EconomyAre we better now? The time that inflation in...

Are we better now? The time that inflation in Mexico approached 180%

“Every time in the past was better”, grandparents or our parents often say nostalgically. “Before, it was enough for more.” Perhaps there was less pollution or insecurity, but life was more expensive.

Inflation, that indicator that measures the increase in prices and that causes the loss of the value of money, stood at 8.62% in the first half of August of this year, the highest rate since 2000.

Although the new generations of the country today are beginning to understand and resent the harmful effects of this phenomenon, they do not realize what the problem meant in the 1980s and 1990s, when goods and services became more expensive, in a matter of days, double and even triple digit.

“Oh son, the inflation of 8.62% that you tell me today is nothing against what we came to live in my time. I went to the market to do the errand every weekend and always came back with the most empty bag. I had a dealer who kept the loose tomato for me, which was cheaper and that way I got a better return on my money. That was living the crises in Mexico very hard”, says Amelia C, 72 years old.

Between 1980 and 1999, the country registered an average price variation of 45.2%, but the highest point reached in that period occurred in February 1988, when it reached 179.7%!

Like Amelia’s testimony, Expansión collected experiences of people who lived through the inflation of those years firsthand. Here we share them with you.

The price drama

“I remember very well when I was a child, I was about 10 years old, in 1985, I went with my mom to the supermarket. Before, there were no barcodes, and from one day to the next, managers or staff relabeled the prices of the products.

“There were times when we had gone to the pantry and if we forgot something, we would come back the next day, and the products that we had seen the day before already had other prices! This was very frequent”, explains Ricardo Esteban Sánchez, 47 years old.

Today the Inegi data allows us to see the atypical behavior of prices in those days. An example of the sudden changes that the products registered at that time is the tortilla, which soared 220% in September 1986 compared to a year before, by October it did 231%, in November, 254%, and by December 317%. . At that speed and in those proportions, Mexico became more expensive.

“To understand the seriousness of the situation, we have to go back to López Portillo’s six-year term in the late 1970s and early 1980s, when a severe crisis was inherited with significant inflation, which worsened for subsequent governments and so on until the the 90’s.

“The price of the merchandise was so high that the new pesos had to be used, removing three zeros and converting a 1,000 coin into a 1 peso coin. But I remember the worst of inflation at the end of the 1980s with Miguel de la Madrid and then in the 1990s with the Error of December and Fobaproa, inheritances left by Salinas de Gortari”, recalls Daniel Ramírez Gómez, 62 years old

The pain of going out of business

Economists say that inflation is the tax of the poor and it makes sense, they are the ones who suffer the most from the loss of purchasing power of the currency. However, no one is exempt, as was the case of Roberto Vidal, who now, at 71 years old, recounts the hard experience of closing his business due to this problem.

“From 1972 to 1981 I worked at the Modelo brewery, it was a very good company. For many years I was a driver, although I also helped in stores and in the yard. In 1981 I left there, and since I had just had my third child, I sold a truck I had and bought a truck for a route. A compadre worked on the permits and he got me one.

“About three years later, my wife began to do well in a gas company where she worked and we opened a store in a space that we rented on the corner of the house where we lived in Atizapán (Edomex). We bought things in markets and sometimes in the central (supply) itself to sell them, it was a small store, but it did not go badly.

“In 1986 we closed it, suddenly all prices went to the sky, we stopped buying in the markets and we only went to stock up at the supply center, which was still a little cheaper. We only bought fruit and vegetables, sometimes some meat, but we had to stop buying the rest of the things, like snacks, because we didn’t have enough to carry the essentials. My wife had the idea of going to Jamaica (market) and stocking up on flowers, but people didn’t bring them either.

“At that time sales dropped, the neighbors who used to buy from us asked us where we stocked up, but we didn’t tell them because they just wanted to know so they could go there too.

“Working in the truck put a lot of pressure on me and it wasn’t enough for me anymore, and my wife wasn’t doing any better either, even though her salary was being raised. People hardly bought the same amount from us anymore, they went for less and always, always wanted to ask us on credit or haggled. I put up a sign that I didn’t haggle or trust, but people did it anyway. We closed down flat when the accounts were no longer coming out.

“Right now everything is expensive, but in the 80s I did see more expensive things. I don’t know if it’s because I was at the store too, but right now you complete something, so you did have to choose one thing or another, if you found it.”

Expensive dollar and endless debts

Unlike today, in those 1980s the national economy was not as open as it is now. To have access to imported products, especially from the United States, the choice of many Mexicans was the fayuca.

Ricardo Esteban Sánchez remembers that he liked to go with his father to shop where contraband merchandise (clothes and electronic devices) was sold.

“My dad used to take us to a market in the center of Cuernavaca, we would take money with the hope that it would be enough for the fashionable sneakers (Reebok at that time) in the fayuca, and that the dollar would not have risen, because it was immediately reflected in the final price. It was the best option we had because it was more accessible to us than going to established stores.”

For Alfonso Ramírez Maya, a 74-year-old retired spokesman, it was also common to see how the prices of merchandise rose “stratospherically” due to inflation and the dollar.

“The inflation of those times of López Portillo, De la Madrid and Salinas hit us hard, and to this day we continue to pay many consequences of those governments like Fobaproa.

“For me it was very sad to see how people who had debts for the house, cars or appliances instead of paying them in installments of one, two or three years ended up doing it for longer periods and even some of up to 20 years.”

Erasing three zeros… but not the memory

With the argument of making the use of money and accounts more practical and simple, in 1993 the monetary system of Mexico was changed, eliminating three zeros from the money. A 1,000 peso coin back then was now converted into 1 peso.

One of the reasons behind this action was the strong devaluation of the peso against the dollar, after the well-known Error of December 1994, and also the erosion generated by inflation on purchasing power.

“Uffff! All that time of high inflation was a very difficult time to understand, but it would be easier if we had to add three zeros to the right of our currency or any product right now. Thus, many young people would now understand what it means to lose purchasing power.

“I remember those times because of the shortage of toothpaste, toilet soap and many other things” Today inflation is hitting us, but in those years (80-90) it was worse,” says Luz María López.

And although times were difficult, there were those who were also able to overcome the crisis of the time, such as Enrique Lara, who in 1995 bought a house, unlike many of his neighbors who could no longer pay for it and abandoned them, he managed to get ahead.

“I worked in a transnational company and they increased our salary every three months to replenish purchasing power, that’s why I managed to overcome the crisis, because they compensated me for inflation.”

However, his story was not the common denominator of that expensive Mexico.

Importance of the autonomy of Banxico

Young people aged 25 and under are barely getting their first taste of the harms of inflation. Inflation in the first fortnight of August, at 8.62%, is for now the highest they have seen. Although it is possible that the figure has not yet reached its highest point, it will not repeat what happened in the 80s-90s.

In 1994, Banco de México was granted management autonomy and the pursuit of stability in the purchasing power of the national currency was established as a priority objective.

Although it took several years for this independence from the central bank to be reflected in people’s pockets, from 2002 to 2020 the average inflation rate in Mexico was 4.2%.

Against those averages of 45.2%, it is clear that the famous phrase “All past times were better” is challenged.

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