RIO DE JANEIRO, BRAZIL – China’s ideological proximity is palpable in impoverished but proud Argentina. Following the communist and authoritarian model, the Argentine government remains determined to control and intervene in the economy, despite the disastrous results its populist policies have produced for decades. The main cause of the country’s widespread impoverishment is inflation, a monster that Argentine politicians continue to feed with their unwise decisions. The proof is that today more than 40% of Argentines are poor and the country leads the misery index among the world’s leading economies.
In 2021, official Argentine inflation reached a whopping 50.9% – the highest rate in the Americas, surpassed only by Venezuela’s – and all indications are that price escalation will continue at similar levels in 2022.
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Peronist Alberto Fernández’s measures, along with the pandemic, have further exacerbated the country’s inflationary situation. The central bank’s reckless monetary policy and the government’s stimulus programs were joined by the shortages caused by the coronavirus crisis or the rise in energy prices. All of these factors have continued to drive up prices and, as inflation always does, hurt lower incomes in Argentina.
FROM DESSERT TO SAUCES
For this reason, price escalation in 2021 led the Fernandez government to resort to a measure as desperate as it was unsuccessful: freezing food prices.
Specifically, last October the Peronist executive decided to freeze the prices of 1,500 food items and other basic consumer goods for three months to curb inflation. At this link you can see the more than 800 pages of price tables that the state set. From “Royal Vanilla Flan” to “Maggi’s Creamiest Texture Mashed Potatoes,” the Argentine executive’s blow to entrepreneurial freedom was total. And as usual when governments intervene in the economy, the freeze on the 1,500 products was extended.
As expected, the situation has not changed in these three months, and prices continue to weigh on the pockets of Argentines day after day. At the time of the announcement of the price freeze, inflation stood at 37% in September, while the Argentine consumer price index stood at 50.7% last January.
Peter Hyland is managing director of several companies in Argentina’s agri-food sector and supplies raw materials to beer company Quilmes, among others. His experience with price restrictions has been disastrous. “It’s a recipe that has never worked. It’s been 10 years since the government of Cristina Fernández de Kirchner introduced the “Precios Cuidados,” and the market basket continues to rise. The only thing they have achieved by limiting the prices of these 1,500 products is that their producers lower the quality and people don’t want to buy them. If they have to sell milk at X price, they mix it with water. They have no other choice. Nobody wants to buy a product whose price is affected because it’s worse,” Hyland explains.
STATE-OWNED FOOD COMPANY
Despite these findings, the Fernandez government has no intention of changing its strategy to make food cheaper. Instead of promoting the free market, facilitating competition between companies, or reducing the taxation of products, it is already considering another crazy plan: the creation of a state food company.
This idea is being pushed by Rafael Klejzer, national director of integration policy for Argentina’s Ministry of Social Development. Klejzer is one of the leaders of the radical leftist La Dignidad party and the visible face of the Confederación de Trabajadores de la Economía Popular (CTEP). Now he is a member of the Argentine executive. He himself has stated that the “National Food Company,” whose acronym is ENA, would aim to control the food sector, which he believes is dominated by the “hands of the big corporations.”