July 30, 2014
Capitanich: dollar hike won’t affect prices
While Cabinet Chief Jorge Capitanich yesterday defended the government’s decision announced on Friday to loosen currency purchase controls for private citizens, claiming that it will not affect price agreements or goods supplies, the Coto supermarket chain warned that the devaluation of the peso against the dollar may fuel inflation.
Meanwhile, Hugo Moyano, the head of the CGT Azopardo, the anti-government faction of Argentina’s largest umbrella union grouping and a former ally of President Cristina Fernández de Kirchner, criticized the measures saying: “This is what the government had always been denying. What formerly was a devaluation in disguise is now an overt devaluation” and creates “more uncertainty.”
Opposition Radical Party chairman Ernesto Sanz, a senator for Mendoza, said that by slackening currency restrictions it once considered essential, the government was showing that “it has lost control over the economy and has been politically damaged.”
The Cabinet Chief said that an accord to control prices reached at the beginning of the year not only continued in force but has been extended to the entire country on the pledge of suppliers and supermarkets to ensure price predictability, transparency and stability.
Domestic appliances, vehicles, electronics and other goods with a high foreign component ratio and in strong demand will be subjected to permanent controls from the Trade Secretariat to guarantee supplies at reasonable prices, said Capitanich, listing as examples steel, aluminiumand plastics, which set trends in the price chain.
“The Trade Secretariat will apply the full rigour of the law in case price-makers incur abuses,” he said.
For his part, Alfredo Coto, the owner of one of Argentina’s largest supermarket chains, warned about a likely cost increase and expressed doubts over the government’s plan.
“The dollar hike will cause oscillations in the price agreements,” he said after the government announced that it would allow individuals to buy dollars for saving and after the peso suffered last week its sharpest fall against the dollar in 12 years.
Coto is one of the businessmen who signed the accord to freeze the price of 194 products as part of a government drive to keep inflation at bay. A few days later he engaged in a dispute with the administration by saying that there could be a shortage of tomatoes, prompting Capitanich to say that the government would allow the purchase of Brazilian tomatoes. However, Capitanich was quickly disavowed by the President after local producers said there would be no shortage of tomatoes.
On Friday, Economy Minister Axel Kicillof and Trade Secretary Augusto Costa warned that the government will not allow price increases with the “excuse” of devaluation.
Domingo Cavallo — an economy minister for neo-conservative Peronist President Carlos Menem, and for the centre-left Radical-Frepaso Alliance of the ill-fated administration of President Fernando de la Rúa — said that the measures announced by the government were “suicidal” and will lead the Central Bank to lose further reserves “in an attempt to regulate the price of the dollar which is traded at the Stock Market... I still hope that at some time the government will realize that the only way to stabilize the price of the Stock Market-traded dollar and the black market is the legalization and full liberation of a financial and tourist market in which everybody can operate and in which the Central Bank does not intervene.”
For his part, José Ignacio De Mendiguren, the Secretary-General of the UIA industrial lobby, said: “It is not enough to slacken foreign exchange restrictions. If at the same time the government doesn’t send an explicit signal that it will fight rising inflation, the measures just announced could be ineffective.”
De Mendiguren is a deputy for the Peronist Renewal Front led by Sergio Massa, a former Cabinet Chief of Fernández de Kirchner who now is a stern critic of her administration.
Herald with DyN