Galloping inflation

#1
Last year I opened a thread on inflation in Argentina. Late last year I went abroad for three months - Europe and the US. When I came back I was stunned at how much prices had jumped. I found Italy cheaper for a number of grocery items. The US the same or cheaper. Taxis went up 20% last year and will rise 19% more in May, then 20% in November. Is there any end to this and how is it affecting expts?
 
#2
Since my income is in euro's I dont realy notice it. The inflation rate is about 20-30%, and the peso hast lost about the same % against the euro last year...
Then again, I don't really think it's fair to take into account the public transportation prices, since they haven't risen since the crisis. So it was about time. A bus fare in Salta was actually more expensive than in Capital...
 
#3
A porteña friend of mine who's in her late-40s told me that, except for the period in the 90s when the peso was pegged 1-to-1 to the dollar, Argentina has been characterized by inflation for her entire life. Other porteños have essentially told me the same thing.Personally, I am not surprised too much by the inflation. Having been an Argentina watcher since 1975 or so, I view it basically the same way my porteño friends do. What surprises me is how many North Americans and such came here during the good years -- 2002 through 2006 -- thinking that they had found some kind of financially-livable heaven.Due diligence, people...due diligence.
 
#4
"VMSmith" said:
A porteña friend of mine who's in her late-40s told me that, except for the period in the 90s when the peso was pegged 1-to-1 to the dollar, Argentina has been characterized by inflation for her entire life. Other porteños have essentially told me the same thing.
You can find a table for average annual inflation rates by the decade at the bottom of the page over here:

From March 1989 to March 1990, the inflation rate was over 20,000 percent, i.e., prices rose by a factor of over 200 times during that year. That would mean just about daily changes in prices (if not even more frequent). Those were the days....
 
#5
If we had a repeat of hyper inflation few expats would stay here, just some who have Argentine spouses and who are in too deep to get out. What we have now is very serious inflaton that has pushed prices, in a geat many cases, up to or beyond those in the US. For those here earning modest peso-based wages, the situation is bad. For expats with dollar incomes, it is much less problematic though I hear some complaints from relatively affluent expats that BA is not so cheap any more. I was interested to hear how inflation has affected expats but so far there few have responded - or have many just packed up and gone home?
 
#6
In answer to your question, Sergio:
Due to inflation, I have had to reasess living here and, UK which was not affordable to me 18 months ago, now doesn't seem much more expensive. If house prices there continue to fall and rents go down, I will be able to move back.
The ABL increase affected me badly as my property here is large and if it, along with everything else. continues to rise, I may have to sell up and leave (if I can find a buyer!!!)
I will definitely not take taxis if the price increases another 40%. I noticed last week that eggs went up 30% in one day (1.80 - 2.40 white and 2.00 - 2.60 brown). My poor dog gets a smaller dog chew now as in one year the large one has increased from 3.50 - 5.00. How mean am I! A tiny bag of walnuts has gone from 6.00-7.50, double UK prices.
Building quotes I had at the end of December have gone up 15% and I am trying to get stuff done now as I have been warned prices jump again in May. My cleaner asked for an increase from 7.50 - 12.50 (!) at the end of last year because she said the government had promised 45% increases to blue-collar workers. I pay her 10 now but had to reduce her hours by one third. If her charges go up again, I will find someone else or stop having a cleaner altogether.
I am wondering how people on a peso wage cope with these increases and how inflation can continue to rise in 2008 without serious repercussions. I can only foresee the economy crashing again soon if this trend does not slow down...
 
#7
Yesterday I spoke to a European who runs a successful business here. He wants to sell and get out because he considers the situation intolerable and believes it will end in a crash this year. He said that many foreigners are trying to sell their homes because of the inflation and instability. I have no idea if the latter is true but I´d be interested in hearing more stories from expats regarding how they have been affected by prices. I find supermarket prices as high as and in many cases higher than prices in the US with generally lower quality and smaller quantities here.
 
#8
"Celia" said:
I am wondering how people on a peso wage cope with these increases and how inflation can continue to rise in 2008 without serious repercussions.
Generally, when there is inflation, there are rises in both wages and prices. It's a spiral. Prices rise...workers demand higher wages...wages rise...etc. That's how the peso-earners will deal with it.
And yeah, there are serious repercussions. This is why the Federal Reserve in the U.S. considers fighting inflation its #1 job. One reason is that in periods of high inflation bond holders suffer. You buy a bond that yields, say, 8%, and if inflation is 10%, you've lost money. So people are reluctant to buy bonds, which has an adverse impact on business and government (as the ability to sell bonds is critical).If you look at the political and economic structure of Argentina, though, it's hard to see how the country can avoid inflation and still maintain the political system and such that most of the politicians seem to thrive on. There's a good book called, "And The Money Kept Rolling In (And Out)," that provides some valuable insights.
So...if you're planning on living here for any type of duration, better have some strategies for dealing with it.
 
#9
Yesterday at a restaurant a waiter I have known for a long time informed me that their meat purveyor told the restaurant that they can expect WEEKLY increases in the range of 5%
 
#10
"sergio" said:
Yesterday at a restaurant a waiter I have known for a long time informed me that their meat purveyor told the restaurant that they can expect WEEKLY increases in the range of 5%
I just did a calculation on Excel: 5% compounded weekly means annual meat inflation of about 1100%, i.e., what now costs 10 pesos will cost 120 pesos after a year. Let us instead take the more reasonable figure of 5% compounded monthly: this leads to 71% annual meat inflation, i.e., what now costs 10 pesos will cost 17.10 pesos after one year.