President Alberto Fernández used war metaphors to mark the beginning of a “war” by referring to the price. The policy against inflation will continue after 4.7% starting next Friday. In February, we recorded a higher inflation index than expected. 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 contracts, such as various types of contracts with entrepreneurs, to stricter contracts, such as the possibility of increasing export duties on certain agricultural products, to other “technical” agreements that are part of an agreement with the IMF, such as an increase in peso interest 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, have increased markedly in the last three weeks, as if the war in Ukraine began. At the end of the year, in the months most in demand in winter, there will be a shock wave due to the rise in the cost of imported gas.
On an international level, this disruptive scenario questions some statements already recorded in the Memorandum of Understanding with the IMF, which will be discussed in the Senate in the future and will be approved by the MMF Council after several hours of debt accrued next Monday. The main variable is the inflation forecast of 38-48% this year, which is well below the expectations of the private sector and analysts close to the government coalition. According to individual analysts, annual inflation (8.8%) in the first two months means that the price increase per case will be well over 60%.
The reading that, starting next Friday, the president's expression of “war” on inflation is taking risks in an official office that has nothing to do with economic governance is related to the fact that the work of Congress ended in the Senate. The agreement with the IMF, which began in February 2020 as a private equity holder, will lead to a page change along with the economic roadmap for the next few years, which is a long chapter in the global renegotiation of dollar debt by the Frente de Todos government.
One official recalled a similar metaphor used in the afternoon by Adolfo Canitrot, Deputy Minister of Economy, Raúl Alfonsin 30 years ago. “Alberto is not a poet, but a lawyer,” they ironically commented on the president's reference to the war in the office.
The truth is that several previous battles against inflation have already failed, such as some price freezing programs that have proven ineffective in curbing gondola rise 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 specific price dam. The final solution pursued by the government was 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 values and It was a national value. To “separate” values It would be.
This is the “favorite” measure of the current economic management to carry out the fight against inflation, according to a reading from 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 different decisions.Type. 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 take place between the Ministry of Internal Trade and mass consumer companies in the coming weeks. It is necessary to renew the care price program, which includes a large food and drink basket in early April. Negotiations will begin over the next few weeks to determine the growth rate of 1,300 products. The adjustment in January was 2%.
The agreement with the IMF includes “dynastic” views, such as how to combat inflation, lack of dollars, monetary and fiscal policies, and adjustment of expectations, and the expected price increase for this year ranges between 38% and 48%. Even private consultants and research schools involved in Kirchnerism believe that the essence of a sustainable economy program is inflation in nature and expects higher interest rates than is officially expected.
According to a memorandum of understanding sent by the government to Congress, the government and the Monetary Fund expect the inflation horizon to fall below 30% by 2024.
The Proyecto Economico Research Center, owned by former deputy director Fernanda Vallejos, said: “Taking into account the January data to achieve this goal, it is not expected that the monthly inflation rate for the remaining 11 months of 2022 will exceed 3.27% per month. However, due to the increase in exchange rate rules inflation (combined with international inflation) and a new tariff policy, the inflation rate has risen.
“Due to the influence of international prices, inflation targets are also becoming obsolete,” said Chief Economist Lorena Giorgio. It's a consulting firm Equilibra. I think so. This year, inflation is more than 60%. If we look at the figures for this year and the first forecast for February, there is no tariff adjustment or the acceleration of the creeping ankle is about 4% higher, which is the monthly inflation floor for the rest of the year,” he said so.
Secretary Guzman received repeated consultations from legislators and senators between last Monday and yesterday. It is about the feasibility of inflation stipulated in the program with the IMF. The official said that “expected inflation is that,” but opened a window into the possibility that the international price shock caused by the war in Ukraine will include scenarios that exceed expectations, especially in terms of spending on energy revenues.
Guzmán told the Senate that “the war between Russia and Ukraine is taking place in Argentina, and today it shows the prices paid for everything related to goods, such as wheat, eggs, milk, oil, products that consume consumer baskets. It is clear that in the last three weeks. Doing nothing means a situation where these shocks are profoundly regressing.” Guzmán continued.
In the same vein, Chief of Staff Juan Manzur said that although the tools used by the government were those of private price agreements through trusts that subsidize local prices (such as oil), “there are other types of measures, such as ministerial agriculture. It was necessary to take Julián Dominguez (see the temporary closure of exports), it is included in the framework of an absolute exception,” said the prime minister because of the war in Ukraine.
This Tuesday Alberto Fernández spoke more directly about the price situation. “Every time we believe that things are going smoothly, everything gets complicated. When we think that the pandemic allows us to develop freely, there is also a war going on in Argentina, which takes the form of an economic complication that affects Europe and the whole world,” said the president. “The biggest complication is that the war is triggering a fierce fight for food, and prices are skyrocketing around the world. He added.
“The inflation war in Argentina promises to start on Friday, hoping we can solve the debt problem 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, and the monthly interest rate was higher than expected. According to the diagnosis of the Ministry of Economy, prices showed the immediate impact of war conflicts in Eastern Europe. “This indicator was affected by the impact of rising international prices for key commodities caused by droughts and conflicts in Ukraine,” the Ministry of Finance said. However, the invasion of Russia began on February 24, four days before the end of the last month of the CPI.
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