MercoPress. South Atlantic News Agency

Growing inflation fears in Argentina

Consumer prices in Argentina continued to advance during March rising 1,5% over February with an accumulated 4% for the first quarter of 2005 and 9,5% in the last twelve months, according to the latest report from the country's Statistics and Census Institute.

The basic food basket which is used to measure the poverty and indigence levels in Argentina increased 3% during March and 5,76% the first quarter of 2005. Wholesale prices rose 2,1% in March and 2,2% in the first quarter, while construction costs, 0,9% and 4,5%.

The 1,5% March upsurge which follows an inflationary rebound that begun last December with 0,8%; January 1,5% and February 1% could endanger the government's inflationary target for the twelve months which has been set between 7 and 10,5%.

Even when President Kirchner's administration argues that the consumer prices level so far should not alarm since it responds to seasonal changes and is expected to decrease beginning April, Argentina's private sector and the International Monetary Fund have expressed concern.

The government insists that with the recent price agreements reached with several basic sectors the overall index in 2005 should be below 10%. The federal budget was estimated on an annual inflation in the range of 8%. Price agreements were reached mainly with poultry and cattle farmers, and supermarkets.

Besides, Economy Minister Roberto Lavagna has suggested to the powerful trade unions confederation, CGT, and the Industrial Union that salary agreements should be kept in line with the government's inflation target.

March consumer prices ballooned pushed by education costs (6%), in coincidence with the beginning of the school year, and clothing (5,7%).

Food and beverage increased 2,7% with items such as beef jumping 6,7%; poultry 9,4% and 3,3% dairy products.

Clothing increases are linked to the change of season (autumn) with outwear 8,9%; underwear 1,3% and footwear 2,5%.

As to wholesale prices, domestic production increased 2,3% as a result of a 6,2% rise in commodities and 1% in manufacture and electricity. Imported goods remained relatively stable with a 0,9% increase.

Since the devaluation of the Argentine peso in December 2002 accumulated inflation has reached 50% with a significant impact in the average income and purchasing power.

Average monthly salary is 204 US dollars, with a basic food basket for a family of four demanding 262 US dollars per month.

In spite of a 9% expansion of the Argentine economy last year, and an estimated 6% floor in 2005, unemployment stands at 13,2% and the 44,3% of Argentines are below the poverty line.