El Peso Falters in Argentina

Clarissa Garcia, Staff Writer

As are numerous Latin American countries, Argentina is also feeling the wrath of a weakening peso. But this has been occurring for what seems to be centuries now. The cycles of inflation commenced with price increases provoked by influential British merchants soon after Spanish colonialists were ousted in 1810. By 2001 and 2002, the financial crisis set off political upheaval, devaluation, and inflation. A decade earlier, hyperinflation set off looting, forcing President Raúl Alfonsín to resign earlier than scheduled.

According to an unofficial index published by the country’s opposition politicians, last year, the nation experienced nearly a 30 percent price increase. The Argentine government flouts these findings and instead claims that inflation has only reached 10.9 percent in 2013.  With regard to a report from J.P. Morgan in New York, inflation could skyrocket to 45 percent and even approach an annual rate of 56 percent; this rate of inflation currently exists in Venezuela, a regional ally undergoing social unrest.

In January, there was a 19 percent devaluation of the nation’s peso, thus alarming emerging markets. Now, civilians must cope with one of the world’s highest inflation rates that have set the stage for social unrest as well. The country is witnessing strikes assembled by schoolteachers, and police sit-ins have led to widespread raiding. The government has recently released a revised index that set inflation at 3.7 percent for January alone, while unofficial calculations inferred an even higher rate for the month of February.

To ascertain that residents are able to purchase essentials, the government has issued a new round of price freezes on items such as vegetables, meat, canned foods, and school material for students. Argentines must call a hotline to report stores that do not adopt the freezes or fail to stock the goods. Consequences include fines, or an immediate shut of business. President Cristina Fernández de Kirchner addressed thousands of supporters who gathered outside Congress and stated “We have to monitor prices… don’t let them rob you” (in reference to rapacious businessmen).

Nephrologist Lucía Martínez asserts that price increases are disproportionate and connected them to an “undercover coup” against the government. A pro-government organization distributed posters that singled out business executives, including that of the head of the Argentine subsidiary of Royal Dutch Shell, who were accused of theft. On the other hand, Argentines consider the controls to be a sign of messy policy making that fails to adhere to the causes of inflation. Observers hypothesize that President Kirchner has been forced into decisions she was ideologically opposed to, which include raising rates and the devaluation, in hope to maintain social calm and protect the legacy of her political model. This was supposedly done after Argentines geared their attention to opposition figures in midterm elections last October.

Clarissa Garcia is a Staff Writer for Latino Giant. She is a college freshman currently Undecided at American University, but leaning to the Education field, looking into Secondary Education.

Source: The New York Times