...but with a different meaning to it

By Michael Soltys

Buenos Aires Herald Senior Editor

President Cristina Fernández de Kirchner’s attitude towards inflation has been often compared by critics to the ostrich with its head in sand — a criticism broadly valid for many years until this month but should we be so sure now? Just before departing to Asia over a fortnight ago, she startled some observers with her passing mention of the “i-word” in a nationwide broadcast on railway modernization announcements — within two days of her return, she was at it again without actually using the taboo word, urging a consumer boycott against excessive price increases in a Friday speech in which she also called for wage restraint. This month has also seen INDEC statistics bureau break a streak of annual single-digit inflation maintained with incredible contortions since 2007, announcing 10.8 percent for 2012 (still well under half all other estimates). In short, there are some definite signs of CFK moving towards taking inflation on board as a reality in her own way, without accepting it in its full dimensions or admitting to any mistakes.

It is not only interesting that CFK should acknowledge the reality of price increases to the extent of proposing action against them — the action proposed is also interesting. If we view it in terms of 1975 in a debate which has become fashionable this month with comparisons between the current situation and the “Rodrigazo” of that year, the consumer boycott proposal is perhaps closer to Celestino Rodrigo’s efforts to “make the economy sincere” than to his predecessor José Ber Gelbard’s rigid price controls — appealing to the consumer is perhaps as close as CFK can come to invoking the laws of the market (almost as taboo to her lips as the word “inflation”). While the Kirchner presidencies have always been prone to state intervention and while they have built up a vast bureaucratic army to enforce controls, they have sat back on a few occasions and left price correction to the consumer with success (tomatoes and potatoes are two examples). Now CFK argues that consumer resistance has brought down holiday prices and she might be at least partly right — those who do not believe that her words always come true should at least accept that market laws can sometimes apply. But those market laws will also tell you that expanding the money supply annually by 40 percent will result in price increases — CFK cannot leave that out of any answer to inflation.

The battle with trade unionism over wage guidelines and Vice-President Amado Boudou’s attack on Buenos Aires Governor Daniel Scioli’s “cowardly” revenue-sharing request stole media attention on Friday but perhaps CFK has silently begun an even bigger war — against the inflationary dragon.