Inflation throughout Latin America saw high, lows, and in-betweens in 2013. Here is a rundown of the top three countries where the prices of goods and services rose the most in a year of overall sustained economic growth (though less dynamic, overall, than 2012). Winners in the eyes of statisticians – and losers vis-à-vis their citizens and the international community.
Venezuela’s inflation climbed to 56.2% in 2013, the highest in Latin America and competing with civil war-ravaged Syria for the highest in the world. President Nicolás Maduro conveniently blames it on the alleged capitalist economic war being undertaken against his country, which led him to launch an “economic offensive.” Maduro has already beaten his predecessor Hugo Chavez in something: inflation was 20.1% in 2012, almost three times lower than in 2013. Currency and price controls have led to shortages of basic goods, such as toilet paper, are the two main reasons. As a devaluation of the bolivar is gaining traction – something Maduro continuously denies while analysts see as the only solution – it’s possible that the inflation will soar even higher in 2014.
As is always the case with recent economic data from Latin America’s number-three economy, there are two sets of books: those kept by the government and those kept by the rest of the world. Cristina Fernández de Kirchner’s government said consumer prices rose 10.9%. However, private analysts estimate inflation exceeded over 28%, making it the highest in over two decades. A new National Consumer Price Index (CPI) will measure inflation in 2014 after the International Monetary Fund threatened to sanction the country (something we believe will never happen). The new index will take into account prices from the whole country, instead of only Buenos Aires and its environs, which isn’t a way to tackle steep price increases. In that direction – to combat inflation – witness the government’s price freeze, which took effect January 1, on up to 200 goods. Will that bear results in the new year? As with Venezuela, a weak currency, the peso, will play a large role in any such result.
Uruguay comes in third, by a considerable distance. Inflation in 2013 reached 8.52% outpacing the government’s 6% target ceiling. Inflation is a hair more than a whole percentage point above the previous year (7.48%) though not as high as 2011 when it reached 8.6% (in these three years Montevideo has failed to hit its full-year inflation target of 4 to 6%). Uruguay’s case is the oddest of the three since it has experienced a decade of strong uninterrupted growth. Will loosening the 2014 target range has to between 3% and 7% have beneficial consequences? Keep an eye on consumer prices.