Americas

Argentina, Milei's shake-up is not working. Inflation is at 236.7%

Prices rise again and protests intensify. El Leon-Milei takes a defeat on the most important and symbolic dossier

by Roberto Da Rin

15 September 2024

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4' min read

Inconsistent narratives and inconceivable choices. Buenos Aires has the allure of a European capital and the governance of a country located in an imaginary elsewhere, beyond the Fin del Mundo. Perhaps because the bourgeois pantheon is populated by ghosts and dreamlike suggestions. Who knows, at least there it might be easier to explain a poverty rate of over 50% in a country with a glorious past as the granary of the world. And still potentially capable of producing food for 400 million people, but unable to feed 46 million, the inhabitants of Argentina

The winds blowing in the Pampas in the last days of the austral winter do not bring good news for President Javier Milei, who just these days is forced to face worsening inflation figures. Minutes after the Reuters news agency released the August figure, +4.2% compared to the previous month, thus exceeding analysts' forecasts, the websites of newspapers around the world, Wall Street Journal, Financial Times, El Pais, cast new doubts on Milei's strength. That's right, the roar of the Leon, that's his nickname, already seems much more hoarse.

Inflation at 236.7%, Milei's flop and the anger of the square

Yes, because Milei had promised it in the election campaign, on the day he took office, 10 December 2023, and then reiterated it often in these nine months of government: "Inflation is a thing of the past", "I have already defeated it", "it is a disaster that concerns the Peronist government that preceded me". But no, the unrelenting figure of consumer prices, the index that best tells the price race, explains that in the last 12 months inflation was 236.7%, the highest level in the world and higher even than the Reuters poll forecast of 235.8%. Analysts had predicted +3.9% and instead Milei's pitched battle against inflation took a heavy defeat, also in terms of image.

The street demonstrations that regularly take place in Buenos Aires and other Argentine cities are increasingly attended by a middle class that has slipped into poverty, and the Indec (the Argentine ISTAT, ndr) surveys explain why: a kilo of potatoes 1.33 dollars, an increase of 40% compared to a month ago. Meat, dairy products have reached exorbitant prices in a country where average pensions are around EUR 300 per month. From January to today, inflation has risen by 94.8 per cent. The asado, the Sunday barbecue, a topical moment in the anthropology of the Argentine family, is no longer affordable for everyone.

The small shops in the neighbourhoods of Buenos Aires, from the most popular ones like Boca or Constitucion to the middle-class ones like Caballito or Almagro, up to Palermo or Belgrano sell goods in bulk, because the whole package is too expensive for the customers.

Prices are often written on blackboards instead of tags, because changing them too many times a week would be expensive. Even coffee becomes a luxury good: 4 euros per 100 grams.

Older people remember the gloomy days of hyperinflation in the 1980s, when supermarkets were forced to change the prices of all products on display several times a day. The sorest note, however, concerns not only electricity and gas bills, but also the soaring prices of medicines, which have risen fivefold in some cases. The ironic and biting complaint of Carmen, a pensioner, in front of a pharmacy in the centre: 'Milei obsessively repeats the word 'freedom', but his wish is for a country free of old people.

Poverty, according to Indec, has reached 52 per cent of the population and destitution is 17.9 per cent. At the end of 2023, the poor were 41.7 per cent and the destitute 11.9 per cent.

The end of the 'honeymoon' and the IMF alert

Milei nevertheless maintains a numerically important internal consensus. The disastrous Peronist government of Alberto Fernandez and vice-president Cristina Fernandez de Kirchner allowed him to sail with the wind in his sails: social and national media supported him in order to avert a Peronist re-election last October. The anarcho-capitalist predicted an economic revolution, soon. The honeymoon over, the results are slow in coming

A few months ago, el Leon cashed in some positive results: the reduction of the fiscal deficit, resulting from spending cuts in the health, education and public administration sectors. That is why he was able to announce that in the first quarter of 2024 Argentina recorded a primary surplus. The first since 2008. The financial markets believed it, lulled by the propaganda of the Casa Rosada.

Until a few months ago, the flow of good news seemed unstoppable: Argentine bonds performed very well, among the best in emerging markets.

Now, however, even the International Monetary Fund, with which Milei negotiates and renegotiates loans of tens of billions of dollars, issued a warning a few weeks ago: 'It is important that the burden of reforms does not fall disproportionately on working families'. The 2024 GDP, according to the Fund's forecasts, will contract by 2.8 per cent.

A few weeks ago, the Financial Times, the temple of liberalism, wrote: 'The dream of the anarcho-capitalist Milei clashes with Argentine reality'.

In Beckett's novel Mercier and Camier, one asks the other: "Well, how are you?" And the other replies: "I am euphoric, but not very".