Chronic inflation and hyperinflation in Latin America - statistics & facts
Latin America and the Caribbean is commonly in the inflationary debate, either considering specific cases such as Venezuela, Argentina, Haiti, or Suriname, or also recording inflation rates considerably higher than the world’s average. In 2022, the region recorded a rate of 13.99, while the global estimate was 8.71. Nevertheless, the inflation rate stayed lower than 10 for the four years prior from 2018 to 2021, far from considering the region within the limits of chronic inflation or hyperinflation.
In much more recent history, the South American country continued with inflationary challenges. In fact, over 50 percent of Argentinians think that inflation is one of the main problems the country currently faces. During 2023, the annual increase in consumer prices returned to triple digits with 122 percent. The newly elected president, Javier Milei, inherited the situation from previous governments and the global inflationary crisis. Moreover, the austerity policies he tried to implement generated a lot of controversy among the population, which called for the first general strike since Mauricio Macri’s government. Argentina is suffering other consequences of chronic inflation, such as taxing, informal employment, and budgeting hardships for the different dependencies.
As of 2021, 48.9 percent of employees were in the informal sector, taking a toll from the income taxes of the country, which has quite a high tax burden when compared to the region, between 9 and 35 percent. Also, in early 2024, regions like La Rioja started proposals to create their own currencies to mitigate the impact of inflation on their budget, nevertheless, that is prohibited by the Constitution. This is not anything new, in 2001 some other kind of bonds for the same purpose called “cuasimonedas” (Quasi currencies) were introduced in the country.
Moreover, Nicolás Maduro, president of Venezuela, decided to increase the minimum wage considerably and start printing large amounts of money. This added to the political instability of elections that year, creating a new currency called “Bolivar soberano”, and launching the cryptocurrency “Petro”. All those generated a rapid devaluation of the currency, prices going up every day, and increasing poverty exponentially.
By 2019, 96.2 percent of the population lived under the poverty line and almost 80 percent under extreme poverty conditions. Even though the inflation rates dropped significantly to three digits since 2022, Venezuela still ranks as the country with the highest inflation in the world. New measures implemented by the government seem to work better than the previous ones, nonetheless, with still a high dependence on oil prices and international sanctions, the forecast is not favorable for the South American country’s economy.
What is considered hyperinflation and chronic inflation?
Inflation is considered a process of price increases in goods and services, while lowering the purchasing power of economic agents. On the other hand, hyperinflation is often defined as quickly increasing prices, normally higher than 50 percent per month, creating an important impact directly on the economy of the affected region. Finally, chronic inflation is defined as persistent high inflation throughout a considerable period.Argentina; a history of hyperinflation and chronic inflation
Between 1988 and 1989, Argentina implemented the “Spring plan” (Plan primavera) after ending the “Austral plan” put in place three years earlier to stabilize the economy and control the inflationary problems the country faced. Nonetheless, the plan failed considerably after losing the support of the World Bank and the falling exchange rates. During 1989 and 1990, Argentina recorded hyperinflationary rates of over 2,000 percent each year.In much more recent history, the South American country continued with inflationary challenges. In fact, over 50 percent of Argentinians think that inflation is one of the main problems the country currently faces. During 2023, the annual increase in consumer prices returned to triple digits with 122 percent. The newly elected president, Javier Milei, inherited the situation from previous governments and the global inflationary crisis. Moreover, the austerity policies he tried to implement generated a lot of controversy among the population, which called for the first general strike since Mauricio Macri’s government. Argentina is suffering other consequences of chronic inflation, such as taxing, informal employment, and budgeting hardships for the different dependencies.
As of 2021, 48.9 percent of employees were in the informal sector, taking a toll from the income taxes of the country, which has quite a high tax burden when compared to the region, between 9 and 35 percent. Also, in early 2024, regions like La Rioja started proposals to create their own currencies to mitigate the impact of inflation on their budget, nevertheless, that is prohibited by the Constitution. This is not anything new, in 2001 some other kind of bonds for the same purpose called “cuasimonedas” (Quasi currencies) were introduced in the country.
Hyperinflation and scarcity in Venezuela
During almost half a century, Venezuela recorded high price increases, but it is difficult to compare other years to the peak during 2018, with 63,374.08 inflation rate and the following year with 19,906.02. The crisis started years prior, with the fall of oil prices in 2014. Venezuela, with its dependency on the oil industry, had less money to import enough goods and the scarcity began. The low supply of goods with the same demand created the perfect scenario for uncontrolled inflation.Moreover, Nicolás Maduro, president of Venezuela, decided to increase the minimum wage considerably and start printing large amounts of money. This added to the political instability of elections that year, creating a new currency called “Bolivar soberano”, and launching the cryptocurrency “Petro”. All those generated a rapid devaluation of the currency, prices going up every day, and increasing poverty exponentially.
By 2019, 96.2 percent of the population lived under the poverty line and almost 80 percent under extreme poverty conditions. Even though the inflation rates dropped significantly to three digits since 2022, Venezuela still ranks as the country with the highest inflation in the world. New measures implemented by the government seem to work better than the previous ones, nonetheless, with still a high dependence on oil prices and international sanctions, the forecast is not favorable for the South American country’s economy.
