In Argentina, to try to curb inflation, the country’s government froze the prices of 1,247 products for 90 days. Food companies will send price lists by October 1st. Prices will remain unchanged for consumers until 7 January. The government’s expectation is the stabilization of the economy.
Argentina has the second highest inflation (48.4%) among 20 countries analyzed by the Organization for Economic Cooperation and Development (OECD), losing only to Venezuela (2.700%). Inflation is global, food prices are rising all over the world. According to the OECD, in Brazil, the forecast for price increases by the end of 2021 is 7.2%, behind only Argentina and Turkey (17.8%).
For many economists, the measure, which has been adopted in the past, including in Brazil, remains unsuccessful.
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“Price freeze was never the solution, ever. It never worked and it won’t. The measure only momentarily dams what will explode up ahead”, said economist Elena Landau, who was president of the Board of Directors of Eletrobras and director of privatizations at BNDES during the FHC administration. She called the measure “a wrong and incompetent view based on interventionist policies.”
“Argentina has tried several times and it went wrong, Brazil too. An ingenious plan with leadership and a good understanding of economics is necessary”, completes the economist.
In 1986, in Brazil, during the government of President José Sarney, inflation reached more than 200% a month and the same measure was taken in an attempt to stabilize the economy. The plan quickly failed, as the freeze created a supply crisis in an overheated economy.
“These are plans that are out of the ordinary and when they fail they cause very serious damage, reducing people’s standard of living and social well-being,” says Felipe Borilli, economist at fintech Hygia Bank.
According to Borilli, prices have to be defined by the market. The most developed economies have little market regulation, so they are freer and have more productivity.
“A free economy is more prosperous. The price freeze plans are ineffective and exacerbate inflation. In the case of Argentina, the measure may be effective in the short term, but it will destabilize the country’s economy”, he concludes.
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