I’m sure you’ve all been wondering how our new President is getting on. Trump’s best friend (now there’s a clash of weird egos and hairstyles) has now completed a year in office.
As I said to many appalled progressive friends of mine when Milei was elected, “It´s the economy, stupid”.
In 2023 we had an estimated inflation rate of 220%, as reported in my first blog of 2024.
Several friends lighter, and now heavily conscious of the need to brush up my skills of diplomacy, let’s turn to how the economy is doing.
After initial high inflation, largely due to the impact of Milei and his team’s radical economic policy, it’s calmed to around 30% over the last seven months.
Here are the inflation stats since December 2023 (this month’s stats will come out around mid-January, but are hoped to be around 2 or 3 per cent):
Dec 25.5%
Jan 20.6%
Feb 13.2%
March 11%
April 8.8%
May 4.2%
June 4.6%
July 4%
Aug 4.2%
Sep 3.5%
Oct 2.7%
Nov 2.4%
As regular readers of my blog will know, I am not an economist, but that looks pretty promising to me.
Milei is now hoping to broker a new deal with the International Monetary Fund (IMF), which, according to the Wall Street Journal, forecasts that Argentina’s economy, while shrinking by 3.5 percent this year, will bounce back with five percent growth in 2025.
That sounds great, so why is everyone feeling so poor? Perhaps because many prices have skyrocketed.
To put it into the perspective of a typical housekeeping budget, as Milei’s beloved Margaret Thatcher liked to do, here’s a random list of my costs on the road with trips, and our household expenses, with year on year comparisons:
December 2024 December 2023
Electricity: 231,776 pesos 48,908: that’s a whopping near fivefold hike
Fixed rate charge: 5.3 units 1.3
Energy charge rate: 185 units 54 (nearly a four fold increase)
Gas: 5,219 1,195 (more than double)
Internet: 39,735 16,990 (more than double)
Car wash: 12,000 6,000 (double)
Airport parking: 2,000 700 (nearly three fold)
4×4 car service: 390,000 130,000 (three fold)
On the road, I’m paying 1,419 pesos for a litre of fuel (it was 500 pesos at the start of December 2023, 795 by the end): so double year on year.
Accommodation prices have shot up, partly because of the fuel hikes: while I paid 9,000 pesos for Christmas Eve in Purmamarca last year: now I am paying 25,000 pesos on Boxing Day up the road in Tilcara.
The Quebrada de Humahuaca has always been pricey, but there should be a special place in the Hall of Shame for the pukara of Tilcara: they increased their prices from 1,000 pesos per person last year first to 6,000, and now to 12,000: a twelvefold increase. (This is the special discriminatory price for foreigners: it’s “only” 6,000 for Argentines.)
One byproduct of Argentina becoming more expensive is that locals are heading to Brazil for their summer holidays in January and Februrary, as it’s cheaper than the Mar del Plata coast (and frankly, the beaches are much better).
This will only be accelerated by the lifting yesterday (23/12) of taxes on Argentines using their bank cards abroad (most recently this added 60% to every purchase, but at the time of the World Cup in Qatar climbed to 100%).
The all-important blue dollar is now around 1,150 (but has been as low as 1,050 recently): compared to 970 twelve months ago: so very little fluctuation.
When prices changed every week in Argentina, I used to console Alicia by telling her to think in dollars not pesos: but now, thinking in dollars, it’s still expensive!
Here you’ll see how the breach with the official and the MEP (which you should get paying with your foreign bank card) has narrowed.
The opposition politician Ana Maria Ianni, whose patch includes El Calafate, famed for the Perito Moreno glacier, describes the impact of the new government on tourism as “catastrophic”.
While she obviously has an axe to grind, she may also have a point: latest stats for the first ten months of 2024 show a 30% year on year decline in foreign visitors.
And since April there have been seven successive months of falling hotel occupancy.
At Poncho Tours, as we concentrate on tailor-made trips with English speaking guides, we’re a niche market, so probably protected from the worst buffets of the economic storm: but I’ve noticed we’ve done more days on the road in 2024 than any year since 2016, but made considerably less profit than in 2023.
The bottom line is we may have to put up prices to cover our costs, not least those of the guides.
And then what happens? It may become too expensive, so customers who have the world to choose from stop coming through the door: this is going to be the quandary for many businesses in Argentina during 2025.
On this rather sombre note, I hope you all have and very Merry Christmas, and a parsimonious New Year…
