What are the characteristics of private sector workers' household savings in Argentina or Brazil

Question

The point of this question is to get a sense of what is it like to earn more than needed for consumption in a middle income, high inflation economy.

Specifically consider large middle income South American economies that have historically experienced high inflation such as Argentina (per capita GDP 10K USD, PPP more than double that) or Brazil (per capita GDP 7K USD, PPP more than double that). The chart shows that even in a high inflation economy like Argentina a large part of GDP can be saved. This is a chart of domestic savings which is not the same as household savings because it probably includes corporate and government savings. It would be good to determine how much households save and specifically the households that do not have a household member working for a government. In other words, I am interested in the savings of people who are not entitled to the kind of pension paid to former government workers.

Specifically what are the characteristics of private sector workers' household savings? DB means defined benefit savings and DC means defined contribution savings. Is it common for companies to offer DC plans in these economies? Are workers allowed to direct contributions to DC plans in the way of controlling the mix of equity, bonds, and guaranteed investments, and the currency denomination of those investments? For example suppose a household can save 15% of income. Would this household be able to put the entire amount into a U.S. Treasury bond fund or U.S. large cap equity fund or a mix of these? How much of private sector workers' household income is being saved? How much of this private sector workers' saving is in land and buildings?

To supply some context, inflation in Argentina in recent years is graphed here...

Answer 1

Can't speak of Brazil, but it's common that Argentina's household saving is directed to durable goods (land and houses) and FX currency (US Dollars). There's little saving going into bonds and equity.

This can be seen in many ways. For example, the volume of financial markets vs. GDP is really low and volatility is usually quite high. On the other hand, house prices and FX rates tend to have very rigid prices and rarely go down nominally, with agents adjusting quantities instead. As an extreme case, consider that, nowadays, the ratio between the income you'd get from renting an apartment in Argentina and the property value is on par with the yield of a T-Bill, which goes to show its dual function as a place to live and as a good meant to be saved.

P.S.: Beware Argentina's inflation metrics, they were falsified between 2007-2016. I recommend using this dataset from the Million Prices Project, instead: http://www.inflacionverdadera.com/argentina/english/

Answer 2

Inflation can change saving pattern in short-term but not in long-term. Nominal interest rates can be decomposed using the Fisher equation as:

$$i \approx p +r$$

Usually in high inflation countries nominal interest rate is high to compensate for higher inflation so high inflation should not matter for saving decision that much. Word Bank data says that real interest rate, that is corrected for inflation, in Argentina was 2019 as much as 11%.

Real interest rate determines saving in the long-run not inflation.