HomeEconomic IndicatorThe Astounding Tale of a Drastic 19,900% Inflation Surge

The Astounding Tale of a Drastic 19,900% Inflation Surge

By Adam Jourdan Buenos Aires (Reuters) – In Ruben Galante’s barbershop in Buenos Aires, a collection of handwritten notebooks holds the record of his decades-long career. The entries detail the date, type of haircut, and price, providing a glimpse into the impact of Argentina’s staggering inflation, which has reached a staggering 19,900%. The notebooks not only document Galante’s personal history but also shed light on the country’s economic struggles. Galante, a 67-year-old barber with a small shop featuring sandy wooden floorboards and a glass window facing the street, has witnessed numerous political transitions, economic crises, and soaring prices over the past four decades. For over 20 years, he has diligently recorded every haircut in his colorful lined notebooks, offering a unique perspective on the fluctuating inflation rates that often differ from the official data. Galante’s notebooks, neatly tucked away on a small shelf in the corner of his store, reveal a striking trend. Between 1991 and 2023, the price of a haircut skyrocketed from 15 pesos to 3,000 pesos. Notably, the current administration of President Alberto Fernandez has witnessed the most rapid price increases in the past three decades, with inflation soaring by 757% since he took office in December 2019, as recorded in Galante’s notebooks. “This crisis has been going on for a long time, and it’s only getting worse,” Galante expressed his concerns to Reuters. “It’s pushing us into poverty.” Inflation has emerged as the primary concern for voters ahead of the upcoming general election on October 22. With an annual inflation rate of 124% – the highest since 1991 – Argentina is witnessing the rise of right-wing radical Javier Milei, who advocates for scrapping the country’s peso currency. Economists predict that inflation could reach nearly 200% by the end of the year. As prices continue to surge, Argentina is facing a severe cost of living crisis, pushing four out of ten people into poverty. Galante worries about his adult children, one residing in Buenos Aires and the other having moved abroad, contributing to the brain drain of young Argentines seeking better opportunities elsewhere. “My son runs a music academy, and he works tirelessly, yet he still can’t afford to buy a property or a car,” Galante shared. “He puts in so much effort, but the money simply doesn’t last.” Galante’s journey as a barber began when he rented his shop in the leafy Belgrano neighborhood in 1982, the final year of military dictatorship. Three years later, with assistance from the bank, he purchased the shop. The initial years were marked by political shifts and economic turmoil as Argentina transitioned into democracy but succumbed to hyperinflation in the late 1980s, resulting in dizzying price changes occurring several times a day. The situation stabilized in 1991 when Carlos Menem’s government pegged the peso at a one-to-one exchange rate with the US dollar. At that time, Galante set his haircut price at 15 pesos, which remained constant for over a decade. As a young barber in cosmopolitan Buenos Aires, Galante lived comfortably with 15 pesos equivalent to $15 due to the currency peg. Argentina, once a global economic powerhouse a century ago, remained one of the wealthiest countries in the region. Galante fondly recalls visiting the neighboring café for multiple coffees per day, traveling, dining out, and regularly replenishing his barbershop equipment. Today, he exercises much more caution. In terms of income earned per haircut, Galante’s purchasing power has drastically declined in dollar terms, now amounting to around $4 based on the parallel exchange rates commonly used by Argentines. “My income was much higher back then with 15 pesos, compared to what it is today,” Galante lamented. As an example, he mentioned that the income from a single haircut today wouldn’t even cover the cost of a mozzarella pizza, whereas in the past, it could purchase five. Years of economic decline have eroded the income and savings of Argentines. The wealthiest individuals seek to preserve their funds outside the country in dollars to shield themselves from inflation and currency devaluation. The current form of the peso emerged in 1991 with the Currency Board peg, following the hyperinflationary period during the final years of Raul Alfonsin, the iconic figure of Argentina’s democratic return in 1983. “With convertibility, inflation virtually disappeared,” Galante explained. However, this peg came at a cost, limiting the country’s ability to implement its own monetary policies and tying its fate closely to the financial health of the United States. Pressure began to mount in the late 1990s as overspending expanded and unemployment rose, culminating in the major economic crisis of 2001-2002 under President Fernando de la Rua. By late 2001, frustrated Argentines demanded the president’s resignation and initiated a bank run in an attempt to withdraw their deposits following the infamous “corralitos” when the government seized savings. On December 20, 2001, de la Rua fled the presidential palace by helicopter, and inflation made a comeback as the peg was abandoned. Galante faced increasing pressure to adjust his prices, but he was mindful of the hardships his clients faced, knowing that raising prices too quickly would result in lost business. “Costs started to rise at an alarming pace,” he recalled. Under President Nestor Kirchner (2003-2007), Galante raised his haircut price for the first time since 1991, increasing it from 15 pesos to 18 pesos. During Kirchner’s term, the price rose by a total of 53%. Subsequently, his wife, Cristina Fernandez de Kirchner, assumed power and emerged as a divisive populist figure, wielding significant political influence for years. During her first term, the haircut price climbed by 117%, accelerating to 200% during her second term. In 2015, Mauricio Macri, a market-friendly businessman, assumed office with a promise of fiscal responsibility. Despite implementing reforms that appealed to investors, the economy continued to deteriorate, leading Macri to seek a $57 billion loan from the International Monetary Fund in 2018. Over Macri’s four-year term, haircut prices surged by 133%, a figure that has since skyrocketed even higher. The largest local bill in circulation, the 2,000 peso note, no longer covers the cost of a simple trim. Galante’s price increases have lagged behind general inflation, and the disparity has grown in recent years, as evidenced by an analysis of official inflation data. While government subsidies have somewhat contained the rise in utility costs, bus and train fares, clothing, home equipment, and grocery prices have climbed at a faster pace. The most significant surge has occurred in healthcare expenses. Galante opens his barber shop drawer and retrieves a stack of papers containing years of healthcare bills. The earliest bill dates back to 2007, amounting to 798 pesos. Since then, the cost has skyrocketed to 142,636 pesos, surpassing the price of a standard haircut. “I don’t even bother trying to keep up anymore,” Galante admitted with a resigned shrug. He acknowledged the importance of ensuring his regular customers can still afford his services. With the imminent election, Galante remains cautious. While he appreciates the rhetoric surrounding shock therapy for the economy touted by the frontrunner, Javier Milei, a right-wing radical, he expresses concerns about Milei’s aggressive personality. Galante stated that he would likely vote for mainstream conservative Patricia Bullrich over Sergio Massa, the ruling party’s economy chief. Each candidate presents a distinct economic plan. As Galante continues to cut the hair of his regular customer, Luciano Muñoz, the conversation inevitably returns to soccer, another passion shared by Argentines. Nevertheless, the economy and inflation remain recurring topics of discussion. “Argentina has a way out of this crisis, and that way out is political,” Galante asserted. “Our country possesses resources and potential for improvement, but it seems that no one can agree on the path forward.”

Must Read