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President Mauricio Macri at the inauguration of Accenture's new office building in Buenos Aires on April 15, 2019, flanked by Sergio Kaufman, senior managing director for Accenture Argentina. (Photo: Argentine President's Office)
Wednesday, April 17, 2019
Special Reports

Argentina: Macri Fails Taming Inflation

As economy suffers its second consecutive recession.


Argentine President Mauricio Macri is failing completely in taming the high inflation rates he inherited from his predecessor. In fact, prices are going up faster now than during the government of Cristina Kirchner (2007-2015), when they averaged 25.2 percent.

This year, Argentina will likely see an inflation rate of 43.7 percent, according to new estimates from the International Monetary Fund (IMF). That’s nearly twice what the government had estimated in its 2019 budget and the highest rate in the current IMF inflation database for Argentina going back more than 20 years -- to 1998.

However, it’s also the highest since the early 1990s when Argentina was recovering from its notorious hyperinflation.

Then-president Carlos Menem managed to dramatically slash inflation by implementing the Convertibility Law that pegged each Argentine currency (first the austral, then the peso) printed to an equal dollar in reserves in the Central Bank.

March data showed an annualized rate of more than 54 percent. “That’s a very bad number,” Alberto Bernal, chief emerging markets strategist at XP Investments in New York, told Reuters.

The government has launched a plan to keep prices stable through agreements with basic food producers.

However, the IMF doesn’t expect Argentina to see single-digit inflation for until 2023, five years from now.


The continued high prices – along with a sluggish economy -- are threatening Macri’s re-election chances in October.

The IMF expects the economy to decline 1.2 percent this year after falling 2.5 percent last year (its worst decline since the 2009 global crisis). With the economy also declining in 2016 (by 2.1 percent) and only growing 2.7 percent in 2017, Macri’s average GDP growth has been a dismal minus 3.1 percent in the 2016-2019 period.

Many business leaders are also discontent, complaining about the lack of tax and tariff cuts that the government delayed after its standby agreement with the IMF following a massive peso crash last fall.

The mood today stands in stark contrast to the widespread optimism among local and foreign investors as late as 2016, when Latinvex named Macri Leader of the Year.


While Macri is not considering dollarization to lower inflation, former economy minister Domingo Cavallo (who designed the Convertibility Law) recommends that salaries and pensions should be paid out in dollars.

In an interview with Cronista newspaper, he also warned about the threat of hyper-inflation returning.

Steve Hanke, a world-renowned currency expert and professor of applied economics at Johns Hopkins University -- has long advocated dollarization as a way for countries like Argentina to dramatically reduce inflation almost immediately.

“If Argentina would dump the peso and adopt the greenback, inflation would end immediately,” he has told Latinvex.

In fact, the three Latin American countries that use the dollar – Ecuador, El Salvador and Panama – are expected to see the region’s lowest inflation over the next five years, according to a Latinvex analysis of the latest IMF projections.

Meanwhile, Argentina will have the second-highest rate in the region, only surpassed by economic basket case Venezuela.

© Copyright Latinvex






Latin America Inflation (2019-2023): Lowest & Highest

Latin America Inflation (2019): Lowest & Highest

Latin America Inflation (2018): Lowest & Highest 

Latin America GDP Growth (2019-2023): Best & Worst

Latin America GDP Growth (2019): Best & Worst

Latin America GDP Growth (2018): Best & Worst


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