Summary: Argentina has reached a state of hyperinflation not seen since 1991, with the rate becoming 102.5% in February of this year. Most citizens of Argentina are suffering from hyperinflation, as they see prices of local groceries change weekly and annual salaries already fell behind the cost of goods before the crisis had even started. The ruling Justicialist Party of Argentina has desperately tried to tame the prices of groceries with elections upcoming for October of this year, but their efforts fail to hide the fact Argentina is the only developed major economy to have a rate this high, with Turkey being its closest comparison at less than 60%.
Analysis: Argentina has unfortunately always been an oddity to the global economy in its inflation rate compared to similar states, with multiple administrations since its transition to democracy in 1989 failing to implement effective or sweeping economic changes needed to completely quell down inflation, which has led to 40% of Argentinians falling into poverty. The Argentine Peso is anchored to the US Dollar, however, the Argentinian government sold a mass amount of bonds that the government eventually defaulted on in 2019 and financed cash handouts and salary programs during the pandemic when the government couldn’t already afford to keep its highly impoverished population afloat. In turn, they had to print more money, which specifically has hit hard against the country now that much of the pandemic fervor is over and global economic practices are running again. Overall, I believe the economic system of Argentina is a cycle that only exacerbates itself with its impoverished population and debt and that the problem will continue until a major ruling party change happens that actually delivers on economic reform, if ever.
Connection to Class: The mass inflation rate in Argentina has led to serious discussions with Brazil under the economic free trade IGO The Southern Common Market (MERCOSUR) to form a common currency called the “Sur”, which Argentina hopes would lessen their inflation. Of course, Argentina’s high rate of inflation and the support of using the USD to back their currencies have led to push backs against this. Furthermore, Argentina has refused to support a sweeping free trade agreement with the EU proposed by MERCOSUR member Uruguay, despite it having potential to majorly uplift Argentina out of some of its burdens of inflation.
