Argentina Inflation Could Ultimately Result In Higher Demand For US Grains

Published on: 11:27AM Feb 07, 2011


Inflation is rising so fast in Argentina the locals are starting to get restless...  The word I am hearing is that inflation in Argentina is running close to 30% right now.  The middle and upper class are using credit cards at a record pace, while the lower class are now struggling to pay for food.  There are whispers in the air about "hyperinflation", and many are calling into question the success and efforts of President Cristina Fernández de Kirchner, who will be trying to seek re-election in October.  You can already see where I am going with this.  How long before those in Argentina start to protest and demand changes and or solutions.  What if "hyperinflation" is the case in Argentina, what if they need all of their inventory and current crops in order to keep a lid on prices domestically.  What if they were to strictly limit exports of soybeans, corn and wheat?  I think we are already seeing this as the government has limited the amount of wheat they are allowing farmers to export, and farmers are threatening to strike because of the mandates.  Argentina may quickly find themselves in a very precarious situation.  Their government continues to underreport and manipulate inflationary data and now things are starting to finally catch up with them.  The manipulation of the statistics has drastically increased Argentina’s risk profile, driven away foreign investors and complicated the country’s efforts to return to the credit markets.  The word is paychecks and salaries have increased 20% per year the past few years and still can not keep pace with inflation.  In 2010, Argentina's people actually purchased fewer units of beverages, fruits and vegetables, a sign that inflation is finally taking hold and is starting to strangle out their economy.  Now that paychecks are no longer keeping pace with food prices more individuals have been forced to turn to credit cards.  Data actually shows that credit card debt in Argentina rose by 45% this November compared to last November.  Inflation in Argentina may have finally reached a "tipping point."  If the government doesn't do something soon I anticipate their citizens will start demand changes.  If the protest cripples the country you could certainly see the world leaning more on the US for their grains.

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