En los medios
Measure could have major impact on prices
Increases have already taken place since runoff based on speculation over devaluation
The decision to lift currency restrictions announced yesterday — and more precisely where the exchange rate will settle after trading commences today — has been preceded by a retail market that has seen jumps in prices since the November 22 runoff in light of President Mauricio Macri’s repeated pledges to undo the Kirchnerite policy of limiting access to US dollars.
The unraveling of the currency clamp could have a major impact on prices.
While official inflation estimates have not been released for November, prices for certain basic goods have spiked between 20 to 30 percent according to major consumer union and business chamber representatives. Supermarkets and retailers have been preparing for what many believed would be a sharp devaluation of the peso once Macri took office.
Although the president backtracked on his promise to lift the restrictions on his first day in office, the new administration took less than a week to push through those reforms. The markets have already partially priced-in that devaluation.
“We’re in the worst situation, because we are between two different governments. One administration that is leaving, and isn’t controlling anything, and another future administration that can’t control prices because it hasn’t arrived yet,” said Union of Argentine Consumers (UCA) President Fernando Blanco Muiño last week.
The beef industry chamber has acknowledged that the price for a kilo the cut of meat known as asado would be priced between 100 and 130 pesos during the summer holidays. The mid-range cut is a standard on Argentine grills.
Finance Minister Alfonso Prat-Gay said yesterday during the announcement that the “law of the jungle” would not apply to consumer prices following any shifts in the exchange rate in today’s trading.
Announcements that beef exports will no longer have any kind of restrictions sent prices soaring before Macri took office, with some reporting increases of 30 percent. Agriculture Minister Ricardo Buryaile said on Monday that the government would “try” to bring prices back to what they were in November, but said hikes could not be explained through the new government’s reforms.
“We have begun talks with supermarkets to bring prices back. There were exaggerated expectations and we believe the impact on the basic food basket has to be as small as possible,” he told reporters.
The minister said chicken and pork production were likely to see improved prices soon, as their production cycles are shorter than beef.
After a series of increases in the price of cars in the last month — with some reaching as much as 40 percent on an interannual basis — industry leaders have suggested the a devaluation will not have a major impact in the short-term. The price of flour has also jumped by 100 percent, as producers have expected that increased exports and reduced export duties will result in greater prices for the products. Emilio Majori, who represents bakeries in the province of Buenos Aires said that the price of a bag of flour had jumped from a range of 110-130 pesos to 240-250 pesos after the runoff and that that as as result the kilogramme of bread would likely be be in the realm of 30 pesos per kilo, a major jump.
Unions have already taken note of the price increases, and Antonio Caló of the UOM metalworkers’ union — leader of one of the factions within the CGT umbrella union — has said that the loss of purchasing power will have to be compensated.
Caló said last night that his union will be seeking a 5,000 peso end-of-year bonus in light of what he expects to be a 50 percent devaluation.
A campaign debate
Whether a devaluation will affect the price of consumer goods emerged as a sharp debate ahead of the presidential runoff with some insisting it would while others contending companies had already adjusted the prices of their products according to the “blue” or black-market rate.
“What (Let’s Change’s economists) are arguing is that if food is not imported then why would it be made more expensive by a devaluation? But the problem is that chicken, beef, oil, pasta, crackers, sugar, fruit, cotton and other basic goods can be sold abroad. A bottle of cooking oil costs 10 pesos in an Argentine supermarket and one dollar abroad, but a sudden liberation of the dollar would mean that now a producer can get 15 pesos for that same bottle by selling it in Holland’s Rotterdam port. If that’s the case, then why would he keep selling it at 10 pesos here?” Daniel Scioli’s chief economic adviser Miguel Bein wondered during a radio interview. Scioli was defeated by Macri in the runoff.
Let’s Change officials, however, have been touting a counter-argument. According to Finance Minister Prat-Gay “the official dollar exchange will strengthen but it will affect almost no one, while the other (exchange rates) that affect most of the population will weaken.”
His words and that of other coalition’s economists have been based on a hotly-debated report by a Di Tella University professor, Andrés Neumeyer, who says that companies stopped using the official dollar rate to set prices somewhere around 2013 and are now using alternative exchange rates as a guide. Neumeyer measured the evolution of prices in a basket of 250 goods in Argentina and the United States and compared the divergence of prices in both countries with the multiple currency rates.
The major question is now determining whether the anticipated slide in the value of the peso will see another increase in the prices of consumer and retail goods.
Herald staff with online media