Australia and the World Past and Present

In the last 50 years or so, Argentina has suffered bouts of chronic inflation.

Inflation has been a defining feature of Argentina’s economy.

Former President, Juan Perón, brought in wage and price controls in the 1970s in an attempt to deal with inflation.

Perón was succeeded by his wife, Isabel, and under her administration inflation soared.

The period of military dictatorship is associated with financial deregulation. 1979 saw the introduction of a fixed exchange rate and a prearranged schedule of peso devaluations. But the peso was still seen to be overvalued and this discouraged exports.

With the return to democracy in 1983, inflation began to take off.

By the end of Raúl Alfonsín’s term, the country was experiencing full-blown hyperinflation. By 1989 prices were doubling every few weeks and riots were breaking out.

Carlos Menem and his Economy Minister, Domingo Cavallo, brought in their policy of convertibility. There was a massive drop in inflation – back to single digits.

There was short term success, but the policy was seen to be unsustainable in the long term.

In 2001 the peso was once again unpegged. Exports surged as Argentina’s products became more internationally competitive. This was the case with soy – a key export crop.

Along came Cristina Fernández de Kirchner in 2007. Subsidies were appearing here and there.

There were recurring deficits and the Central Bank was financing government debt.

Mauricio Macri was happy to see the currency continue to float. His time was characterised by an appeal to the IMF for a bailout, a devalued peso and still more inflation. Inflation really took off in the period 2017-2024.

Enter Javier Milei. He promised to stop the money printing that seemed to be have done so much damage in the past. He has eliminated many of the subsidies that had previously been in place. Milei is a scathing critic of the the country’s Central Bank. Part of it stems from the Bank’s history of money printing. Part of it comes from his Libertarian philosophy. He puts more faith in invisible market forces and he has sought to sideline the Central Bank.

Inflation has been a persistent feature of Argentina’s economy in recent decades. It will be interesting to see whether Milei’s policies will be effective and to what extent he can change his country’s relationship with inflation.