Report Nº: 104428/11/2023


The inflation measured by the official agency does not reflect the increases repressed behind the price controls and the monetary emission contained by the Central Bank’s leliqs. The release of these containments will be very traumatic if it is not accompanied by a comprehensive reorganization of the State.

The INDEC reported that October inflation was 8.3% but, with the available evidence, likely, in November it will again be in double digits. It is impossible to predict December, although it is certain that 2023 will be a year of very high inflation. People perceive the enormous disruptions that this process causes on the functioning of the economy and its devastating social impacts. But the most serious thing is that this is only part of the problem because there is a lot of repressed inflation. This means not all inflation has been made explicit since the government uses tools to defer price increases over time.

To contain inflation, adjustments of many prices regulated by the government have been postponed. This allows to hide the inflation that will be generated when the prices of energy, public transportation, private medicine, private education, and the official dollar will be freed. On the other hand, it is good news that next year, the agribusinesses and Vaca Muerta will generate more dollars. But, when the Central Bank buys those dollars, it will have to issue more pesos adding inflationary pressures.  

The most important suppressed inflation is the monetary issuance that the Central Bank took out of circulation by selling passes and leliqs to commercial banks. According to Central Bank’s data, it can be seen that:

  • The stock of existing monetary issuance amounts to 29 trillion pesos.
  • The amount of banknotes in the hands of the people (monetary base) is 7 trillion pesos.
  • The amount of money that the Central Bank took out of circulation by issuing passes and leliqs is approximately 22 trillion pesos.  

These data show that barely a quarter of the total amount of pesos issued is in the hands of the people. The remaining three quarters were absorbed by the Central Bank to avoid further inflationary pressure. To this end, it induced the commercial banks to use the deposits that they receive from their customers, instead of lending them to companies or individuals, to be given to the Central Bank. If all this pent-up monetary issuance were to be dumped into the market, inflation would be much higher than it already is. The Central Bank pays interest (currently in the order of 250% per annum) to absorb these excesses of monetary issuance, which is covered with more issuance, generating a perverse circle. 

If the Central Bank were to dump this enormous mass of money in the market, the inflationary impact would be explosive, at hyperinflationary levels. The alternative –which was already applied at the end of 1989 with the so-called “Bonex Plan”– consists of holding the money the people have deposited in the bank and exchanging it for a long-term government bond. In the first case, savings lose real value with hyperinflation; in the second case, savings lose real value by rescheduling. Both alternatives are traumatic and costly but appear inevitable if the repressed excess of issuance continues.

The genuine solution is to tackle a comprehensive reorganization of the State. This means rethinking its organization to make it financially balanced and more efficient. In this way, conditions will be created so that the correction of regulated prices and the dismantling of leliqs will be less traumatic. To this end, it must be assumed that “zero deficit” policies are of little use if the poor quality of public management is maintained. Instead, a disruptive transformation agenda must be addressed. Among its central components are tax planning (unifying taxes and tending towards the self-financing of the provinces), pension planning (so that aging ceases to be a fiscal compromise), and functional planning (so that the national State stops interfering in provincial and municipal functions and each province with its municipalities are accountable for the quality of the services it provides to its citizens).

The integral organization of the State is a very ambitious proposal. But it is the only one that will allow getting out of repressed inflation without going through a very traumatic experience such as hyperinflation or a Bonex Plan. Its realization depends not only on the next president but also on the agreement of most (not all) provinces. Beyond monetary and exchange rate issues, the central issue is to change the organization of the State, which requires a great deal of technical expertise and political audacity.  


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