Food: Inflation in Argentina is five times higher than in the region

So far this year, food prices have been characterized by a gradual acceleration, not only locally but throughout the region. However, the process has gotten more dizzying in Argentina: the country came in at a rate of 3.5% per month in 2021 and soared to 5.8% monthly for the past seven months, while in Latin America (taking the median of 10 countries) the same item went from 0.6% to 1.2% per month. That means, local commodity inflation was five times higher than in the region and this gap has gotten even bigger with some countries such as Bolivia, Ecuador and Paraguay where there was greater price stability.

This is one of the conclusions of a IERAL study by the Mediterranean Foundation that investigated what’s happening to final food prices in 11 Latin American countries: Argentina, Brazil, Chile, Uruguay, Colombia, Peru, Mexico, Costa Rica, Ecuador, Paraguay and Bolivia.

A relevant fact is that, in most of the countries of the region, inflation in food and beverages exceeds general inflation, with very important differences in several cases (Chile, Paraguay, Peru). That is, the food They drove the acceleration of inflation. In Argentina, this was reflected in the official statistics. According to INDEC, the voice grew 48.3% between January and July against a 46.2% increase in the overall level of the consumer price index (CPI).

The figure is not insignificant considering that the increase in the products of the basic basket has a greater impact low-income consumers who devote a greater share of their income to the purchase of these products.

Another differentiating fact of what is happening locally compared to the region is that, while in other countries food is giving in to inflationary pressures, in Argentina, growth continues to be strong. In this sense, several private investigations have been detected the acceleration of the basket in the first half of August.

For example, on a measurement of 545 products sold in neighborhood self-service stores, the average increase 3.9%, according to the firm Scanntech. And in the survey of a basket of 21 Free Consumers products, the average rises 2.9% in the same period, accumulating an increase of 47.18% from the beginning of the year. In both cases, these are greater differences than those recorded in the previous weeks.

According to the measurement of the consultancy LCG, up to the third week of August the increase in food prices was on average 6.6% monthly in the last four weeks.

According to the IERAL study, when we analyze the behavior of food prices in different countries, we see that are higher than last year, although the rate of change was different: in Argentina, (2.3 percentage points in one month), in Chile (1.6); in Colombia (0.9 pp) and Brazil (0.9 pp). On the contrary, the countries that are showing more stable are Mexico (0.3%), Peru (0.4%), Uruguay (0.5%) and Bolivia (0.6%).

What happened to the rest of the prices in the economy? Basically, in most Latin American countries the prices of these products have risen more than those of the rest of the economy’s goods and services.

The analysts responsible for the study of the Foundation, Juan Manuel Garzón and Tobías Lucero, recall in the work that “at the time it was expected that the expansionary policies applied by governments to counter the negative economic effects of COVID-19 and the mandatory isolation measures (sensitive increases in public spending, money issuance, very low real interest rates) would have cost inflation once the pandemic ended. Also that it would have been difficult to withdraw the extra liquidity that contributed to the economic system and that, by clearly exceeding the growth in production, this would have generated inflationary pressures ”.

The acceleration of inflation has occurred around the world and the region has not escaped this situation. When looking at the statistics, it is found that, in most Latin American countries, after a very stable 2020, inflation starts to rise in 2021 to pick up speed in 2022. For example, Chile moves from an annual inflation of 3% in 2020 to a rate of 7.2% in 2021 and aims to approach 10.8% in 2022 (estimates by the Central Bank of Chile). Peru had 2% inflation in 2020, rose to 6.4% in 2021, and this year reaches 8.7% year-on-year. Brazil is an exception as it ended 2020 with inflation of 5.4%, rose to 10.2% in 2021 and stabilized at around 10.0% thereafter (July on an annual basis).

Among the reasons that explain the phenomenon, according to the report, is that “the post-pandemic macroeconomic context, fraught with inflationary tensions, The Russian invasion of Ukraine and other factors specific to agricultural commodity markets were added (a couple of bad harvests in major producers), with upward effects on international prices of energy products, cereals, oils and other commodities, adding further fuel to the situation “.