Argentina is on the cusp of an economic collapse; inflation has crossed 100 per cent for the first time since 1991, a severe drought is hampering grain exports, and the black market dollar is double the official rate due to the government's stringent exchange control. So bad is the situation that people are struggling to afford even basic groceries.
"There's just nothing left, there's no money, people don’t have anything, so how do they buy?" a 74-year-old woman, Irene Devita, told Reuters. A retiree from San Fernando, on the outskirts of Buenos Aires, Devita says she cannot afford anything but tomatoes. "The other day I came and asked for three tangerines, two oranges, two bananas and half a kilo of tomatoes. When he told me it cost 650 pesos [$3.22], I told him to take everything out and leave just the tomatoes because I don’t have enough money," Devita added.
This is one of its worst economic crises in three decades. According to the figures published by the National Institute of Statistics and Census, Argentina’s annual inflation is at 102.5 per cent. The worst affected are meat, dairy and egg products. In February alone, inflation rose 6.6 per cent, spiking the price of meat by 20 per cent.
The gravity of the situation is such that there are only four countries before Argentina with higher inflation - Zimbabwe, Lebanon, Venezuela and Syria.
President Alberto Fernández’s centre-left administration has been trying to control the rising prices, but has not found much success. According to critics and the opposition, Argentina needs a broader stabilization plan that includes a sharp decrease in spending.
"We think the inflation data is bad, very bad, plus it was unexpected," presidential spokeswoman Gabriela Cerruti told reporters. "The government remains firmly committed to controlling prices, controlling inflation, reducing inflation, and not allowing prices to continue increasing."
Climate change
The severe drought has hit Argentina hard. Climate change has affected the country's grain export system, leaving the farmers across the Pampas high and dry.
Argentina is the world's top exporter of processed soy and one of the leading exporters of corn but the worst drought in over 60 years has damaged the crops, thereby hitting the imports.
Mickaël Attia, a crop analyst for EarthDaily Analytics, told CNN that is the worst drought of the last 30 years in Argentina. "It will have an enormous impact on national corn and soybean production, which is expected to be at least 20-30% lower than last year," he said.
The loss amounts to $14 billion and 50 million tonnes less of grain output across soy, corn and wheat. Exports are projected to fall 28% in 2023 compared to last year.
IMF deal
The government is already in talks with the IMF and last week, the IMF announced it had reached a "staff-level agreement" to ease the country’s economic targets under the new debt plan, citing "the challenges of an increasingly severe drought."
According to the IMF staff, they have asked the administration to adjust key targets to build up foreign currency reserves.
It said adjustments would be focused on early 2023 and would help adapt the program for the "impact of the increasingly severe drought" while also taking into account plans by the country to save dollars by cutting spending on energy imports.