about 36.7%. For large restaurants 39.7%. For small restaurants 37.9%. Gotta pay for all those social programmes and “free” university education and “free” healthcare for nonresident foreigners here somehow. Small wonder so much commerce here is done off the books.

    Nov 06th, 2016 - 10:53 am - Link - Report abuse -2
  • chronic

    This is the essence of the matter.

    With so little of the economy conducted in the white it is impossible to determine the immediate direction of it from tax receipts.

    Nov 06th, 2016 - 02:16 pm - Link - Report abuse -1
  • DemonTree

    I finally found an article that at least partially explains the situation:

    http://www.buenosairesherald.com/article/219992/peso-posts-monthlong-strengthening-streak

    In summary; more money in the form of borrowing and some investment has been flowing into the country since Marci settled with the vulture funds, and this helped strengthen the peso. There is also some money coming in from the 'whitewash' and tax amnesty on money hidden abroad.

    Plus the Central Bank has promised to keep interest rates above the rate of inflation, which makes it worthwhile investing in the peso. All this has meant it has mostly been rising against the dollar since March.

    It's interesting to see that the only big fall was due to the Brexit vote; I'm not sure if that was due to the dollar strengthening vs other currencies, but it does show Argentina is still affected by outside events.

    Nov 06th, 2016 - 02:41 pm - Link - Report abuse +3
  • shackleton

    “the Central Bank has promised to keep interest rates above the rate of inflation, which makes it worthwhile investing in the peso.”

    @Demon Tree
    Thanks for that link - its certainly a significant development which I was unaware of but it would not tempt me to want invest in pesos since the said interest rate is just barely above the inflation rate (if that) and the peso is so obviously over-valued - in terms of what it buys inside the country - and therefore seems headed for a steep sharp fall sooner or later.

    Can anyone name another country with a very high inflation rate whose currency has defied the laws of economic gravity and not nose-dived - if not on the official market, but certainly on the black market?

    Nov 06th, 2016 - 05:50 pm - Link - Report abuse 0
  • CapiTrollism_is_back!!

    “because of the Brexit vote”

    That's because a lot of the trading happens in London so obviously the locals always think they are the center of the universe and without them the galaxies stop shining and atoms stop spinning. But then it was discovered Brexit in the real world has virtually no effect on Argentina, nor does the American election, so the Peso has been doing it's own thing the last months even as the UK and US stock markets and currencies swoon from the sudden “emergingmaketization” of those formerly first world countries. Since American and British politics now have proven to have become as uncertain as emerging or third world country politics in that there no longer seems to be a steady course.

    Nov 07th, 2016 - 04:36 am - Link - Report abuse 0
  • Enrique Massot

    The numbers on the Argentine economy are so bad, the only way friendly media can prop the Macri government is with such unreliable data such as presented above, i.e. the inflation “economists think Argentine will have in the coming year.”
    Consumption is down, sales are down, unemployment soars, buying power dissolves, industrial activity plunges, and the promised “rain of investments” is not even a drizzle.
    This reminds me of the “second semester” story, more recently changed to “next year” promises.
    Meanwhile, Macri is taking foreign debt at record speeds.
    In one year, the country has piled up as much debt as the last military dictatorship did in seven years.
    The media, part of the judiciary and the main union groups are keeping this government in life support for now--but inevitably the breaking point will come.
    And Macri, his joyful revolution and his cheerleaders will become another sad memory in Argentina's history.

    Nov 07th, 2016 - 05:10 am - Link - Report abuse 0
  • Marti Llazo

    “....the country has piled up as much debt as the last military dictatorship did in seven years...”

    US$40 billion or so in new high-interest debt so far this year, giving both national and provincial governments the opportunity once again to spend like drunken sailors. Provinces with high deficits taking on more bond debt and paying 30 percent interest. And since people here know that pesos are becoming increasingly worthless for purchases within the country, they are converting to those borrowed dollars for purchases outside the country, while that same inflation makes Argentine products too expensive to be competitive in international trade.

    We all know how this is going to end.

    Nov 07th, 2016 - 11:53 am - Link - Report abuse +1

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