What happened to the Argentine economy the last time there was 100% inflation?

In 1991, Argentine society began to emerge from the excruciating effects of the hyperinflation of 1989 and 1990 at the end of the government of Raul Alfonsin and the beginning of the management of Carlos Menem.

It was then, in October 1991, 32 years ago, that triple-digit inflation was last recorded until the figure announced today by INDEC for February this year.

In March 1991, the convertibility plan was launched, which Domingo horse he thought since the end of the 1980s, accompanied by a series of structural reforms which, in turn, generated negative consequences in terms of unemployment.

Cavallo replaced Antonio Erman Gonzalez at the end of January 1991 with a public debt of 50,000 million dollars and five years later it left with a stock of 85,000 million dollars.

On Sunday March 15, Cavallo summoned his main collaborators, Horace Liendo there Juan Jose Llach, relaunch the convertibility plan which he unsuccessfully proposed to Carlos Menem to apply in 1989. The three discussed for an hour the level of the future exchange rate. Llach wanted the dollar to reach 11,000 Australs before switching currencies, while Cavallo had thought of maintaining a floating band of 8,000 to 10,000. After an hour, Liendo tried to close the debate with a striking anecdote :

— Alfonsín always had a hyperinflationary subconscious, as he believed that each series of the austral should be printed with the face of a different president, starting with Rivadavia; so when Alfonsín himself was hit, we would have already been blown up. Since Carlos Pellegrini was supposed to appear on the 10,000 bill on this route, I thought I’d leave him there, as I was inspired by his figure for this shot.

Cavallo accepted Liendo’s curious argument and five days later announced the convertibility plan. The Central Bank became obliged to maintain the ratio between reserves and the monetary base to support the price of 10,000 Australs per dollar, the indexation clauses of contracts were suspended and the executive branch was empowered to change the currency which would take place on January 1, 1992.

The process of disinflation has been continuous: in March inflation reached an interannual level of 287%, in June it was 200%, in August 144% and in October 102.4%. Since that month, he had never hit 3 figures again, until now.

The company, happy to have secured the Copa América in July after 32 years without continental exploits, was beginning to see the fruits of the transformation process.

That year, in addition, Prince gave his only recital in Argentina, Soda Stereo aroused passions with his show on Avenida 9 de Julio and Daniel Scioli was getting married Karina Rabolini.

After a sharp decline in GDP (-2% in 1988, -7% in 1989 and -1.3% in 1990), economic activity rebounded by 10.5% in 1991 and 10.3% in 1992; the annual average of economic growth was 6% between 1990 and 1998, against a significant decline in the previous decade due to the regional debt crisis and the terrible conditions that the Alfonsín government inherited from the military government 76- 83.

Indeed, Peronism obtained a victory in the 1991 legislative elections with 40.8% of the vote, followed by the UCR with 28.8%, Ucedé with 6.2% and Socialist Unity with 5, 6%.

Inflation continued to fall: 17.6% in 1992, 7.4% in 1993, 3.9% in 1994 and 1.6% in 1995.

At the same time, credit picked up and wages gained purchasing power, although unemployment reached 17.5% in the year of the Tequila effect, when economic activity fell by 2 .8%, although it recovered in 1996 with a rebound of 5.5%, which was maintained in 1997 (8.1%) and 1998 (3.9%), until falling to 3 .4% in 1999.

Poverty, which had reached 40% in 1990, fell to 20% in 1994% and jumped to 57% in 2002, standing at 31% in 2006, the last year of reliable official measures until 2016. 2022, it ended at almost 40.9%. .

In 2001, convertibility was flying in the air for lack of reforms to eliminate the budget deficit (it went from a surplus close to 2% of GDP in 1992 to a red of 3% in 1996, which reached 4% in 2001) and the loss of competitiveness due to the appreciation of the dollar. In 2002, inflation would reach 40%, although several experts predicted further hyperinflation, then it began to decline alongside a budget surplus that continued into the early years of Kirchnerism.

The history since 2007 is more opaque due to the distortion of INDEC statistics. While the official body reports a 159% increase between 2007 and 2015, the ECO GO study by Marina Dal Poggeto revealed that inflation was 489%. In recent months, the former president and the current vice-president Cristina Kirchner He validated this difference by referring to the rise in prices in the last years of his presidential mandate.

Even if Mauricio Macri claimed it would be easy to beat inflation, racked up a 295.7% price increase when INDEC returned to report the true numbers and Alberto Fernandez It has already exceeded 300% since taking office in December 2019.

With analysts expecting inflation to approach 100% again this year after hitting 94.8% in 2022, the price hike nightmare is far from over. And the February index added another element for disappointment.

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