Argentina is famous for many things, but among these is (sadly) its history of economic trouble. It has defaulted on its bonds nine times since achieving independence (https://en.wikipedia.org/wiki/Economic_history_of_Argentina), and has long suffered from high inflation.
President Javier Milei, a libertarian economist, came into office nearly two years ago, promising to improve the economy, including reducing inflation. And indeed, inflation has declined dramatically since he came into office. It also appears that the number of people below the poverty line has dropped by a large degree.
But Argentina is still having a tough time. I'm not an economist, but my impression is that every foreign-currency transaction flows (directly or indirectly) through Argentina's central bank. If people and companies in Argentina import more than they export, or if lots of people convert their money to dollars because they don't believe in the future of the peso, then the central bank will spend its dollars faster than it gets them. Eventually, the bank would run out of dollars.
That's a problem not only because international trade requires dollars, but also because Argentina pays its debts (e.g., bonds) in dollars. And it uses dollars to defend the peso.
The Trump administration has decided to give Argentina $20 billion to beef up its foreign currency reserves. (And yes, "beef up" is a sad attempt at an Argentina cattle joke.) That would give Milei more economic breathing room, which would, he and Trump both hope, also give him a political advantage in mid-term elections on Sunday, October 26th.
Economist Paul Krugman is very skeptical that this bailout would work. He also wonders if this is an attempt to help American hedge funds that bet on Milei's economic success. Even if you don't buy his cynicism, his economic analysis is worth reading (https://paulkrugman.substack.com/p/bailing-out-bessents-buddies-bets).
This week, we'll look at a few Argentine economic measures, including inflation, the central bank's currency reserves, and the peso-to-dollar exchange rate. We'll also see just how big Trump's proposed bailout is relative to the central bank's reserves.
Data and five questions
This week's data comes from several sources:
- From Argentina's National Institute of Statistics and Censuses (INDEC), which publishes historical values for its consumer price index (CPI in English, and IPC in Spanish), a leading inflation measure, at https://www.indec.gob.ar/indec/web/Nivel4-Tema-3-5-31. I downloaded the first link, an Excel version whose name starts with "Índices y variaciones," from https://www.indec.gob.ar/ftp/cuadros/economia/sh_ipc_10_25.xls .
- From FRED, the St. Louis Federal Reserve Bank's online data-download and analysis system, I retrieved data about the non-gold holdings of Argentina's central bank. The page is at https://fred.stlouisfed.org/series/TRESEGARM052N?utm_source=chatgpt.com , and I downloaded the CSV version of this data.
- Also from FRED, I downloaded the historical peso-to-dollar exchange rate, from https://fred.stlouisfed.org/series/ARGCCUSMA02STM .
Learning goals this week Joining and merging, correlations, grouping, and plotting.
Paid members, including subscribers to my LernerPython membership program (https://LernerPython.com) can download the data files from the end of this message. Paid members are also invited to monthly office hours, can download my Jupyter/Marimo notebooks, and can also open the notebooks with a single click in their browsers.
Here are my five tasks and questions. I'll be back tomorrow with my solutions and explanations:
- Read the national CPI data (the first section) into a data frame. Given the general inflation level ("Nivel general"), produce a line plot in Plotly showing monthly inflation numbers for the history of this data.
- For each calendar year, calculate the annual inflation for the "Nivel general" values, and produce a line plot showing annual inflation in Argentina starting in 2017.