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Argentine policy to contain inflation “has collapsed”

Wednesday, April 11th 2007 - 21:00 UTC
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The Argentine government prices policy “has collapsed” and inflation could become out of control warned on Wednesday Javier Gonzalez Fraga, a former Central Bank president and expert in capital markets.

"The lack of, or insufficient beef and dairy produce supplies and the increase in prices are a clear signal of the collapse", said the economist during an interview with a Buenos Aires broadcasting station. Gonzalez Fraga said the scarcity of these consumer goods can be attributed to a higher domestic demand, the ban on exports imposed by President Nestor Kirchner's administration and an overall policy "ignoring and pretending to repress the natural evolution of prices". He said the situation became particularly serious "in the last twelve months", under Domestic Trade Secretary Guillermo Moreno who, inevitably with his heavy hand tactics "helped generate a supply retraction" plus no political success in inflation control. "We're facing a collapse of Mr. Moreno's policies which besides generated no political success. We only have scarcity, eroded supply and even problems with public utilities services", underlined Gonzalez Fraga, who is considered a free market "liberal" economist according to Argentine standards. However he pointed out that these problems "have not been caused by the current production model because macroeconomic numbers are sound", adding that "we are facing management problems". "The current anti inflation policy is management madness and at some point these policies will have to be reviewed", he insisted. With a booming economy for almost five years running the Kirchner administration has been obsessed with keeping inflation numbers under control going as far as establishing "reference prices" in different sectors mainly of the food industry. However supply of these "reference priced" goods on which the consumer prices index is calculated, has proved limited as labor costs increase, and in areas such as beef, staple item of the Argentine diet, and dairy produce, the government has been forced to temporarily ban exports to reinforce domestic supply. Livestock and dairy farmers have reacted threatening to stop cattle shipments and have done so in several occasions at different degrees, which cost the job, so far, of one Agriculture minister and black listing of several members of Congress who support camp demands. On Wednesday farmers' organizations are meeting with cabinet chief Alberto Fernandez, Economy minister Felisa Miceli and Agriculture Secretary Javier de Urquiza to try and find a way out from the deadlock. A spokesperson for the all powerful Argentine Rural Society, the most diplomatic as far as demands are concerned, said that "days and months have gone with no solution on sight", adding that the lack of beef, other meats and dairy produce in supermarkets is "the natural reaction to prices suggested by the government". Farmers and Kirchner administration officials last met March 30 with the same agenda as today: end to the intervention of the livestock market of Liniers; debt restructuring for farmers and wheat and corn compensations to help cover the difference between domestic and international prices. "At this rate in four, five years beef in Argentina will be as expensive as caviar, and there's no way the current policy can prevent prices from steadily increasing", said Ricardo Buzzi president of the Argentine Agrarian Federation. "Every six hours a cattle farmer goes down", he said adding that "unless the production model they are trying to impose on us is changed, the only resource left will be to take to the national routes with our tractors", he warned.

Categories: Economy, Argentina.

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