How Argentines live with an annual inflation that is close to 109%

For Yanina, living in a country with high inflation is nothing new: when she opened a small supermarket ten years ago in a working-class neighborhood of Greater Buenos Aires, annual inflation exceeded 25%.

Despite the fact that this number grew over the years until it doubled, people “managed by” and still managed to treat themselves, he says.

“Of ten products they bought, four were basic,” he tells BBC Mundo.

But since the rise in prices accelerated, doubling in a single year from around 50% a year to 95% in 2022, and widely surpassing the triple-digit barrier this year – in April the year-on-year figure climbed to 108.8% – the habits of your customers changed.

“Now they only carry basic products, they stopped buying the rest,” he says.

Millions of Argentines are not even able to meet their basic needs. According to data released at the end of March by the National Institute of Statistics and Censuses (Indec), 4 out of 10 Argentines are poor.

And the situation is even more dramatic among children: more than half of those under 14 years of age (54.2%) live below the poverty line, which is equivalent to almost 6 million children.

Economists anticipate that this figure will continue to increase this year as a result of the new impulse that inflation took in March and April, when it reached 7.7% and 8.4% per month, respectively, its highest point since the economic crisis of 2001/ 2, the worst in the history of the country.

The acceleration of prices caused Argentina to even achieve an unfortunate record, surpassing Venezuela for the first time in decades in monthly inflation (although the year-on-year figure for Venezuela is still almost five times higher than Argentina’s).

Inflation is a phenomenon that disproportionately affects those who have less, since the prices that rise the most are those of food, which constitute the greatest expense for working families.

But in addition, the lowest income sectors are unprotected against rising prices because they tend to have informal jobs, which are not covered by a tool that has been used in the last twenty years to protect the population against inflation: parity.

These are agreements between unions, companies and the government to adjust wages to the rise in prices.

But those who have unregistered jobs (“in black”) -according to INDEC they are 35.5% of the Argentine labor force- do not have parity.

Nor do the self-employed, who are the economic sector that has grown the most in recent years.

According to a study by the Institute for Labor and Economic Development Studies (Ielde), based on INDEC data, 8 out of 10 new jobs created after the coronavirus pandemic were unregistered salaried positions or non-professional self-employed.

In 2022, both groups represented more than 50% of the total labor force (that is, today they are more than the number of workers registered in a dependency relationship).

But the truth is that being a “blank” employee does not guarantee protection against inflation in Argentina either.

Because, although there is work – the unemployment rate is low, 6.3% according to INDEC – salaries are on the floor.

The minimum wage in April was 80,342 pesos a month (about US$170 market).

In addition to being the lowest salary in South America, after the Venezuelan, it was insufficient to cover the minimum expenses of a family, since the basic food basket for April (which includes the supplies needed by two adults and two children) was 191,228 pesos, that is, more than two minimum wages.

And that doesn’t even include housing expenses.

Cinthia, 37, who entered Yanina’s store to buy some cookies for her godson, tells BBC Mundo that she has a stable job as an administrator in a maternity and child hospital.

However, he claims that he had to return to live with his parents because he could not continue paying the rent, which was increasing in line with inflation.

“I couldn’t keep up with my salary. And my parents couldn’t keep up with their retirement either,” he says.

Even living all together, they no longer have enough to make the roast on Sundays, he points out. Now they eat it once a month.

She also can’t buy her godson his favorite candy when he visits, because “the price has gone through the roof.”

“We always had inflation in Argentina, but before the salaries beat him,” he says. “Now even with work you are poor.”

According to the consultancy Labor Capital Growth (LCG), registered workers lost close to 20% of their purchasing power in the last five years and the unregistered lost almost double.

Meanwhile, the latest survey by the Argentine Social Debt Observatory, published at the end of 2022 by the Argentine Catholic University (UCA), showed that almost a third of all workers are poor.

In the midst of the inflationary escalation, the Central Bank of the Argentine Republic (BCRA) announced the launch of a new 2,000-peso bill, which will be the highest denomination.

Although the announcement was made in February, it is still not clear when it will enter circulation (sources from the Mint told the local press that it would be available “in the middle of the year”).

For many Argentines, like Cinthia, the new ticket falls short.

“Today $2,000 is the minimum you have to leave your house with to buy anything. With these levels of inflation they should issue $5,000 or $10,000 bills,” he says.

He also points out that with prices skyrocketing, it’s impossible to have a baseline of how much things are worth.

“I have no idea how much I’m going to pay for these cookies. Yesterday they were at one price and maybe today they are at another,” he says.

A report by the consulting firm Focus Market on the bill that is currently the highest denomination in Argentina (the $1,000) revealed how much purchasing power it has lost since it entered circulation in November 2017.

According to the paper, it’s worth almost 18 times less today than it was when it launched. Put another way: what is bought today with a $1,000 bill in 2017 could be achieved by paying only $56.18.

The most affluent sectors

Even Argentines with the best salaries (and the best parity) suffer as a result of the rising cost of living.

Not only because -as a famous saying of former President Juan Domingo Perón says- “while prices go up the elevator, salaries go up the stairs”, that is to say: they always run behind.

Also because, even though their salaries rise in line with or even above inflation, the taxes on that income rise even more.

This is due to a fiscal distortion caused by the inflationary effect: the government periodically raises the floor from which income taxes are paid (to reflect the salary increases agreed in the parities) but does not modify the scales, making each More and more workers pay the maximum rate of 35%.

Guillermo, a 67-year-old logistics expert, who worked three decades as an airline cargo manager and retired two years ago, decided to continue working as a consultant, not only to maintain his standard of living but also to help his children, increasingly suffocated by these difficulties.

“This year I started paying for my granddaughter’s school, because otherwise they would have to change her. I started the year paying $25,000 in fees and in four months I’m already paying $50,000,” she says.

Speaking to BBC Mundo in a hypermarket near the wealthy Nordelta neighborhood, in the northern suburbs of Buenos Aires, he revealed that, even with a salary and a pension, he had to change some habits because they became too expensive.

“The good thing is that I don’t smoke anymore. I used to smoke cigars, but they’re imported and I stopped buying them because of the value. I smoked a pack of 10 a day and paid $300. Now they’re worth $4,200. I couldn’t go on.”

The huge collapse in the value of the peso against the dollar is the other side of inflation.

Five years ago, 21 pesos were needed to buy US$1. Today, about $470 is needed in the parallel or “blue” market, the only one available to the majority of Argentines since the “stocks” were imposed on the sale of US currency, to try to preserve the few currencies that remain in the Central bank.

For Argentines with a better economic position, the pulverization of their salaries measured in dollars -between 2015 and 2022 they fell by 86%, according to Focus Market- not only limits how many imported products they can consume but also slows them down when it comes to spending in foreign currency, such as the purchase of cars, which are valued at the “blue dollar” price.

“We updated the car from time to time, but now it’s unattainable. We don’t have that possibility like in other years. And now we travel through Argentina instead of going to other countries,” says Jesica, a 33-year-old psychologist and mother of two young children. , about the changes you have had to make.

Despite these limitations, she considers herself “one of the lucky ones” because, as independent workers, both she and her husband can adjust their fees and still manage to maintain their lifestyle and also buy a few dollars each month to preserve their savings.

Jesica and the rest of the interviewees told BBC Mundo that they believe that the economic situation will become even more volatile in this election year, full of political uncertainty.

Both the president, Alberto Fernández, leader of Peronism, as well as his predecessor and rival, the center-right Mauricio Macri, as well as his predecessor, the current vice president Cristina Fernández de Kirchner, ruled out running as candidates, and only at the end of June will it be known who they will compete in the open primary in August.

While it is defined who will take the reins of the country in December, the Argentines pray to be able to reach the end of the year without repeating any of the great debacles that marked the last decades, such as the hyperinflation of 1989/90 or the economic and social explosion of 2001/ 2, whose memory still hurts today.

Remember that you can receive notifications from BBC Mundo. Download the new version of our app and activate them so you don’t miss out on our best content.