Argentina Freezes Prices as Macri Seeks to Appease Voters

(Bloomberg) -- Argentina’s government reached an agreement with companies to freeze prices on an array of items Wednesday in an attempt to ease the impact of a recession and austerity measures ahead of October’s presidential election.

Companies will halt price increases on 64 food products at least until the end of October, while holding gas, electricity and public transportation costs unchanged, according to a document published on the presidential website. Officials also reached agreements with mobile service operators to fix prices for the next five months.

"We remain convinced that to lower inflation in the long term -- and end this problem we’ve had for 75 years -- profound changes are indispensable," the document reads. "In the short term, however, we’re taking measures that protect Argentines in this transition stage."

Economy Minister Nicolas Dujovne said the government wasn’t freezing prices as a way to cool inflation, which the previous populist government often did. He said the short-term measures were meant to ease the financial burden on Argentines suffering the second recession in three years. President Mauricio Macri, who faces re-election on Oct. 27, has seen his approval ratings fall to the lowest of his tenure.

"We have to clearly differentiate between administrations that have used price freezes or price agreements as an anti-inflationary tool," Dujovne said. The new pricing pact "is voluntary, it voluntarily helps the businesses that participate."

The measures come a day after the government reported that the inflation rate reached almost 55 percent in March, with prices rising 4.7 percent in the month. Part of the reason behind persistent inflation is the government’s reduction in subsidies on transportation and electricity, which it must do to comply with targets in a $56 billion agreement with the International Monetary Fund. Food and clothing prices have also increased sharply in recent months.

The government also said today that it would provide more loans to pensioners and discounts at supermarkets in an effort to boost an economic rebound.

The key measures announced:

  • Food prices fixed starting Monday April 22
  • The government will freeze electricity, gas, transport prices for the rest of 2019
    • The national government will absorb the cost of previously announced electricity price increases
  • Argentina to launch pension agency loans and discounts for pensioners, investing 124 billion pesos in round of pension agency loans
  • Tax agency AFIP launches payment plan for indebted small and medium-sized companies
  • Argentina to launch new round of housing loans known as Plan Procrear, to benefit 10,000 families
  • Small and medium-sized enterprises that export under $50 million annually won’t pay export taxes if they export in 2019 more than they did the prior year

©2019 Bloomberg L.P.