Tuesday, February 5, 2013

Argentina Adopts Official Policy of Food Shortages

The Associated Press (via Fox News) reports that the Argentinian government is going to impose price controls in a vain hope of limiting inflation. From the story:
Argentina announced a two-month price freeze on supermarket products Monday in an effort to break 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 market, 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.

The government announced the price freeze on the first business day after the International Monetary Fund formally censured Argentina for putting out inaccurate economic data. The IMF has given Argentina until September to bring its statistics up to international standards, or face expulsion from the world body in November.
It is basic economics that artificial price ceilings reduce the supply of a good. In other words, the Argentinian government has chosen food shortages over inflation. That should create even more unrest. I believe that they have chosen poorly. And I don't think spurious claims over a hunk of rock hundreds of miles from their shore is going to distract the people.

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