The government of Argentina released on Thursday (14) the complete list of items covered by the price freeze announced the day before, which includes products from sectors such as food, hygiene and cleaning.
The measure that affects the prices of 1,247 products in the country is retroactive to October 1 and will be effective until January 7, 2022. The new secretary of Internal Trade of Argentina, Roberto Feletti, said on Wednesday (13) that the freeze is in progress of a “price agreement” with producers, suppliers, supermarket chains, wholesalers and retailers.
“I believe that some businessmen should see this as a negative process, but if we analyze the accounts, there is no loss of profitability and, if there is, it can be calmly compensated by the quantity, as it is an expansive context,” said the secretary, in a statement published by the official news agency of the Argentine government.
If the price freeze is a measure to contain inflation that never works, it is especially dramatic in the case of Argentina, a country where different governments have adopted it, always without success – according to a report released by the Argentine Chamber of Commerce and Services in 2018, in the previous hundred years, the average inflation rate in the country was 105% per year, with a historical high of 3,079% in 1989.
During this period and after, several Argentine presidents resorted to the strategy of freezing prices. 70 years ago, Juan Domingo Perón adopted a plan to freeze and control prices. In 1973, president again, repeated the dose.
Twelve years later, with the return of democracy, the government of Raúl Alfonsín promoted a price and wage freeze. In 2006, it was Néstor Kirchner’s turn to make a “price agreement”; in 2013, his widow and successor, Cristina Kirchner, also bet on the measure. The last two attempts were with Mauricio Macri, in 2019, and already in the term of the current president, Alberto Fernández, who froze the prices of 23 thousand products in March 2020.
This Thursday, the president of the Argentine Chamber of Commerce and Services, Mario Grinman, reiterated that this record is definitive proof that the new freeze will not work. “What do you imagine? When there is an increase in wages, the cost increases and therefore, to some extent, the increase is transferred to the product. Every time they tried, it didn’t work. But they keep trying and the truth is, if they want something different, they should try something different,” he told the newspaper Perfil.
In a survey of market expectations corresponding to September released last week, analysts had estimated that Argentina would end 2021 with an accumulated inflation of 48.2%.
In an interview with La Nación, economist Guido Lorenzo, director of the LCG consultancy, highlighted that the price freeze only “slows down inflation”, and the effects on the economy later end up being even more perverse.
“To think that all prices in the economy can be controlled and that, therefore, this will not be discovered at some point is a mistake, because inflation comes from an imbalance between the quantity of money, which is what gives the nominal price, and the quantity of goods produced and circulating in Argentina”, argued Lorenzo.
“And the truth is that long-term freezes don’t work, they haven’t worked historically except in some experiments for very short periods of time and with the consequence of having more inflation in the future,” added the economist.