Key facts:
The cessation of the inorganic monetary issue reduces inflation in Venezuela.
A potential deal with the IMF keeps prices in Argentina under control for the time being.
Monthly inflation in Argentina during February 2022 was 4.0%. In the same period, Venezuela suffered an inflation of 1.7%.
The figures, for the Argentine case, correspond to private consultants, because the official data from the National Institute of Statistics and Censuses (INDEC) will only be available on March 15. For Venezuela, the number provided by the Venezuelan Finance Observatory (OVF).
According to analysts at OJF & Asociados, Argentines saw a considerable increase in prices, especially in transportation and food and beverages. The monthly variations for these items were 6.3% and 5.5%, respectively.
For their part, the Venezuelans had considerable price increases in communication (16.7%) and in services (10%). This was offset by the reduction in the price of all other items. Among them, the following stand out: food (-10.5%); alcoholic beverages and tobacco (-6.2%); and miscellaneous goods and services (-5.8%).
It was this drop in prices that made Venezuela drop positions in the Latin American inflationary ranking in February 2022, although the Caribbean country should maintain similar figures to also abandon the leadership of the year-on-year ranking.
As reported by the source cited above, Venezuelan year-on-year inflation was 246%, while in the southern country it was around 51%.
Why is inflation low in Venezuela?
As this medium reported a couple of weeks ago, the country governed by Nicolás Maduro has had five consecutive months of monthly inflation below two digits. Furthermore, with twelve months of inflation of less than 50%, it is no longer possible to speak of hyperinflation.
After the last monetary reconversion in Venezuela, the State ceased the inorganic emission of money that, in a chronic way, carried out for years. Ronald Balza, professor of economics at the Catholic University of Caracas, explains it as follows:
Hyperinflation in Venezuela is gone as it came. (…) The Government did not take measures to stop it, but rather stopped doing what was causing it, which is to finance itself with accelerated monetary emission.
Ronald Balza, Venezuelan economist.
Balza’s words seem to evidence the veracity of the postulate of the late Milton Friedman, one of the referents of economic liberalism. For this American economist who won the Nobel Prize in 1976, “Inflation is always and everywhere a monetary phenomenon”.
Why did Argentine inflation exceed Venezuelan inflation in February?
Although monthly inflation in February in Argentina exceeds that of Venezuela, as revealed by previous data, this is not due to a considerable increase in the southern country, but rather to the drop in prices in Venezuela.
As CriptoNoticias reported weeks ago, signs of an agreement between the Government of Argentina and the International Monetary Fund (IMF) have put a stop to the escalation of inflation and the devaluation of the national currency, which had been accelerating.
In any case, this agreement —which is not yet completely firm— would only extend the payment term, so the next government would have to take over.
Before knowing the negotiation, the liberal deputy José Luis Espert, had predicted that inflation would reach 100% year-on-year in case of not agreeing on a debt payment.
It can be thought, then, that the Argentine situation is one of “tense calm”. At any moment, that 4% or 5% monthly inflation to which Argentines are accustomed could shoot up to levels that they haven’t seen each other for several decades.
The Bitcoin Plan: Monetary Sovereignty of Individuals
In these contexts, both in Venezuela and Argentina, a constantly growing bitcoiner ecosystem is perceived. New exchanges, companies providing services with bitcoin (BTC) and the growth of groups on social networks demonstrate this.
In Argentina, Satoshi Nakamoto’s cryptocurrency is a perfect refuge against the devaluation of the peso, in the medium and long term.
Even for the Venezuelan case, where the bolívar is maintaining a certain stability, bitcoin generates interest in the population. On the one hand, it offers protection against the devaluation of the dollar, which is slower than that of Latin American currencies, but is not non-existent for that. On the other hand, it offers characteristics that fiat money (much more so in its digital versions) does not have: unconfiscability and resistance to censorship.
The Venezuelan economist and bitcoiner, Daniel Arraez, values these characteristics of bitcoin, as he foresees “a turbulent period in regulatory terms” for the near future. He suspects —as he stated in dialogue with CriptoNoticias— that the growth in the use of BTC could take place underground. It would be “a more discreet way, where the actors who are now showing their faces or who are showing themselves as promoters could be affected by the security and control bodies of the State.”