BUENOS AIRES — High inflation — a weakness of the Argentine economy for decades — is soaring again. Independent economists say inflation rose by 25 to 30 percent in 2010, the highest level since the calamitous 2002 devaluation that sent the economy into a tailspin. While a return to the kind of hyperinflation that swept Argentina in the 1970s and 1980s — when retailers sometimes updated prices hourly — seems unrealistic to most, inflation shows no sign of abating.
The economy minister, Amado Boudou, said in November that inflation was a problem of “the middle and upper classes,” and blamed companies for raising prices. Inflation “is not an issue of big proportions that the Argentine population is criticizing,” he said in a radio interview.
“It is clear that inflation weighs heaviest on Argentines on fixed incomes and especially those in the informal economy that don’t have a union to defend their interests,” said Sergio Berensztein, a political analyst with Poliarquía, a consulting firm in Buenos Aires.
Even as the government says Argentina’s economy grew by 9.5 percent in 2010, the nation’s poverty level topped 30 percent of the population, the highest since poverty exceeded 50 percent after the 2001-2 economic crisis, private economists said.
“The poverty level is higher now than the worst moments of the 1990s,” said Domingo Cavallo, a former economy minister. “Without a doubt, inflation is increasing poverty.”
In early 2007, the government of President Néstor Kirchner, Mrs. Kirchner’s husband, who died last year, began manipulating data from the statistics agency, said Martín Redrado, who was president of Argentina’s Central Bank at the time.
In the years since then, the cumulative rate of inflation has been 120 percent, private economists said, though the government has reported it to be 39 percent in the four-year period, according to a comparison in the newspaper La Nación last month.
The manipulation of the statistics has drastically increased Argentina’s risk profile, driven away foreign investors and complicated the country’s efforts to return to the credit markets, even as it moves to settle $100 billion in debt from a 2001 default.
Critics say the government is refusing to print bills in denominations larger than 100 pesos because that would be an acknowledgment of soaring prices and could revive memories of hyperinflation, when the Central Bank issued notes of up to 1 million pesos.
The Kirchner government has tried to quell concerns about mounting inflation by continuing to keep the economy growing at China-like rates, largely fueled by high soybean prices. The government also says the country is in the midst of a consumption boom, pointing to domestic car sales that reached record levels in 2010, and it has protected itself by keeping substantial foreign reserves of dollars.
“Argentina is in a formidable moment economically,” Florencio Randazzo, the interior minister, said on the radio last month.
But that may be part of the problem, economists say. Domestic consumption is surpassing the limits of production, causing inflation. The government has not inspired the kind of confidence that would help increase investment and, by extension, the supply of goods. And by tinkering with the economic data, the government has created an environment in which suppliers and producers, operating absent reliable numbers, feel the freedom to raise prices seemingly at will, economists say.
Salary increases have averaged more than 20 percent a year, yet they are still struggling to keep pace with rising food prices. In 2010, Argentines bought fewer units of beverages, fruits and vegetables, a sign that inflation was finally taking a toll, said Mr. Redrado, the former Central Bank president.
Argentines are certainly spending, but many are doing so on credit, buying cars, appliances and televisions before they become more expensive. Banks are aggressively issuing credit cards, offering discounts and interest-free payment plans stretching up to 50 months.
Carlos Bermejo, 74, said he was bargain hunting, taking advantage every Wednesday of a 15 percent discount when using a debit card at the supermarket. But he said he still had to go into debt on his credit cards every month to get by. “I’ve lived through inflation many times. The young people don’t have that experience. They are going into debt thinking they will beat inflation. But you can never beat inflation.”adapted from The New York Times - By Alexei Barrionuevo
