Monday, September 26

Inflation in Argentina could approach 100%, according to deputy


Key facts:
  • Espert regrets that the government is not making any effort to reach an agreement with the IMF.

  • “There is no place for shortcuts or for tying with wire,” says the deputy.

If an agreement is not reached with the International Monetary Fund (IMF), «it will cause an acceleration of prices that can lead to inflation [interanual] almost 3 digits. So said yesterday, January 18, the national deputy of Argentina, José Luis Espert.

In a radio talk, the representative of the Province of Buenos Aires for the block Avanza Libertad, explained that, in case of reaching an agreement with the IMF, the inflation numbers would not be very encouraging either. “With agreement with the Fund we have a floor of 50% and, perhaps, a ceiling of 70% inflation.”

The liberal economist regrets that “the agreement with the IMF is not at the top of the agenda” of the Argentine government. He adds: “here we have to start doing things that are very different from what we are doing, because there is no room for more shortcuts or for tying with wire.”

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The agreement with the IMF to which José Luis Espert refers is related to the payment of the external debt. Argentina asks the international organization for more time to return the more than USD 40 billion it owes for the loan requested in 2018.

To agree to negotiate this, the IMF requires the Argentine State to reduce its fiscal deficit and suggests an economic adjustment program. According to the government of President Alberto Fernández, doing so would hamper growth. For this reason, the negotiations are stalled.

Inflation: A Monetary Phenomenon

Asked about the significance that liberal ideas (economic doctrine that promotes the free market and minimal state intervention) are having among Argentines, Espert said:

«Liberalism is becoming important now because the failure of Argentina, at the hands of populism, in the last half century has been resounding. The debate has always been so far to the left that ours appears for what it is: the only real alternative outside the crack».

José Luis Espert, national deputy of Argentina.

The growth of liberal ideas in Argentina, and its greater presence in legislative areas, was reported by CriptoNoticias a month ago. On that occasion, this medium reviewed the speech of the also deputy Javier Milei (from the La Libertad Avanza bloc), who explained in Congress that “inflation is always a monetary phenomenon”, as expressed by Milton Friedman, referent of the economic school of Chicago.

For the Argentine case, a graphic elaborated by the economist Federico Alonso, shows the coincidence between the increase in the monetary base (that is, the issuance of pesos) and the increase in inflation:

Inflation shows apparent correlation of inflation with the growth of the monetary base in Argentina. Fountain: Federico Alonso/ Twitter.

Who does not think the same way is the president of Argentina. The president maintains that Inflation is a multicausal phenomenon that includes —as said recently– psychological factors.

Be that as it may, the truth is that living in Argentina is becoming more and more expensive. According official statistics, the consumer price index (CPI) had an interannual increase of 50.9%. The National Institute of Statistics and Censuses (INDEC) projects that, by 2022, inflation will be around 55%.

Dollar, bitcoin, CEDEAR, stablecoins… alternatives to flee from the Argentine peso

In this scenario in which a good future is not in sight, Argentines with savings capacity (a minority sector in a country with more than 40% poverty) are looking for ways to escape the constant debacle of the peso.

The most traditional methodology, the purchase of dollars, is restricted by government impediments. In the South American country it is forbidden to acquire more than USD 200 per month in the Single Exchange Market (and, in addition, you have to pay taxes to do so).

Within the stock market, CEDEARs are positioned as the preferred option. These are shares of other countries that are listed “wrapped” in the Argentine stock market, as if they were national shares. Although they are valued in pesos, their value follows that of the original share in dollars.

For those who want to enter the world of cryptocurrencies, bitcoin (BTC) is always the favorite option. It is a highly volatile asset in the short and medium term, but it has reported large profits to those who have been able to maintain their holdings longer.

The defined monetary policy of Bitcoin, with a limited maximum currency (unlike fiat money that can be printed indefinitely) and an issue that is reduced every 4 years, makes many think that the upward trend in its price will continue.

Too stablecoins are gaining more and more popularity. These are cryptocurrencies —or rather, tokens— that maintain price parity with that of another financial asset (usually the US dollar).

Stablecoins are a way to dollarize so that the devaluation of individual purchasing power is less. It is worth remembering that the US currency also loses its value, as this medium has reported on several occasions.

For the reader who wishes to consider purchasing bitcoin, stablecoins, or other digital assets, CriptoNoticias has prepared a guide on the Argentine platforms that allow it to be done.





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