Argentina is once again suffering from high inflation. The opposition is now bringing an old, new idea into play: dollarization. This opens an economic and political culture war.
Not only the coffee machine in Fernando Alvarez's small bistro on Avenida Libertad in Buenos Aires has become indispensable for daily work. Even the good old inkjet printer. He uses it to print out the new prices for espresso or lunch every two weeks. “It's a constant race,” the café owner told DW. And one he actually can't win. Prices rose by more than 55 percent in March compared to the previous year. The worst value since April 2002 in a country with chronic inflation anyway.
President goes on the offensive
The current and fiercely divided government led by Peronist President Alberto Fernandez and his influential deputy Cristina Kirchner has been criticized. Fernandez fled to the front during a visit to Germany this week. He criticized the economic sanctions imposed on Russia as a result of the attack on Ukraine. These would affect the entire international community and lead to more poverty and hunger: “The food security of many people on the American continent is at risk,” said Fernandez in an interview with DW in Berlin. However, the economic crisis, inflation and sometimes also the scarcity of certain foods have been accompanying Argentina for years and not just since February 2022.
This is also inflation: Because it's not worth saving or it can't always be exchanged, the Argentines spend immediately: for example in restaurants.
Beacon of hope or charlatan?
Fernandez' critics see it differently anyway. One of them is Javier Milei, an increasingly popular economist who uses catchy, simple explanations to summarize complex issues on talk shows. That earns him the accusation of populism. Milei is not really easy to classify, some call her an anarcho-capitalist, others a market liberal and others the Argentine Donald Trump. According to surveys, Milei's liberal movement has around 22 percent of the political spectrum.
Economic-political culture war
In the pope's homeland of all places, a kind of economic and political culture war seems to be in the offing: The “liberation economist” Milei against the liberation theologian Francis and his popular priest of the poor. Some believe capitalism frees people from poverty, others see capitalism as the cause of all evil. This can be read on posters in Buenos Aires bearing slogans such as “The rich should pay the country's debts.” (see article picture)
More and more young people seem to follow the provocative theses. In view of the recent poverty rate of up to 40 percent and high youth unemployment, the government's sometimes socialist-tinged promises are becoming less and less effective in the slums. Milei, on the other hand, proposes dollarizing Argentina's economy to free itself from the chronically weak peso. “We have to unleash our economy, free it,” is his creed.
Grafitti in Buenos Aires: do something for the fatherland and kill a liberal (in essence)
None simple solutions
A good campaign topic, but also dangerous, economic consultant and Argentina expert Carl Moses told DW in Buenos Aires. Because with simple-sounding solutions, the problem often lies in the detail. And in the case of Argentina, that lies in the renunciation of the “coin profit” that the state generates when printing money. “That would be painful for any country, but especially so for a hyperinflationary country like Argentina,” says Moses. Significantly, in Argentina the coin profit is called “inflation tax” and without this tax the national budget could not have been financed in recent years. This is the profit made by the central bank by issuing central bank money.
This pack of pesos is worth the equivalent of 180 euros
“Inflation in Argentina has fluctuated between 20 and 60 percent for ten years. However, it is now threatening to escalate,” says Moses. On the other hand, Argentina has basically been “dollarized” for a long time. Argentines calculate and plan in dollars. The peso is only used for daily transactions, otherwise the national currency is largely insignificant. An election campaign topic for next year's election seems to have been found.