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Why food inflation is already decoupled from international prices


Photo Reuters / Mariana Nedelcu

For months now, the Government has insisted that the problem of food inflation in Argentina is mainly due to the evolution of international prices, from which it must be dissociated. But actually, Keeping up with the pace of the global rise might be a much better idea. That, at least, if the advance of food inflation is followed in the main countries of Latin America in which the post-pandemic context, with an increase in energy costs included, caused a clear impact and where the increase in prices it is a concern again. However, this pressure is far from resembling the rise in prices in Argentine supermarkets, which grow at a monthly rate 5 times faster than the average of the most important economies in the region.

This is what arises from a follow-up carried out by the IERAL of the Mediterranean Foundation, which shows that while food prices increased 11% since the beginning of the pandemic in a group of 10 Latin American countries, including Brazil , Mexico, Chile, Uruguay, Paraguay, Peru, Ecuador and Colombia – Venezuela is excluded – in Argentina they doubled. That is, food in the country today costs 100% more than at the end of 2019.

As expected, the jump in the price of meat after a truce of several months, added nervousness in the Government, attentive to the consumption at the end of the year and the overheating of inflation that, far from yielding, accelerated in the last weeks. Without generating any surprise, the official reaction aimed to agree to a price freeze -which, this was unprecedented, was achieved for just 3 days- while more measures for the sector are evaluated, to which the Secretary of Commerce himself, Roberto Feletti, He considered nothing new: an increase in withholdings and a cross-subsidy scheme like the one in force for oil. The rationale behind the application of these “traditional” tools is the need to “unlink” prices.

Why food inflation is already decoupled from international prices
The enormous difference between the evolution of food prices in Argentina and in the rest of the region. Source: Ieral

“If we want to ensure meat, chicken, bread and milk we have to decouple domestic prices from international ones”, Feletti pointed out. The truth is that, while the global price increase is undeniable, in Brazil, food prices grew 12% in the last 12 months, in Colombia 14% and in Mexico 7%, unlike all of them in Bolivia, where prices practically did not register any variation.. At the other extreme is Argentina, which multiplies the percentages of any of these 10 countries surveyed several times, with an inflation of food and beverages of 51.4% year-on-year and 41.2% accumulated as of October of this year. This despite the fact that, as stated by the economist Juan Manuel Garzon, responsible for monitoring consumer price indices for food and beverages in different countries, the persistence of high inflation contrasts with the slowdown two variables that influence domestic food prices: the official exchange rate and prices international commodities. While the dollar went from growing at 3.3% per month in the first quarter to 1.1% in recent months, international prices (FAO basket) also decelerated from 3.2% to 1.3% per month, in similar period. Thus, it is more complex to explain the inflation of the gondolas in Argentina based on the evolution of prices in the rest of the world, even when the phenomenon exists to some extent.

“I wish Argentina had more ‘links’ with what is happening in the region, the inflation levels that the country has are clearly abnormal” (Juan Manuel Garzón)

“In all the countries of the region, food prices have had much more stable dynamics than in Argentina. My reasoning is completely different from that of the secretary (Feletti). I wish Argentina had more ‘links’ with what is happening in the region, the inflation levels that the country has are clearly abnormal, ”said Garzón. The economist added that the evolution of the price of food in the country is attributable to “clearly internal factors, associated with economic policy and government management, which drive the prices of food and all goods in the economy.”

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