MercoPress. South Atlantic News Agency

Inflation fears become real in Argentina

Argentine Economy Minister Roberto Lavagna admitted that inflation in 2005 could reach 11%, above the targeted band of 8 to 10,5%.

"Obviously we're all working to keep to the lower end of the band, 8%", added Mr. Lavagna who yesterday left the Inter American Development Bank annual general assembly and headed for Frankfort to meet with President Nestor Kirchner who is on an official five days visit in Germany.

Retail prices in Argentina accumulated during the first quarter 4% equivalent to half the estimated objective for the whole twelve months which has sound alarms in the Economy Ministry.

Surging inflation is a big threat for the high public opinion standing of the Kirchner administration which also faces crucial legislative elections next October.

Besides given the vulnerable financial situation of the country price hikes submerge even more Argentines into poverty. According to the latest official data an estimated 40% of the population is below the line of poverty.

Mr. Lavagna will join President Kirchner's in Germany who is looking to fortify Argentina's international political support ahead of upcoming talks with the International Monetary Fund over a possible new aid agreement.

President Kirchner is scheduled to meet with German Chancellor Gerhard Schröder, President Horst Köhler (former IMF Managing Director) and Bavarian leader Edmund Stoiber.

Mr. Kirchner will also be seeking to lure new German investments to Argentina, but Kirchner's main goal is to muster Germany's support within the G-7 group of industrialized nations and in the International Monetary Fund after Argentina's successful debt swap.