It’s striking how the incumbent Peronist government is sticking with the same old same old.
The surprise success of libertarian (or anarcho-capitalist: descriptions vary) Javier Milei in the first round of Argentina’s presidential election is probably more a reflection of many voters’ disgust with a broken status quo than a sudden enthusiasm for radical free-market policies. Even so, it’s striking how the incumbent Peronist government is sticking with the same old same old.
Argentina’s government announced on Friday a price agreement for supermarkets to limit monthly increases to a maximum of 5% for 90 days as the country tries to tamp down triple-digit inflation as a high-stakes election looms.
Economy Minister Sergio Massa made the announcement after a meeting with supermarket representatives, noting that officials reached the deal with representatives of 31 local supermarket chains to “stabilize” prices until national elections scheduled for October.
Subtle.
This regime appears to cover mainly foodstuffs. Supermarkets that go along will receive tax benefits, and a credit program will be launched for small and medium companies that supply supermarkets.
This is unlikely to do much for inflation, but in time may lead to shortages if it ceases to become worthwhile for supermarkets to sell these goods.
This is not the first such initiative the country has seen in the last year or so. In November (Reuters reported), the government announced a deal “with supermarkets and suppliers of mass consumer goods to freeze or tightly regulate prices of some 1,500 products.” Tellingly, the government referred to this as a “fair prices” (precios justos) program, suggesting, not for the first time in Argentina’s history, that Peronists have not quite got the hang of this price-mechanism thing.
Meanwhile, inflation has pushed the number of Argentinians living in poverty to over 40 percent, up from 11 percent in 2020. Inflation is currently some 113 percent and is expected to hit 135 percent by the end of the quarter.
The “blue” dollar (basically the black-market U.S. dollar-exchange rate) bought around 720 pesos on Monday. That’s down from the peak of 780 it reached as the election results came in, but it will not be long before it rises again. This time five years ago, it was trading at around 37 to the U.S. dollar. Meanwhile, shortly after the presidential vote, the central bank devalued the peso’s official rate by 18 percent to 350 to the U.S. dollar and increased the benchmark (LELIQ) interest rate to 118 percent, up from 97 percent. At the same time, it tightened access to the MEP dollar, one of Argentina’s many exchange rates (for a taxonomy, see here).
The presidential and parliamentary elections are due on October 22. It’s going to be turbulent few months.