What is inflation like in Argentina
This year’s annual inflation rate is 95-100%. At the beginning of the year, we expected a rate between 50 to 65%. In other countries inflation may change one or two percentage points, while in Argentina it might change 30 or 40 percentage points. So, if you ask me how people are living with rising prices today, inflation is certainly a big worry.
However, Argentinians are accustomed to living with it. This year inflation was almost 100%, last year was 50%, the year before that it was 45%. The issue here is not only inflation but salaries. At the end of the day, if you are an entrepreneur, you can put your prices up, but if you are an employee; you have to wait for a salary increase. In the past we used to have one salary increase per year, last year it was two and this year there will be four. With inflation what we face is a gradual decline of purchasing power, then suddenly when you get a pay rise you recover at least some of that purchasing power.
How are Argentinians responding to this
We are everyday a little bit poorer than the day before, but we are accustomed to adapt our expenses to the current situation. At the end of the day, it’s very common for us. We are used to doing this and it’s part of our day-to-day life. People suffer but adapt to do what they have to do. They buy in-bulk to anticipate an increase in prices, but those on a lower income they have to reduce the quantity and quality of the products they buy, as well as eliminating some spending.
Under inflation this high it’s very difficult to save money. Argentinians are used to buying US dollars as a means of protection from the devaluation of the currency that is a natural consequence of high inflation.
This report is focused on consumer psychology, how are people feeling in Argentina
Why? Because we survived two periods of hyperinflation. In the 90s, the inflation rate was 100% per month. What we did was when we received money we tried to buy dollars if we could, or went to the shops and purchased what we could as the day after it could be 10 or 15% more expensive. People always adapt to the environment and in Argentina Inflation is part of the environment.
Does this affect consumers perception of how much something is worth
Absolutely yes! One of the consequences of high inflation is you lose the perception of the prices. Another consequence is that the price relationship between different products is completely lost. At the end of the day, we have no notion of what is expensive or cheap.
Let me tell you a recent example of something that happened to me. Last week I went with my daughter to the supermarket and when we collected all the things we wanted to buy, my daughter asked me how much it would be. I said it could be 30,000 pesos. When I had to pay, the cashier said 18,000, I thought they said 80,000 and I was happy to pay that. This is because there are no relative prices, you lose the idea of the cost of goods. I don’t know if 80,000 is expensive or cheap for shopping in the supermarket.
It is common to find the same item with a price difference of 70% -100% between different stores. It is dramatic, but it is what happens when inflation is so high.
For businesses to be successful, do they need to react quickly
Yes. Companies change their prices permanently and there are many promotions aimed at showing people that they are saving (“buy three, pay for two”, “50% discount on the second unit”, etc.). Brands are permanently required to manage the very short term.
The real challenge for companies is how to maintain a balance between the extreme need to manage the very short term and the positioning of brands in the medium and long term. As we said an inflationary process is a process of gradual impoverishment, therefore brands must adapt to this feeling of negativity people have and accompany consumers in their experience, show them that they understand them, that they empathise with them.
During the storm you need to adapt your strategies, but you also need to think about what is going to happen when the storm stops.
Looking ahead to 2023, what lies ahead in the new year
As we said before, we live in the very short term. It is not possible to have serious forecasts about what may happen in 2023. That’s how we live in Argentina, the long term is the next three months
Table of content
- Feeling the pressure: Context
- Understanding human psychology during the polycrisis
- Has disruption become the new normal?
- The Indian consumer's response to inflation
- Turkey: Re-designing adaptation in the shadow of hyperinflation
- Brazil: Downsizing VS price rises- making the right choice
- Malaysia: Between money well spent and life well lived
- Understanding Argentina
- France: The end of recklessness
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