💸🎈LatAm's inflation story is not all doom and gloom: in fact, most countries are doing quite well. Let’s explore the progress made since the 1980s ↓
In August, Latin America’s largest economy saw prices actually decrease for the first time in over a year—and Domingo Brief subscribers, naturally, heard it first.
Brazil saw 0.02% deflation, driven by a drop in housing, electricity, and food costs, bringing 12-month annual inflation to just 4.4%.
For reference, most orthodox economists say that central banks should aim for a target inflation of 2% (to allow room for wages to grow over time).
So Brazil is not too far off. But here’s the good news: most of Latin America is also doing quite well on inflation.
Yes yes, we know: you’re thinking about two of Brazil’s neighbors, to the north and south. Argentina and Venezuela have unfortunately made headlines over the last decade owing to their repeated cycles of hyperinflation.
While the problems in both these countries are real and persistent, fixating on them ignores all of the massive progress made by other Latin American countries since the 1980s. So today let’s look at the rest of the region.
The 1980s were infamously known as the lost decade in Latin America for the hyperinflation and currency crises which gripped much of the region. Just about every local economy cratered in that time, with some suffering more than others.
Nicaragua, which spent much of the 1980s witnessing a civil war between the Sandinista government and Contra rebels, saw over 2700% inflation. Bolivia saw nearly 1400%, while neighboring commodity-rich Brazil and Peru each saw over 300%.
These high figures represent years of lost economic progress for everyday citizens watching their savings and assets evaporate in real time. Which is what makes the general advancements made in recent decades, owing in no small part to disciplined central banks, so impressive.
As central banks have gained autonomy in recent years, they’ve learned from the lost decade and actually pursued more conservative fiscal policies, hiking interest rates even while their counterparts at the US Federal Reserve or European Central Bank were trying to stimulate
their economies.
What’s the result? The 2010s saw improvements by most Latin American countries over the previous decade, while even the 2020s saw inflation held back by high interest rates.
So sure, Latin America’s inflationary history isn’t always great—but its present is certainly better.
