Prices to rise 7% on average as IVA restored to basic food items

As from the first working day of the New Year, the government has restored the IVA value-added tax to basic food items, authorising a seven percent increase in most cases.

A number of basic food items have been exempt from IVA since then-president Mauricio Macri scrapped the taxation last August, following his catastrophic results in the PASO primary to Alberto Fernández.

The big exception was milk in fluid form (although not dairy produce in general) where no immediate hike was granted – a result of the lack of any agreement between supermarkets and the Production Ministry in the closing hours of the dying year. In the end it was decided that the business sector would have to absorb the tax in full pending negotiations with dairy producers.

The current price range for milk is 52-74 pesos, depending on quality and the supermarket chain.

In contrast, the government cut retailers some slack with some of the hitherto exempted products not considered essential food items, such as jam, peaches in syrup, popcorn, rolls for hamburgers or hot dogs and certain types of flour (such as integral or for pizzas or pasta) where the supermarkets will be allowed to pass on the full 21 percent.

Food items permitted the average seven-percent increase include most yogurts, rice, sugar (except icing), most breads, polenta cornmeal, common flour, canned vegetables, yerba mate, eggs and dry pasta.

The common loaf may only rise five percent. Edible oils go up nine percent (except for maize, permitted the full 21 percent) while breadcrumbs for milanesa cutlets etc. go up 10.5 percent.
The new changes in prices are a result of an agreement reached last Tuesday between the government, supermarkets and producers.

Speaking earlier this week, President Alberto Fernández said he had asked business leaders to assume "social responsibility and to lower their profit margins."

“It will be interesting they act responsibly and avoid huge profits on the different items otherwise government will be forced to intervene," he added.

Also on the consumer front, the government rolled over the 'Ahora 12' instalment plan for another quarter on the last day of the year, also easing statutory reserve requirements to ease the credit in a measure clearly aimed at boosting the domestic market.

The Ahora 12 programme dates back to the latter stages of Kirchnerismo (September, 2014, to be precise) but was maintained throughout the Mauricio Macri presidency.
The same end-of-year package also included freezing UVA mortgage credits for another month.

Elsewhere in prices, the government confirmed Thursday that it would freeze public transport rates in the Metropolitan area of Buenos Aires (AMBA) for 120 days, trailing in addition that “subsidies will be reviewed” and that the SUBE public transport card would be redesigned.

Transport Minister Mario Meano, flanked by Cabinet Chief Santiago Cafeiro, said at a press conference that the government wanted to extend use of the SUBE card to “the whole country.”
The freeze will affect up to 15 million people who use public transport in the Greater Buenos Aires region, Noticias Argentinas reported.