Tags: Argentina | inflation | beer | shampoo

Argentina to Cap Prices on Beer to Shampoo to Tame Inflation

Friday, 20 Dec 2013 12:43 PM

Argentina reached an agreement with supermarkets and food producers to set price limits on a basket of about 200 consumer goods in a bid to slow inflation that accelerated to the fastest in at least two years last month.

The government will electronically monitor prices in supermarkets and determine the fair value of goods, which will be periodically revised, Economy Minister Axel Kicillof said in Buenos Aires. The agreement will last for 12 months beginning Jan. 1. The initial basket of goods includes rice, flour, milk, yogurt, beef, chicken, fruits, vegetables, soda, beer, perfume and personal hygiene goods, Trade Secretary Augusto Costa said.

“This isn’t a price freeze, it’s a voluntary price agreement between the state and private companies,” Kicillof told a room full of supermarket executives, according to images broadcast on CN23. “This gives Argentine households more predictability for their expenses.”

President Cristina Fernandez de Kirchner tried to freeze the prices of 500 goods earlier this year in agreements with companies including Wal-Mart Stores Inc., Carrefour SA and Cencosud SA to contain the second-highest inflation rate in the Western Hemisphere. Still, consumer prices surged 26.8 percent in November from a year earlier, the highest since at least May 2011, according to private estimates. Inflation may quicken to more than 30 percent next year as the government weakens the peso and fails to curb spending, Bank of America Merrill Lynch economist Marcos Buscaglia wrote in a Dec. 13 report.

‘Help Monitor’

Fernandez replaced the central bank president, cabinet chief and economy minister on Nov. 18 and accepted the resignation of former Trade Secretary Guillermo Moreno a day later. Moreno, who once brought boxing gloves to a shareholder meeting, was in charge of imports and the agency that publishes official economic data.

“The new administration of prices will identify variations in costs that are justified and not based on expectations that prices will rise,” Costa said. “We’ll publish price changes so that consumers are aware of the changes and can help monitor and ensure the compliance of the agreement.”

The government is also trying to keep salary demands in check by curbing consumer prices. Earlier this month looting broke out in cities across the country after police officers went on strike to demand higher pay. The violence left at least eight people dead.

Pricing Philosophy

Consumer prices have increased by at least 20 percent a year for five years, according to independent estimates.

The number of pesos in the economy has jumped 23 percent in the past year, and government spending has increased 36 percent. While Argentina maintains that the official inflation rate is 10.5 percent, wage negotiations for public employees usually begin with the government proposing increases of more than 20 percent.

Argentines expect consumer prices to rise 30 percent over the next 12 months, according to a poll of 1,200 people taken by Torcuato Di Tella University and published yesterday.

“A lot of people probably don’t share the philosophy of connecting prices with morals,” Cabinet Chief Jorge Capitanich said at the event with business owners. “But this is to benefit all Argentines.”

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Argentina reached an agreement with supermarkets and food producers to set price limits on a basket of about 200 consumer goods in a bid to slow inflation that accelerated to the fastest in at least two years last month.
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Friday, 20 Dec 2013 12:43 PM
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