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ECONOMY | 13-04-2019 09:00

Government to freeze prices in bid to tame inflation, boost consumption

Package set to be annnounced this coming Wednesday, but details are still set to be fine-tuned.

Pr e s i d e n t M a u r i c i o Macri’s government looks set to announce a new Price Watch programme (“Precios cuidados”) covering around 50 basic food items next week, following a key Thursday meeting hosted by Cabinet Chief Marcos Peña with Cambiemos (Let’s Change) governors and other top brass of the ruling coalition.

Last week also saw frantic negotiations with supermarkets and other relevant companies over the package, which aims to tame inflation and kickstart the economy by reviving demand. The not so hidden agenda of this plan is also to win the general elections next October with a view to Macri’s re-election.

The plan could go as far as freezing supermarket prices for the next six months, as well as offering 10-15 percent discounts for pensioners and family benefit recipients, though details remain scarce on the ground at this stage.

Thursday’s meeting orchestrated by Peña gathered Buenos Aires Province Governor María Eugenia Vidal, City Mayor Horacio Rodríguez Larreta and Radical Governors Alfredo Cornejo (Mendoza), Gerardo Morales (Jujuy) and Gustavo Valdés (Corrientes), as well as Ministers Carolina Stanley (Social Development) and Rogelio Frigerio (Interior), Economic Policy Secretary Miguel Braun, Energy Secretary Gustavo Lopetegui and AFIP tax bureau chief Leandro Cuccioli (entrusted with ensuring that the measures carried no fiscal cost in order to achieve zero deficit) among others.

The meeting was initially expected to focus on recent tensions among the three parties forming the Cambiemos (Let’s Change) coalition – PRO responding to Macri, the UCR Radicals and the Civic Coalition – but the budding Price Watch package ended up being the centre of attention.

‘SERIES OF MEASURES’

Following the meeting Cabinet Chief Peña was at pains to stress that the programme was not a “plan” but rather a “series of measures.”

The supermarket discounts for pensioners and family benefit recipients will be financed by ANSES social security administration and only available to those presenting an ANSES debit card.

Beyond such everyday shopping, plans to boost the credit lines in the Procrear housing programme are also under discussion.

Despite the intense speculation over the price announcements, ASU supermarket association yesterday pleaded ignorance of the final details while confirming meetings with Production and Labour Minister Dante Sica and other government officials.

USA Executive Director Juan Vasco Martínez said yesterday that the programme was basically an expansion of the remnants of the Price Watch programme implemented on a much wider scale by the previous Kirchnerite administrations.

The programme had boosted sales but also depended heavily on the capacity of industry to keep up the supply of products like rice, pasta and milk, said Martínez. He also pointed out that price controls had never worked in the past, distorting the market and generating shortages since suppliers could not keep up.

“We supermarkets cannot invent what we sell,” he concluded.

Meanwhile basic food prices continue to rise. According to the minutouno.com website, the latest eight percent surge in milk prices now has them outstripping petrol at 42.67 per litre as against 40.43.

Instead of congratulating Macri for following the Kirchnerite example, former deputy Economy minister Emmanuel Álvarez Agis (Axel Kicillof’s second-in command in the Cristina Kirchner presidency) was critical, acidly commenting that having a government like Cambiemos in charge of price controls was like placing Ricardo Barreda (a La Plata dentist who murdered all the female members of his family in 1992) in charge of gender equality, straining credibility.

The government was “confused,” the Kirchnerite economist said, in the face of inflation approaching 40 percent, a context which made price freezes a “very bad idea” which had far more to do with electoral campaigning than economic policy.

With a price freeze, he continued, only two things could happen – either producers would lose all incentive to deliver or shelves would be emptied in two minutes, as in Venezuela. Such factors as the dollar, interest rates and utility billing would also need to be factored in, he said.

IMF CHIEF: FOOLISH TO BACKTRACK NOW

Argentina’s cost-cutting economic reform programme is beginning to show results – and it would be “foolish” for presidential candidates to abandon it, International Monetary Fund (IMF) chief Christine Lagarde declared Thursday.

The nation, which has had a fractious relationship with the IMF over the years, has been trying to stabilise its economy with the help of a US$56.7-billion IMF-funded aid package, and will face presidential elections in late October.

“We are now beginning to see the programme actually work,” Lagarde told reporters at the start of the IMF-World Bank spring meeting. “Our assessment is that the Argentine economy is at the point where it is going to bottom out.”

The IMF projects Argentina’s economy will shrink by 1.2 percent this year – and improvement on previous estimates of a 1.7-percent contraction – but will begin to grow in the second half of the year and that will be followed by an expansion of 2.2 percent in 2020.

“Now that so much hard work has been done, in a programme where social protection has always been one of our three key priorities, it would be foolish on the part of any candidate to turn their back to the work that is underway,” Lagarde said.

Argentina originally secured a US$50-billion financing package from the IMF in June before returning to the fund to ask for more in October. The IMF granted an extra US$6 billion and accelerated disbursements in exchange for tougher conditions.

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