For the fourth consecutive month, Argentina no longer holds the highest monthly inflation rate in Latin America. Moreover, for the first time in over a year, its annual inflation rate is not the highest in the region. Following the price surge at the end of 2023, inflation in Argentina has begun to slow down amid fiscal adjustments, a controlled depreciation of the currency at a 2% monthly rate (now reduced to 1%), and continued currency exchange restrictions. As a result, last month saw the lowest inflation level in four and a half years.
Inflation Rate Decline in Argentina
In January, Argentina’s cost of living increased by 2.2% on a monthly basis, a 0.5 percentage point decrease compared to December (2.7%), according to the National Institute of Statistics and Censuses (Indec). This was the lowest inflation rate recorded since July 2020, when inflation stood at 1.9%. Over the past year, Argentina’s Consumer Price Index (CPI) accumulated an 84.5% increase.
With these figures, Argentina has a lower monthly inflation rate than Venezuela, a trend that has been observed for much of 2023 and 2024. However, what is even more striking is that this now applies to the annual inflation rate as well. Venezuela, which has been trying to recover from hyperinflation for years with an informally dollarized economy, saw a 7.9% increase in prices last month, accumulating a 91.3% inflation rate compared to January 2024, according to the independent Venezuelan Finance Observatory.
Venezuela’s Inflation Accelerates Again
Venezuela’s inflation increase was in line with the 7% rise in the price of the U.S. dollar during January, reflecting the high level of dollarization in the pricing of goods and services. The report further highlighted that January is usually a month of low inflationary increases, making this surge particularly significant. This suggests that inflation is regaining momentum, driven by currency depreciation after Venezuela abandoned a quasi-fixed exchange rate regime in September and switched to a system of small devaluations.
Inflation Rates Across Latin America
In most Latin American countries, inflation is reported and analyzed on an annual basis, as the monthly rate is usually below 1%. For example, in Brazil, the cost of living increased by 0.16% in January compared to December, the lowest rate for that month since 1994. Over the past year, Brazilian prices rose by 4.65%.
Similarly, in Mexico, the Consumer Price Index increased by 0.29% on a monthly basis and 3.59% annually, marking the lowest rate since January 2021.
Across the Andes in Chile, inflation was recorded at 1.1% monthly and 4.9% annually, slightly exceeding market expectations. Uruguay reported a similar increase, with a monthly rise of 1.1% and an annual inflation rate of 5.05%, remaining within the government’s tolerance range.
In Colombia, prices increased by 0.94% in January and 5.22% annually, still distant from the country’s 3% target. Paraguay’s CPI rose by 1% monthly and 3.8% annually. Bolivia, where inflation has become a concern, saw a 1.95% increase compared to December, marking the highest inflation rate in 18 years, with a 12.03% annual increase.
Inflation Rankings in Latin America (January 2024)
| Country | Monthly Inflation (%) | Annual Inflation (%) |
|---|---|---|
| Venezuela | 7.9 | 91.3 |
| Argentina | 2.2 | 84.5 |
| Bolivia | 1.95 | 12.03 |
| Colombia | 0.94 | 5.22 |
| Uruguay | 1.1 | 5.05 |
| Chile | 1.1 | 4.9 |
| Brazil | 0.16 | 4.65 |
| Honduras | 0.61 | 4.27 |
| Paraguay | 1.0 | 3.8 |
| Mexico | 0.29 | 3.59 |
| Peru | -0.09 | 1.85 |
| Costa Rica | 0.36 | 1.14 |
| El Salvador | 0.17 | 0.31 |
| Ecuador | -0.15 | 0.26 |
Inflation Trends in Central America
In Central America, inflation remained relatively low. In Honduras, prices rose by 0.61% monthly and 4.27% annually. In Costa Rica, the Consumer Price Index increased by 0.36% from December and 1.14% over the past year. Meanwhile, in El Salvador, a dollarized economy, inflation was recorded at 0.17% monthly and 0.31% annually.
Deflation in Peru and Ecuador
Interestingly, in January, two Latin American countries experienced a decline in consumer prices. In Peru, inflation registered a negative variation of -0.09%, though prices had increased by 1.85% over the past year. Ecuador, which has been dollarized since 2000, saw a 0.15% drop in prices compared to December, while the annual CPI showed a 0.26% increase.
Argentina’s declining inflation rate marks a significant shift in Latin America’s economic landscape. While Venezuela continues to struggle with inflationary pressures due to currency depreciation, other countries in the region are experiencing relatively stable inflation. The varying trends across Latin America highlight the diverse economic policies and external factors influencing price levels. Moving forward, Argentina’s ability to sustain its downward inflation trend will depend on continued fiscal discipline and monetary policies.