Monday, July 15, 2024

OP-ED | 16-04-2022 00:01

Anything but a holy week

Inflation at this level traps the government in the austerity it abhors since prices and government revenues both rising in real time leave wages and pensions trailing, thus turning the political debate into an uphill battle.

With the nativity of his second son Francisco right at its start and with the shattering blow of the highest inflation in two decades in midweek, President Alberto Fernández has experienced Christmas and Easter all in the same week – the Calvary of yesterday’s Good Friday at least because there is no resurrection in sight either tomorrow or for some time to come.

All the more frustrating because there has already been a resurrection in progress throughout most of last year (crystallised in a 2021 growth rate of 10.3 percent) which continues to this day with every prospect of a bumper long weekend for local tourism. Consumer-led growth since support for exports is more rhetorical than real but for perhaps the first time its correlation with an upbeat public mood is no longer automatic.

The unexpectedly high March inflation figure of 6.7 percent (not far short of the annual rates now alarming other countries) serves to confirm that a populism accustomed to victory in all but one of this century’s elections is losing both the economic and political debate. After six months of Domestic Trade Secretary Roberto Feletti enshrining price controls and with any significant acceleration of devaluation or real updating of public service pricing (probably the most divisive issue for a divided ruling coalition) yet to come, it is hard to deny that the monetarists could be right with these levels of inflation – even allowing for the global price havoc from the Russian invasion of Ukraine, those trillions of pesos printed for last year’s “platita” electioneering look like coming home to roost within a model in any case dedicated to boosting consumer demand. These levels of inflation also trap the government in the austerity it abhors since prices and government revenues both rising in real time leave wages and pensions trailing, thus turning the political debate into an uphill battle.

Short of confronting the extreme wing of the Frente de Todos coalition, a cornered Economy Minister Martín Guzmán can find little other excuse for runaway inflation than the global turbulence, but perhaps it is time that this problem was turned into the solution which soaring commodity prices should always promise Argentina. Here farm products would be the key. Since food prices have risen above the average in recent months, despite being the main target of controls, the government’s instinct has been to curb the exports so much in demand in the outside world in order to ensure that supply responds to the domestic market. This approach runs to the global antidote to the commodity crisis as expressed by last month’s meeting of G7 agriculture ministers calling on “all countries to maintain their agricultural and food markets open without any unjustified restrictions on exports” (a recommendation endorsed by the International Monetary Fund). At the same time the IMF’s strategy director is openly admitting that many countries have unsustainable debts in the wake of the double whammy of the coronavirus pandemic and the Ukraine war.

Strangling exports may not suffice to halt inflation when in the short term at least it will be fed by such conditions of the IMF agreement as upping the exchange rate, public service pricing and interest rates in line with prices. Since that agreement was made a dead letter even before it was approved by the soaring cost of Argentina’s energy import needs alone, why not reverse course and start complying with the responsibilities of a major food producer as urged by the outside world instead of continuing the uphill struggle to meet the terms of agreement? Not default, of course, but fixing a standstill (like Ecuador in the first months of the pandemic in 2020) for renegotiation while enthusiastically cooperating with the global appetite for food – this would help Argentina regain the integration into the world which has been partly lost by this government (not helped by the pandemic). An audacious strategy carrying plenty of risk but one at least worth considering.

Enough of current affairs – in conclusion, some Easter spirit. Our final message should be one of reconciliation as it was for the 40th anniversary of the South Atlantic war a fortnight ago – if this seems impossible at the political level, the overlap between Easter and Passover should inspire us to seek it in spiritual life. And nor should concern for the poor be limited to the ritual foot-washing of Maundy Thursday. 


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