Argentina concerned on inflation outburst

Ratio hit 4% in the past three months, as authorities admitted they are working to prevent a soar

The Argentine government admitted on Wednesday concern on the level of inflation that hit 4% in the past three months, according to official statistics. Chief of Cabinet, Alberto Fernandez, said at a news conference in Buenos Aires that President Kirchner's administration was “carefully working” to prevent an eventual soar.

The inflation rate causes great concern in a country that suffered two hyperinflations processes in the last 15 years. The first one took place in 1989 leading to the resignation of the then President Raul Alfonsin six moths before the expiring of his term. The second hyperinflation slashed Argentineans a few months later when President Carlos Menem took office to champion draconian pro-market shock policies.

Fears about a possible outburst of the inflation rate worry President Kirchner ahead of October mid-term elections. Kirchner expects to plebiscite and legitimate his rule in the polls after being elected by a 24% of the votes in 2003. An economical crisis could also shatter his popularity and excellent connection with the public opinion across the country.

However, specialists do not think the scenario is serious enough to be alarmed. In a report forwarded to Pravda.Ru office in Buenos Aires, economists Horacio Val and Victor Perez Barcia from San Martin State University believe that the rising in the retail prices are more related to stationary events than to a structural problem with the economy.

“It is not ruled out that the recent incorporation of thousands of unemployed workers to the labour market had an impact in the increasing costs of food and other basic needs”, analysts added. The report also state: “To avoid a possible escalate in the inflation rate, which cannot be completely ruled out, the government should tighten control over speculative funds flowing to Argentina.” 

On the contrary, analysts quoted by local mass media warned that the inflation rate could go up even more after Kirchner's administration finish a new schedule of tariffs with privatized public service companies. “The renegotiation of the contracts will have an impact in fairs”, they admitted.

Kirchner has based his popularity in the extraordinary recovering of the economy since its collapse in 2002. For the last two years, the Argentine GDP has been growing at great speed with rates over 8%. Kirchner is aware that if the economy starts warming up the first one to become burned will be himself.

On the photo: Argentine President Nestor Kirchner