Nearshore Americas

Uruguay and Argentina Inflation Among Highest in the World

Source: Merco Press

Inflation in Uruguay was not only far above target domestically but also figures among the ten highest in the world, and in Latam only behind Argentina and Venezuela

Uruguay ended 2011 with 6.8% inflation, above the target range of 4% to 6%, which nevertheless completes a seven year period below two digits, the longest since stats started back in 1939.

However Uruguayan economists are divided as to the future approach: some believe it’s not so important the actual percentage increase but the fact that the acceleration of prices is under control. They argue that in a global volatile environment it’s not necessarily advantageous to strictly implement “monetary policy”.

Although monetary policy helps contain prices it also slows the economy and job creation, and helps an increase in imported goods and services because a stronger currency (and cheaper dollar) means Uruguayan goods (particularly with a high component of local costs) can loose competitiveness.

The other school believes it’s time to begin cutting government expenses, containing the budget deficit and salaries’ agreements so as to give monetary policy more flexibility. Anyhow they consider the current monetary policy “too expansive” and President Jose Mujica in his daily radio chats has warned families about over spending, “plastic credit” and increased indebtedness.

But in spite of the debate in Uruguay the fact is that before the rest of the world and even in Latam, Uruguay with 6.8% inflation ranked poorly out of 71 countries: eighth highest inflation at world level and third in Latam.

Venezuela leads (for the sixth year running) with an inflation of 27.6% (mainly food and textiles) followed by Argentina and including Bolivia. However Argentina’s data is questioned because the official index is 8.8%, but the so called Congressional index signals 22%, and is the reference for salaries, the private sector and judicial rulings.

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Panama and Brazil (6.5%) missed the first ten, but figure in positions 11 and 12. Other rankings in Latam include Guatemala with 6.1%; Ecuador, 5.41%; Paraguay, 4.9%; Chile, 4.4% and Colombia, 3.73%.




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