The consumer suffers, not celebrates Prices of basic commodities will double with effect from November

In the words of the Economy Minister, while the government celebrates the “reduction” or outright “decline” of inflation, the official price index is falling in the face of the exorbitant increases Argentines have suffered since the end. Last year , and the data held doesn't seem to offset the real loss of purchasing power. Economic recession, anchored in real and nominal terms by wages, complicates the social environment.

“At the beginning of the year you have to think Big food companies set their prices by assuming that a dollar is 1,500 pesos, that didn't happen. Prices have more than doubled in the four months since December, but economic conditions have not changed significantly, and even wages have remained stagnant. So we didn't see such huge markups in March, but the prices were at a very high level,” he says Page 12 Fernando Savor, president of the Federation of Grocers of Buenos Aires (FABA).

A kilo of cooked ham in a warehouse in the province went from 9,988 pesos in February to 10,445 pesos in March, according to Intech, and prices are still higher. Double the price in November. Other products rose more than the 11 percent monthly rate set by Indec in March, such as badgrass cheese, which rose 18 percent to 12,793 pesos (from 5,488 pesos per kilo in November) or disposable diapers, which rose 20 percent to 3,666. pesos (against 1,117 in November), and dulce de leche which rose 18 percent to 2,073 pesos (against 942 pesos per 400 grams in November).

Consumers are still trying to adjust to the new prices, “There is a denial behavior among many customers who still do not dare to stop buying a bimbo bread for 4,200 pesos, for example, because they cannot afford it or they do not want to. Pay that price.” “It's gradual, but many people They are starting to move towards SME brands Because the price spread is huge: a Coca-Cola costs 3,500 pesos and a Manas brand drink costs 1,200, or a liter of Danone brand yogurt costs 2,200 and a Suipassence brand costs 1,200,” he adds.

Secondhand brands are now more common in supermarkets. In one Buenos Aires city, terma mountain bitter was 1,740 pesos between March and February, but 980 pesos in January. Taconi and Tres Torres, 1,040 pesos, made by Grupo Cebas, like Terma, and placed in a gondola. Consumers can save up to 50 percent of the purchase price when they take advantage of discounts, offers or second-hand brands, the newspaper reported.

On the other hand, according to the warehouse leader, “neighborhood businesses are starting to get bonuses from big companies like Argor, which give bonuses but don't cut prices.” This is possible due to the nominal stability of the costs of these companies, which increased substantially after demonetisation. “Another thing we see are important offers in hypermarkets and wholesalers, which put merchandise at 50 percent of the value, but they expire next week. These practices must be reported, we are filing a report to consumer protection,” he warns.

The situation is worrisome starting next month, “We are getting price lists with 4 per cent hikes in April, which are not very high, but the increase will come with new electricity charges: Businesses We went from 120,000 to 400,000 pesosThat is our main concern.” Many SMEs, butchers, bakeries are going to close downetc. If a household paid 35,000 and now pays 220,000 pesos for electricity, the bills will be unpayable and sales will suffer.

Recession and exchange rate stability

Economists consulted through Page 12, first, “They show moderation by maintaining monthly inflation at 11 percent, compared to PASO or pre-ballot data.” According to Genaro Grasso, an economist at the Center for Cooperative Culture, “Inflation will be in a recession from now on, and it will be difficult to get off.” Tradable products increased the most in December and January, for example goods purchased in supermarkets, while non-tradable products increased the most in February and March, i.e., indexed services.

The goods category rose 23.5 percent and services 16.5 percent on average between December and January, while they rose 11 and 17 percent in February and March, respectively, according to Intech data. Analysts were not surprised by the inflation data for March, which is actually done by private consulting firms that examine prices at supermarkets or mass-consumption stores.

This essentially reduced the growth of commodity inflation due to the stability of the dollar and nominal wages, both of which act as “anchors”. For Grasso, one of the legs of Javier Mili's economic model consists of maintaining a rate of deflation that is much lower than inflation: between 2 percent and 11 percent. “This creates competitive pressure through imports and reduces costs for imported inputs keeping prices relatively low,” he said, though he expressed his reservations about the sustainability of exchange rate stability.

Meanwhile, for Florencia Médici, a researcher at Conicet and CITECDE at the University of Rio Negro, “The recession, the growth of unemployment and the fear of losing one's job prevent inflation from skyrocketing because they reduce wage demands. I don't think there is anything to celebrate.” Social conflict can be a threat in that respect, but maintaining exchange stability without exchange restrictions is a much more difficult matter.

Is the exchange kept quiet?

Argentina coined the concept of “stagnation” in world economic theory, and it refers to the coexistence of inflation with economic stagnation. This is impossible for the traditional theory as a recession reduces price increases. In Argentina, recession coincides with exchange rate devaluation, which in turn accelerates inflation, so one might wonder how weak is the exchange rate stability achieved by Javier Miele?

“The government's exchange rate approach is pragmatic and combines conventional features (maximum devaluation) with other less conventional ones (construction maintenance, deferral of import tariffs and channeling of official dollars to the parallel market),” warns consultancy Centro-Periferia. This strategy produced good results, “In the other years when exchange controls were in place (2012-15 and 2020-23) the central bank bought an average of $300 million in the first quarter of the year, and in 2024 it bought $8.5 billion. Dollars,” they calculate.

However, the president has repeated in interviews in recent weeks that “we're not going to devalue,” which doesn't set a good precedent. strategy Deferral of payments to importers It was well-suited to stockpiling reserves, but could run out by the end of April, “which was widely used by the previous economic administration and is now being replicated by the new authorities,” the report warned.

“Despite providing direct central bank interventions in the gap, the new authorities have unveiled a plan from which they have transferred a very significant amount of official dollars to parallel markets (more than their predecessors). This has kept the prices of parallel dollars under control and narrowed the gap,” they add. Ways are Export Enhancement Program and settlement of dollars coming through cards of expatriates in the country for tourist expenses and financial market.