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Government food price claims baffle Argentines

Published on NewsOK Modified: January 17, 2013 at 4:55 pm •  Published: January 17, 2013

The low official inflation numbers have historically enabled the government to keep pay raises and consumer prices from going even higher, and shave millions from the payments it makes on inflation-linked bonds.

The official data reflects a wider effort by the government to control many aspects of the Argentine economy, subsidizing major industries, fixing prices and controlling currency exchanges to the point that it's almost impossible now to legally trade pesos for dollars.

Officially, the U.S. dollar that generations of Argentines have sought as a refuge from their roller-coaster economy can now be bought for 4.96 pesos, but only with prior approval from the tax agency and the central bank.

In practice, the ever-changing requirements for these approvals have made legal dollar purchases all but impossible and have fostered an illegal black market for what Argentines call the "blue dollar," which has soared this week to 7.54. At that rate, anyone who illegally trades pesos for dollars loses half their official value.

Central Bank Chief Mercedes Marco del Pont recently reiterated the government's position, dismissing the parallel currency market as tiny in comparison to the overall economy. "It's marginal and doesn't impact the functioning of the currency market," she said in a television interview Saturday with Argentina's leading C5N channel. "It should not affect how prices are determined."

But a number of economists say that because Argentines lack confidence in official data, the "blue dollar" is doing exactly that, becoming one of the nation's most closely watched indicators of consumer confidence, and as such influencing prices for everything from food to real estate.

"The blue dollar is reflecting the inflation that people feel in their pockets," said Argentine economist Enrique Dentice at the Universidad de San Martin. "It's what people expect to be the rate of devaluation."

Argentina's leading media companies and web sites track the illegal trading of this "blue dollar" by the minute, and as with the INDEC, their methodologies are not transparent. Dentice suspects the influence of major exporters, including Argentina's all-important soy producers, who must soon sell their harvest, and whose dollar profits jump every time the peso drops.

They're preying on the Argentine psyche, says Dentice, who maintains that the economy is stronger than many people think.

"It's psychological," he said, citing the many crashes that have fundamentally shaken the Argentines' faith in economic progress.

"When you have the memory we have, of generations that always end up doing badly, it's difficult to escape from it," he said. "We have this ancestral memory. We expect to be saved by the dollar."


Associated Press writer Luis Alonso Lugo in Washington contributed to this report.