“War” on inflation: economists say the plans that the government will put forward will not stop price spikes

“They are the same old ideas and will produce the same results.” “These measures do not contribute to a decrease in inflation.” “There is no coordinate axis.” Therefore, in a conversation with Infobae, local economists gave their opinion on the plans that President Alberto Fernández will announce this Friday to curb the price surge in Argentina.

“I hope this week we can bring order to the enormous debt issue that we have inherited. And on Friday, the war against inflation begins in Argentina. We will end the speculators.” The president slipped last Tuesday at the Buenos Aires Party in Malvinas Argentina as he led the opening ceremony of the renovated Tortuguitas station of the Belgrano Norte Railway.

In this context, Alberto Fernández is writing an isolated package of measures that he will try.Open a new economic phase: he is the best in local stores It is not excluded to establish two trusts to establish prices, stabilize the prices of flour and fresh vegetables, establish new values for popular meat cutting, and increase withholding for soy products.

“This is the same old idea and will produce the same results,” said Agustín Etchebarne, economist and general manager of the Freedom and Progress Foundation. “Every year they publish 'fight inflation' with the same people and ideas. Einstein would say that doing the same thing that he thinks will give you different results, is one of the symptoms of insanity. The reality is that you will get the same result. Inflation continues to rise from 30% to 50% of annual inflation. This year we will have more than 60% inflation per year, and it will rise again next year because we continue to have the same ideas, the same economic measures, the same price controls and the same tariff delays.” I emphasized that.

In a similar opinion, the economist Rodrigo Álvarez said through this plan that “the government is clearly trying to respond to measures beyond that, we all said that inflation will be more than this year because some anchors such as tariffs will be announced and the exchange rate will be more dynamic.” “In terms of credibility and the ability to lock in policies and expectations, governments have little room for it. There is no room for believing that a consistent anti-inflation policy will be implemented,” the expert thought he was trying to prove that the government was doing something in the short term. However, according to his impressions, society and economists “would not buy that this would drastically change the price dynamics.”

After stressing that the average price increase is consolidated at 5% in the first half of the year with the latest inflation data, the expert pointed out that the annual inflation figure will be “very compromised”. In this regard, he estimated that 2022 is very likely to close at 60%. “It is very difficult to think of a scenario of recovery of purchasing power with this inflation, I think that in this framework the government wants to show that it is doing something, but all these recipes have already shown that they do not work, and society already knows it.” He said.

For Guido Lorenzo, economist and director of the consulting firm LCG, in the context of high inflation, such as Argentina, “Such a contract can be maintained for 3, 6 months, it is possible to freeze 1 kg of bread for 250 dollars for half a year.” But if the price rises by 5% per month, he told Guido Lorenzo that the price is already behind by more than 15%. “It is not visible in the current inflation system.”

According to his point of view, “there is no coordination axis”: a round table with the path of inflation, exchange rates, wages, other key prices of a sincere economy. “And I sincerely mean that we are not always thinking about setting goals and goals that are not plausible.” He said.

Álvarez argues that “these measures do not contribute to a decrease in inflation.” In this regard, he said: “The price contract, the highest price, already knows that it does not work, and it does not surprise anyone. I had the impression that the government was trying to respond to a reality that surprised me.”

For Sebastián Menescaldi, an economist at Eco Go, reusing prescriptions that include the highest price for stores or the application of withholding is not a solution.In this regard, he told Infobae that “what is missing today is to create expectations and explain where prices are going and why.”

“I need someone to guide me through what the Central Bank or the Ministry of Economy has not done, especially considering the loss of anchors and exchange rates and tariffs that are used to prevent price increases by agreement with the International Monetary Fund (IMF). Only the interest rate remains a means, but it is not very effective.” The expert thought.

In this context, he stated that “the monetary plan will be more effective at lowering inflation than all the measures that are being discussed.”

President Alberto Fernández urged the business and trade union sector on Wednesday to begin agreeing on an anti-inflation package after starting with the sector after a 4.7% price increase last month. Minimum living and mobile has increased by 45% in Casa de Gobierno. wages.

Politically, they agree on the need to urgently lower inflation, but in fact economists agree that the measures that the government intends to implement did not work in the past and will not work in the future.

In this regard, Gabriel Caamaño, economist at Ledesma Consulting, added to the media that the government continues to apply an approach that “has failed so far” and that in the media “measures with purely fiscal cuts such as the increase in export tariffs have been added.”

“The truth is that if we wanted inflation to fall in a few months in a sustainable way, we would have used an agreement with the International Monetary Fund (IMF) to start a stabilization plan. And they didn't. Now it remains only to do more of what they do.” He said.

In the case of Caamaño, these measures eventually add more problems that promote actions that are counterproductive to the economy and deepen inflation inertia.

“In the context of an agreement with the IMF, it was time to draw up a comprehensive plan in which money was the first prerequisite: an agreement with finances, a currency front and a gradual exchange rate normalization,” he said.

Understand what inflation is

Etchebarne said that the most important thing is to first understand what inflation is. According to his definition, inflation is a mechanism for transferring wealth from the poor to the rich, because “not all prices rise the same.” “Wages, retirements and even AUH rise less than inflation; on the other hand, inflation allows entrepreneurs to issue loans at lower interest rates than inflation, for example.” Therefore, money is being “abandoned” with subsidized credits.

On the other hand, the government continues to believe that “inflation is a dynesic phenomenon, and the culprits are entrepreneurs and people who raise prices. It is a mistake because inflation is nothing more than a deterioration in the purchasing power of currencies.” The Secretary-General Libertad y Progreso explained, he summarized the following: “To fight inflation, you need to understand what inflation is. If they continue to say the same thing, propose the same anti-inflation measures, and continue to deteriorate the value of the currency, the result will remain the same. Inflation will continue to be maintained. At best, it will add some additional problems. Because effective price management runs out of stock.”

Another expert, director of Federico Moll Ecolatina, considered that “under normal conditions” the battery of measures proposed by the government “will have a limited impact in the short term and will not affect in the medium term.” In this context, he noted that “the ability to reduce inflation in this way does not exist even in the short term.”

“In order for the impact on inflation to persist, it is necessary to operate according to the expectations of the agents, and this requires credibility that governments do not have or can build on today. Will trade unions reduce wage claims because of such a plan?” , Mall wondered.

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