My group and I are researching Argentina, specifically its black market. A big contributor as to why Argentina’s black market is so popular is due to high inflation rates. Therefore for this post, I decided to take a deeper dive into inflation rates in Argentina and why they are so high.
Argentina is a country with some of the highest inflation rates, and as time is going on, it is only increasing. When looking at statistics from 2023, inflation rates were at an all time high compared to any recent year. Ultimately, Argentina’s annual inflation soared to 211.4% in 2023, which is the highest rate in 32 years. The most consumed products, food and non-alcoholic beverages, were the biggest contributors to the annual inflation rate. Just these two products experienced an average increase of 29.7%. According to Forbes, Argentina is third on the list for countries nationwide with the highest inflation rates. The reason for such inflation rates is due to the fact that the country’s economy descended into a crisis in 2018. Crisis happened when its foreign-debt obligations expanded to unsustainable levels and the peso collapsed against the US dollar.
These incredibly high rates are harming Argentinas citizens. Such high rates have pushed 40 percent of Argentines into poverty and has led to a surge in demand for US dollars. In the past few decades, Argentina has experienced a massive increase in the money supply going through their economy. For example, in 1990, Argentina had 711 billion pesos in circulation and then by 2020, Argentina had roughly 2.5 trillion pesos in circulation. In other words, the Argentina government nearly quadrupled the amount of money in circulation over a 30-year period.
Ultimately, Argentina citizens are forced to cope with high inflation rates. One way they are doing so is by using an interest free credit card. They often follow the idea of buy now, pay later because saving up for a special purchase or even everyday goods can mean that they will end up paying a higher price in a few months or even weeks down the line. Which leads to another strategy citizens use, buying in bulk, so they don’t have to buy more later when prices are higher. Also, individuals who are running out of cash are going back to bartering or swapping. Lastly, as a last result, people are trying to buy American dollars with their pesos because they feel having US dollars is a safer option.
As inflation accelerates, political pressure to reduce inflation builds, leading to an eventual “monetary reform”. Argentina will hopefully establish a policy that decreases inflation rates in a stable way that will help the people and economy. Fiscal policies are also another tool that can be used to stop inflation which is one tactic that Argentinas government should look into. A fiscal policy would have the government reduce its spending or raise taxes in order to reduce inflation.
Overall, my research surprised me since I initially was unaware of how bad inflation rates were in Argentina. With such high rates, people will continue to use the black market, especially for necessary goods they can not afford legally. In effort to reduce black market use, the government must create a stable solution to decrease inflation.
Image from: https://www.reuters.com/world/americas/argentina-annual-inflation-hits-114-monthly-rate-slows-unexpectedly-2023-06-14/
Blog written by Charlotte Arnswald
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