President Alberto Fernández used war metaphors to mark the beginning of a “war”, referring to pricing. The policy of combating inflation continued since next Friday after 4.7%, which recorded a higher inflation index than expected in February. In the same tone as the President's speech, the government has a limited army of measures and regulations to deal with inflation rates. From light ones, such as various types of contracts with entrepreneurs, to stricter ones, such as the possibility of increasing export duties on some agricultural products, other “technical” ones that are part of the agreement with the IMF, such as rising peso rates.
The economic team is still trying to measure the impact of international price shocks on food and energy, suggesting that it immediately affects domestic values. The first victims were foods derived from wheat and corn, which, according to official diagnoses, showed a remarkable increase at the same time as the war in Ukraine began in the last three weeks. At the end of the year, a shock wave would occur through higher gas costs imported during the months most in demand in winter.
At the international level, this disruptive scenario questions some of the statements already recorded in the Memorandum of Understanding with the IMF. This statement will be discussed by the Senate in the future and will be approved by the Council of Monetary Funds after a few hours of debt due next Monday.The main variable targeted is inflation forecasts of 38-48% this year, which is much lower than the expectations of the private sector and analysts close to the government coalition. According to individual analysts, annual inflation in the first two months (8.8%) will mean that the price increase per case will be well above 60%.
The reading that, starting next Friday, the president's expression of “war” against inflation is taking risks in official offices that are not related to economic governance, is related to the fact that parliamentary proceedings have ended in the Senate. The agreement with the IMF, which began as a private bond holder in February 2020, will lead to a page change, already with the economic roadmap for the next few years, a long chapter in global renegotiation on dollar debt by the Frente de Todos government.
One official recalled a similar metaphor used 30 years ago by Adolfo Canitrot, Deputy Minister of Economy, Raúl Alfonsín, in the afternoon. “Alberto is not a poet, but a lawyer.” They ironically commented on the president's mention of the war in the office.
The truth is that there have been several previous battles against inflation that have already failed, such as some price freezing programs that were inefficient at suppressing the escalation of gondolas in the two years and months of the FrontTodist order. The order was changed by the Ministry of Internal Trade because it failed to establish a concrete price dam. The last alternative sought by the government was through a special trust agreed between exporters and supermarkets that subsidized the local price of certain products such as oil. The purpose of these measures was international value and domestic value. It's about “separating” values.
This is the “favorite” measure of economic management at the moment to carry out the fight against inflation in the reading of the Ministry of Economy, but they say that the situation caused by the war conflict in Eastern Europe changes the scenario and forces us to make decisions of a different kind. The contrast is clear. A few weeks ago, when the war had not yet broke out in Ukraine, senior officials of the economic team categorically ruled out not touching export tariffs.
Negotiations will be held between the Ministry of Internal Trade and the mass consumer enterprise in the coming weeks. In early April, it is necessary to renew the Care Price Program, which includes a large food and beverage basket. Negotiations will begin in the coming weeks to determine the growth rate for 1,300 products. In January, the adjustment was 2%.
The agreement with the IMF includes “dynastic” views such as methods of combating inflation, lack of dollars, monetary and fiscal policies and adjustment of expectations, the range of price increases expected for this year is between 38% and 48%, agreed with the agency's technicians. Even private consultants and research schools related to Kirchnerism believe that the essence of a perennial economic program is inflation in nature, and expects a higher interest rate than the issue officially expected.
The government and the Monetary Fund also expect the inflation horizon to rise below 30% by 2024, according to a memorandum of understanding sent by the administration to Congress.
The Proyecto Economico Research Center, owned by former deputy director Fernanda Vallejos, said: “To achieve this goal, taking into account the January data, the monthly inflation rate for the remaining 11 months of 2022 should not exceed 3.27% per month. However, the increase in inflation in exchange rate rules (combined with international inflation) and the new tariff policy lead to an increase in inflation rates.
“Inflation targets also become obsolete after the impact of international prices,” said Lorena Giorgio, chief economist at the consulting firm Equilibra. I think. This year, inflation is at least 60%. If you look at the figures for this year and the first forecast for February, there is no tariff adjustment, or the acceleration of the crawling peg is about 4% greater. This is the floor of monthly inflation for the rest of the year.” He said.
Secretary Guzman has repeatedly received consultations from lawmakers and senators between last Monday and yesterday on the feasibility of the projected inflation stipulated in the program with the IMF. The official said, “The expected inflation is That's it,” but it opened a window into the possibility that the international price shock caused by the war in Ukraine would include scenarios beyond expectations, especially in terms of spending on energy revenues.
“The war between Russia and Ukraine is taking place in Argentina, and today it can be seen from the prices paid for everything related to goods, such as products that consume wheat, eggs, milk, oil, consumer baskets,” Guzmán told the Senate. “The impact on food prices has been significant and evident in the last three weeks. Doing nothing means a situation where these shocks are profoundly regressing.” Guzmán continued.
In a similar vein, Chief of Staff Juan Manzur said that although the tools used by the government were tools of private price agreements through trusts subsidizing local prices (for example, oil), “there are other types of measures, such as ministerial agriculture, had to take Julián Dominguez (see Temporary Export Closure), understood within the framework of absolute exceptions,” said the Prime Minister due to the war in Ukraine.
This Tuesday Alberto Fernández spoke more directly about the price situation. “Every time we believe that things are in order, everything has become more complicated. When we think that the pandemic can make us develop freely, there is also a war in Argentina, which comes in the form of Europe and economic complications that affect the whole world.” The President said. “The biggest complication is that the war has sparked a tremendous struggle for food, and prices are flying around the world.” He added.
“I promise that the war against inflation in Argentina will begin on Friday, hoping to be able to clear up the debt issue this week. We will put an end to speculators and put things in order,” he said.
Inflation in February was 4.7%, accumulating 52.3% last year with a higher monthly interest rate than expected. According to a diagnosis from the Ministry of Economy, prices showed the immediate impact of the war conflict in Eastern Europe. “This indicator was affected by the impact of rising international prices for major commodities due to droughts and disputes in Ukraine,” the Ministry of Finance said. However, the invasion of Russia began on February 24, four days before the end of the last CPI month.
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