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.