MercoPress. South Atlantic News Agency

Inflationary debate rages in Argentina; food CPI ranges 15%

Prices in Buenos Aires supermarkets and groceries jumped 1.6% in August totaling 14.1% in the first eight months of the year according to reports from the controversial Argentine Statistics and Census Office, Indec.

This index however is not the questioned Consumer Price Index, CPI, which has caused a political storm with international repercussions since the inflation rate not only is linked to salaries and labor strife but also to the Argentine post-default bonds which carry an inflation premium. The "official" Indec CPI was 0.6% in August and 5% in the first eight months of the year, a percentage questioned by almost all sectors in Argentina since independent provincial offices of Indec show that the CPI is actually closer to 15%. The supermarket index "only refers to a limited number of goods and not the totality of the economy's prices, and thus can't be taken as a measure of inflation" pointed out Indec Buenos Aires, which is technically correct. Nevertheless it must be said that supermarket associations have an agreement with the Kirchner administration to limit price increases or provide cheaper alternatives, which could indicate true inflation is even higher. But in spite of inflation consumption in Argentina is booming having expanded in August 16.6%, the highest monthly record since the end of the 1998/2002 recession. Analysts say Argentine demand keeps increasing because salaries also increase, consumers appeal to credit cards and installments fearing more inflation ahead. According to Indec salaries on average are increasing 2% per month and in spite of stagnant consumer confidence or declining, with financing people keep purchasing in advance of inflation. "Since May and until the elections the pro consumption measures are readily visible, step by step, with salary increases for civil servants, higher pensions and more tolerance in private sector labor agreements", points out Juan Delgado an economist from Ecolatina. "These measures are helping demand and demand is the engine of Argentina's economic growth", adds Delgado. Supermarket sales in the first seven months of this year have increased on average 25.4%, ranging from 23.3% in metropolitan Buenos Aires and 22.2% in Cordoba to 49.4% in Salta and 37.5% in Tucuman. Delgado points out that the overall expanding Argentine economy, particularly in some provinces and the fact that competition helps to contain prices, is one of the reasons for the disparity among the "richer" and "poorer" provinces. Since 2003, Argentina has been growing at an annual average of 8.5%. The Kirchner administration argues that there is no inflation in Argentina but rather "price movements" which respond to increased specific demand in certain areas because of higher income and less poverty in the country. "If inflation is understood as price variations, this exists, but if described as the sustained and generalized increase of prices, it does not exist", said cabinet chief and head of Mrs. Kirchner's presidential campaign Alberto Fernandez. "Consumption is up, production is up, so is industrial activity but we have none of the inflationary process consequences such as shortages or a hoarding demand", insists Fernandez.