Lost battle?: despite the controls, food does not give up and accumulates a rise of 10% in the last three months

February 6, 2022

January inflation again showed a strong rise in food and beverages, driven by fruits and vegetables

Almost four months have passed since Roberto Feletti took office at the head of the Ministry of Domestic Trade and ordered new price controls to stop the rise in food prices. As if that policy had been successful every time it tried to be applied in Argentina, the official bet that inflation would go down quickly, but he did not succeed. In the first place, because the plan – Extended Care Prices – could only be fulfilled in the large chains and because, in addition, it did not include fresh products, impossible to control due to the great atomization of their manufacturers.

In this way, food and beverages rose 3.4% in October; 2.1% in November and 4.3% in December. For January, a high figure is expected again, according to what Feletti himself anticipated in radio statements.

In the first week, the increase in food and beverages amounted to 1.8%. Vegetables led the rise 4.5% and dairy products and eggs 2.7% (LCG)

“We are losing the battle of fresh products, such as meat, tomatoes, potatoes, vegetables. In January, inflation will be the same as in December,” said the secretary, while indicating that food inflation “will even be higher” than in the last month of 2021. And the scenario for February is not appears very different. Already in the first week, the increase in food and beverages amounted to 1.8% and the increase was led by vegetables (4.5%) and dairy products and eggs (2.7%), according to a survey of the LCG consultant.

Food and beverages rose 3.4% in October;  2.1% in November and 4.3% in December (NA)
Food and beverages rose 3.4% in October; 2.1% in November and 4.3% in December (NA)

To the typically seasonal issue of summer, this year the weather was added, both high temperatures and heavy rains, which caused the destruction of many crops and a sharp decrease in supply. The consequences that this situation had on prices will continue to be felt during this month, and probably also in March.

With the aim of giving some answer to this problem, which is resolved with a greater offer, Feletti announced that in the Ministry of Commerce they are studying some regulatory mechanism to reduce price volatility in fruits and vegetables and that the results of these measures will only be seen in March.

With the meat, they tried in a thousand ways, but they did not achieve the desired results either.

He had said the same with the freezing of 1,300 products (they form the new Care Prices) and it only works in the main supermarket chains. Inside, and in the traditional channel in general, prices run at a different speed. “With meat, they tried in a thousand ways, but they did not achieve the desired results either,” market analysts point out.

Without a true macroeconomic plan, these measures are useless in the short term and always fail in the long term, economists tirelessly repeat. And in the case of fresh, the control is inapplicable due to its great atomization.

During November and December, months in which the price freeze was in force, meat was the item that rose the most.  But fruits and vegetables climbed strongly in January, according to private
During November and December, months in which the price freeze was in force, meat was the item that rose the most. But fruits and vegetables climbed strongly in January, according to private

“Inflation is a macroeconomic problem, it is not going to be solved by chasing butchers and greengrocers. In the short term, it is true that many set prices as a margin on costs, and you can work on that, but the current level is one of inflation that is not due to who gives up (salary or margins), but rather It responds to a total disorganization of the monetary regime and that is where it should be targeted to solve it.even if it’s painful,” he told Infobae the LCG economist, Guido Lorenzo.

Regarding the price agreements, he stated that as inflation reached a very strong inertia, they are outdated very quickly, so “freezing and updating quarterly the only thing it does is generate wear and tear that represses inflation for a few months and then it is uncovered with strong increases”.

Inflation is a macroeconomic problem, it will not be solved by chasing butchers and greengrocers (Lorenzo)

In fact, this is what is happening, for example, with the nearly 400 who were left out of Cared Prices in the January renewal. Supermarket sources assure that a strong discussion is taking place with the companies to prevent the increases from exceeding 2.5% per month, since some sent lists with increases of up to 20%, in some cases, despite the warning of the Secretary of Commerce that they could not rise more than that established guideline.

So much so that the Feletti team sent the United Supermarkets Association (ASU) a list of these products, with the respective authorized monthly increase percentage. “Happens that many products came with frozen prices since June, since the update negotiated with Paula Español, in October, was not considered by Feletti”, justified the director of a food company.

The Feletti team sent the United Supermarkets Association (ASU) a list of these products, with the respective authorized monthly increase percentage (Nicolás Stulberg)
The Feletti team sent the United Supermarkets Association (ASU) a list of these products, with the respective authorized monthly increase percentage (Nicolás Stulberg)

When referring to food inflation in January, which was higher than that of December, the Secretary of Commerce also referred to these products that had been left out of the official program, despite the warnings he made through the ASU that there would be inspections and, eventually, closures, if the companies did not comply with the established guidelines.

The Government continues to insist on agreements, controls, inspections and closures, despite the abundant evidence, recent and historical, that none of this works more than to contain some prices for a short time and calm inertia. “There is still no comprehensive anti-inflationary policy. Inflation is a macroeconomic phenomenon, it is not sectoral. Therefore, cannot be attacked only with agreements and controls, but they work if they are part of a consistent program that has the macro reordering as its north”, said the Analytica economist, Ricardo Delgado.

There is still no comprehensive anti-inflationary policy. Inflation is a macroeconomic phenomenon, it is not sectoral (Delgado)

In the view of the economist in question, “thinking that they are going to be able to fight fresh products outside of a program is going to be very complex, with a 100% exchange rate gap that implies permanent devaluation expectations in the price setters, without the ability to control and with programs that are very limited in terms of scope, number of mouths and food. It’s going to fight a war with toy bullets. It is not the way to go and there will be no success in seriously lowering inflation”.

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Reference-www.infobae.com