Argentina: South America’s True Basketcase

Per­o­nist pol­i­tics were never my forte.  All I pretty much under­stood from the few polit­i­cal cul­ture classes I took at col­lege gave me the idea that they’re left-wing, they’re typ­i­cally pop­ulist, and they’re based on personality.

(No won­der so many Nazis found the place to be so wel­com­ing after World War II.)

Well, the lat­est “Evita” wannabe is Pres­i­dent Cristina Kirch­ner, and like Eva Peron her­self, took over after her husband’s death.  It’s not gone well.  She wants to re-fight the Falk­lands Wars with the United King­dom (May she’ll last 75 days before com­plete sur­ren­der?) and ram­pant, run­away infla­tion has crip­pled their econ­omy due to mas­sive gov­ern­ment spend­ing, pla­cat­ing to gov­ern­ment and trade unions, crony-capitalism, manip­u­la­tion by their cen­tral bank, and fal­si­fy­ing gov­ern­ment eco­nomic data.

Sound famil­iar to any­one who’s been liv­ing in the U.S. since 2008 or so?

Well now they’ve double-down on fight­ing the infla­tion by tak­ing a page from the Sovi­ets, and by Sovi­ets I mean, the Gray Davis play­book and doing an all-out price freeze on com­modi­ties.  The first thing to suf­fer through this new real­ity — gro­cery items.

(Wake me when the U.S. gets asked to help with the human­i­tar­ian aide because no one will be ship­ping gro­ceries to Argentina.)

Argentina announced a two-month price freeze on super­mar­ket prod­ucts Mon­day in an effort to stop spi­ral­ing inflation.

The price freeze applies to every prod­uct in all of the nation’s largest super­mar­kets — a group includ­ing Wal­mart, Car­refour, Coto, Jumbo, Disco and other large chains. The com­pa­nies’ trade group, rep­re­sent­ing 70 per­cent of the Argen­tine super­mar­ket sec­tor, reached the accord with Com­merce Sec­re­tary Guillermo Moreno, the government’s news agency Telam reported.

The com­merce min­istry wants con­sumers to keep receipts and com­plain to a hot­line about any price hikes they see before April 1.

Polls show Argen­tines worry most about infla­tion, which pri­vate econ­o­mists esti­mate could reach 30 per­cent this year. The gov­ern­ment says it’s try­ing to hold the next union wage hikes to 20 per­cent, a fig­ure that sug­gests how lit­tle any­one believes the offi­cial index that pegs annual infla­tion at just 10 percent.

Econ­o­mist Soledad Perez Duhalde of the abeceb.com con­sult­ing firm pre­dicted on Mon­day that the price freeze will have only a very short term effect, and noted that sim­i­lar moves in Argentina had failed to con­trol infla­tion. Con­sumers shouldn’t be sur­prised if the super­mar­kets are slow to restock their shelves and offer fewer prod­ucts for sale, she added.

A more effec­tive way to con­tain infla­tion would be to “reduce gov­ern­ment spend­ing, which is financ­ing an expan­sion of the money sup­ply, and to have a cred­i­ble price index.”

Unless the rules of polit­i­cal econ­omy and trade have changed, expect to see Argentina’s gro­cery shelves bare in the com­ing weeks — if not months — as com­pa­nies look at a mar­ket which will become more and more erratic, with their imports into Argentina ham­mered by high prices they can’t pass on to con­sumers.  Even­tu­ally, the ports in Buenos Aires may even close to all imports all together.

Oh, there will still be inter­nal, domes­tic pro­duc­ers inside the coun­try, but they won’t fair much bet­ter than those from over­seas. Hyper-inflation has a ten­dency to eat a coun­try whole from the inside; espe­cially when the gov­ern­ment stymies profit mar­gin for two months all in the name of “price controls.”

So please don’t cry for Argentina one bit.  They’re about to deserve what’s on its way.

Here’s hop­ing we learn from their mis­takes before they become ours.

Be Socia­ble, Share!