Buenos Aires — With the intention of anticipating the impact that the exchange rate devaluation may have on inflation, the Argentine government has announced a renewal of the price agreements already in force, with increases of 5% per month, for three months.
“We are aware of the variation [of the US dollar], and that is why we launched tax-relief mechanisms for companies so that they do not pass on the increases in the exchange rate to products,” said Guillermo Michel, head of Customs and in charge of the new initiative.
The government expects that, after extending the 600 price agreements already in force, companies will roll back the price increases already made between Monday and Tuesday.
The announcement comes after the country’s central bank announced on Monday it would increase the official exchange rate by 22%, in order to contain the impact that the devaluation may have on prices in the coming months, and in the run-up to the general elections on October 22.
On Tuesday, the country’s statistics bureau INDEC reported that July inflation was 6.3% month-on-month, with a year-on-year variation of 113.4%, and a year-to-date variation of 60.2%.
There has also been a strong increase in the parallel exchange rate.
According to Gabriel Rubistein, secretary of macroeconomic programming, this could be contained in the next few days, however. “We believe that to the extent that prices are assimilated and increases are rolled back, this will help to decompress the dollar financial markets”, he said.