Care Prices rise more than the rest: why

05/17/2021 1:33 PM

• Clarín.com

• Economy

Updated 05/17/2021 1:33 PM

Faced with persistent inflation, the Government decided to intensify agreements and price controls.

But in a context of fiscal lack of control like the current one, this tool - instead of moderating -

increases inflationary pressure

.

Inflation is a multi-causal phenomenon.

Therefore, only with price agreements is not enough.

Inflation does not give up and remains in the order of 4% per month.

In response, the Secretary of Domestic Trade intensified efforts to multiply price agreements. One was made for the price of meat, another is under discussion for household appliances and a strategy was moved to add agreements with food manufacturers to agreements already signed with supermarkets. It goes to the extreme of asking for prices to be printed on the product's packaging to take away the freedom of businesses to modify them.

According to an analysis by the Argentine Social Development Institute (IDESA), the product categories that are included in the “Careful Prices” agreements reached by the Government with supermarkets and other points of sale rise more than inflation.

The permanent renewal of brands and presentations that companies make of the products they include in the basket makes

the increases go unnoticed

.

"Argentina has a long history of agreements and price controls that in most cases failed," the report details.

And he adds:

"When they worked it was because they were accompanied by a battery of consistent measures

to combat inflation and for a short time."

From IDESA they assure that possibly

the most remembered case of success is the Austral Plan of 1985,

which, including agreements and price controls,

managed to lower monthly inflation from 20% to 5% in 1986

.

But even in this case the effect was transitory.

"Will it be different this time?" Asks the consultant.

And to bring an answer closer, it is useful to observe

what is happening with the main program, the so-called "Care Prices".

What is the Care Prices program

This is a list of products with a

presence in supermarkets across the country on the price to which they undertake to sell fixed.

According to the latest INDEC data,

as of April 2021 it is observed:

• Headline inflation was 46.3% per year.

• The increase in prices in the food item was 46.4% per year.

  
  

• Inflation among the products of the "Care Prices" program was 53.4% ​​per year.

  
  

These data show that the products of the main program of price agreements promoted by the Government,

had increases higher than general inflation and also food inflation.

That is to say, "that the differences are not explained because in the" Care Prices "there is a proportionally greater quantity of food. This shows that the price agreements, by themselves, do not lower inflation," the report indicates.

"Inflation is a multi-causal phenomenon. For this reason, it is logical that a set of consistent measures is needed to address it. In the current context,

the most important thing is a credible plan to sustainably reduce the fiscal deficit in order to generate confidence that the The monetary issue is going to slow down

. With expectations that the conditions are in place to lower the issue, the price agreements could help contain prices, "the IDESA study points out.

And in that sense it indicates that

so far in 2021, liquid money held by the public (cash, checking accounts and savings accounts) has only increased by 4%.

But inflation remains very high due to the huge issue that was made during 2020.

Since December 2019, liquid money held by the public doubled while production contracted by 10%

. Since inflation since December 2019

was “only” 66%,

approximately

one third of the emission

remains

that was not liquefied by price increases.

That is, there are more bills circulating and fewer goods in the economy. "Added to this inflationary pressure are the signals issued by the government regarding the future. For example, the reduction of the income tax on human beings and increasing subsidies to control rates. As if that were not enough, the Central Bank's indebtedness with passes and Leliqs they generate interest that will force more monetary issuance in the future, "the document indicates.

"If in the government coalition the unconcerned about the fiscal deficit and the monetary issue continue to prevail, there is no chance of moderating inflation.

The price agreements will not only not work, but they will boost inflation.

The reason is that Before the intensification of controls, companies tend to preventively increase prices. This is what has been happening in recent months. Programs such as "Careful Prices" make sense if they are accompanied by a consistent anti-inflationary plan that gives clear and credible signals of greater fiscal austerity, "he concludes.

YN

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Inflation in April was 4.1% and increased 17.6% in the first four months