Argentina applies price control and companies predict shortages

Argentina applies price control and companies predict shortages
Argentina applies price control and companies predict shortages
  • Peronism tries to contain the runaway inflation a few days before the legislative elections

  • Argentina has a long history of price control that sometimes led to hyperinflation

Do not buy more from the one who increases (the prices) “, his late president asked the Argentines Nestor Kirchner. On the 11th anniversary of her death, the current Vice President, Cristina FernandezShe remembered the advice of her late husband, as if that voice came from beyond to establish an order that seems impossible.

The government of the president Alberto Fernandez put in place a plan to control the prices of 1,432 products in the mass consumption basket. The measure will govern until the beginning of next year, but Peronism thinks about its most immediate results: in a country with 40% poor, each point up the inflation, which will close this year above 50%, marginalizes thousands and thousands of families. Among the most socially disadvantaged sectors are the natural voters of the party that returned to power in December 2019 with the promise of healing the wounds aggravated by the pandemic.

The disenchantment with the Government was of such depth that in the August primaries he had five million votes less than in the 2019 presidential elections. These results predict an electoral disaster in the Legislative of November 14. The peronism he mobilizes all his forces to avoid it. Otherwise, it would lose control of the Senate and its majority status in the Chamber of Deputies.

In the midst of that storm, Fernández launched a battery of provisions to minimally improve the condition of the millions of Argentines punished. Price control is one of those provisions. The Argentine Business Association (AEA) predicted that the tool to avoid rising prices is doomed to failure. “It is a very negative measure“, he assured. The Argentine Chamber of Commerce and Services (CAC) predicted an imminent shortage of essential products.

A history of stumbling

Inflation is a cyclical upheaval. In 1973, Peronism “froze” prices and wages. Inflation fell from 80% to 27% in one year. But in 1975, a 50% currency devaluation opened the floodgates of another inflationary spiral. The military dictatorship (1976-83) also wanted to apply the same remedy: inflation went from 444% in 1976 to 177% a year later. In 1981, a new devaluation had new brutal consequences. The first post-dictatorship government, that of the radical president Raúl Alfonsín (1983-89), stumbled over the same stone and ended half a year early, devoured by a hyperinflation. His successor, Carlos Menem, dollarized the economy. But before he suffered the same scourge of his predecessor.

Kirchnerism (2007-2015) carried out the “Careful Prices” program. His feat was to end that political cycle with an annual inflation of 25%. Mauricio Macri He said it was very “easy” to end this scourge. He concluded his presidency with the same inflationary percentages forecast for this year.

The rising cost of living alters customs. A kilogram of tomato can cost up to 40% in two grocery stores 200 meters apart. The corrosive power of purchasing power is such that the highest denomination banknote in this country, 1,000 pesos, is the one that is worth the least in the region: it does not reach seven dollars, according to the price set by the marginal market.

“Soft hit”

The candidate for official deputy for the province of Buenos Aires, Victoria Tolosa Paz, denounced an attempt to make the price control fail. There was talk of the danger of a “soft hit” promoted by the large food chains, whose dominant position in the market leaves consumers defenseless. Fernández asked the provincial governors and municipal mayors to fight for stability. The followers of Cristina Kirchner joined the inspection measures in supermarkets. “We are concerned that militants will come to our businesses,” complained the CAC. “We are scared“, assured Yolanda Durán, from the Chinese supermarkets chamber.

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The dispute has another major background: negotiations between the Government and the International Monetary Fund (IMF). Argentina must pay $ 44 billion of foreign debt contracted by Macri. The agency demands, once again, that the country tighten its belt. Fernández assured yesterday, during the act of tribute to Nestor Kirchner, and before the G-20 Summit in Rome, that he will not “kneel” in front of these demands. Promises are sometimes as volatile in Argentina as prices.

 
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