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Argentina freezes prices to halt inflation

Source: New Age

Argentina has announced a two-month price freeze on supermarket products in an effort to stop spiraling inflation.

The price freeze applies to every product in all of the country’s largest supermarkets – a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains.

The companies’ trade group, representing 70 per cent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported.

The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1.

Polls show Argentines worry most about inflation, which private economists estimate could reach 30 per cent this year.

The government says it’s trying to hold the next union wage hikes to 20 per cent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 per cent.

Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation.

Consumers shouldn’t be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.

A more effective way to contain inflation would be to “reduce government spending, which is financing an expansion of the money supply, and to have a credible price index”.

The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data.

The IMF has given Argentina until September to bring its inflation and economic growth statistics up to international standards.

If Argentina doesn’t comply, it could face expulsion from the world body in November.

President Cristina Fernandez and her economy minister, Hernan Lorenzino, responded over the weekend with a flurry of attacks on the IMF, saying the agency’s data-gathering efforts had lost credibility in the lead-up to Argentina’s historic 2001 debt default.

They said IMF advice also is leading Europeans astray by favouring big banks over measures that can grow economies out of crisis.

However, Lorenzino also said that the government will begin using a new inflation index starting in fourth-quarter 2013 – just in time for the IMF’s decision.

The IMF censure “is not just a new error … it’s also a clear example of the organisation’s unequal treatment and double standards in regard to certain member countries,” Lorenzino said.

“Argentina, just as it agreed with the IMF to do, will keep working to improve its statistical procedures in accordance with good international standards.”

“Later this year, the new General Household Spending Survey will enable the tracking of spending in Argentine households nationwide” and generate a new consumer price index whose design was agreed to by IMF technical experts, he said.

 

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