MercoPress. South Atlantic News Agency

Argentine industry warns: inflation is like a hard drug that creates “illusions and social tensions”

Cristiano Ratazzi, Argentina’s FIAT CEO and vice-president of the Industrial Union

Argentina’s Industrial Union’s vice president, and FIAT Argentina’s head Cristiano Ratazzi, warned Monday that “inflation is like a drug that creates illusions but also social tensions”.

Ratazzi during a round of morning interviews on radio stated that Argentina experiences a “state of disorder, and does not know how to keep a low inflation rate”.

He added that some unions are claiming for new salary hikes and floors completely out of line which erode the competitiveness of Argentine companies: “what they are asking is way out of bounds, most if we wan to lower the inflation”.

The businessman also indicated that inflation “is like an unfair tax that poor people must end up paying”.

“A country that is incapable of keeping its accounts in order with inflation below 3% particularly with such a strong tail wind is a country in a state of disorder. Inflation is a drug, and a hard one since it creates illusions”.

Likewise, Ratazzi considered that Argentina “was tremendously competitive until 2008, then it started going down slope”.

Finally Ratazzi criticized measures that hinder economic activity such as the Supply Bill (basically price controls) which he described as “palaeolithic” and contrary to a “serious country”.

The industry’s spokesperson comments follow statements from Economy Minister Amado Boudou who assured the Argentine economy will hit single digit inflation in 2011.
”Single digit inflation will contribute to maintain the salary recovery and the competitiveness in the domestic market“ said Boudou and emphasized that “we are convinced that the Argentine economy will hit single digit inflation in 2011”.

Boudou also praised the trade alliance with Brazil and assured that the bilateral trade with the neighbouring country “generates jobs, and encourages us to increase our industrial output, other than focusing only on commodities.”

“The foreign exchange rate, the fiscal surplus, as well as the trade surplus and the Central Bank foreign currency reserves will continue to be the core of the current administration in order to increase formal employment” pointed out the minister.

Officially Argentina’s 2010 inflation was above 11%, however private estimates (supported by salary demands from unions) put the figure above 25%, close to 30% and at the current rate, increasing.