Home' Trinidad and Tobago Guardian : September 11th 2014 Contents BG20 REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt SEPTEMBER 2014 • WEEK TWO
A price fixing law under debate in Argentina s
Congress will be used sparingly to protect consumers
and won t track similar legislation in Venezuela that
has led to widespread shortages, the nation s com-
merce secretary said.
The senate voted 38 to 27 in favour of the bill on
September 3. The law, which must now be approved
by the lower house, will allow the government to
limit profit margins and set price ranges as well as
establish minimum production levels. A new agency
will be created to monitor prices.
As in Venezuela, Argentina is using price controls
to try to slow inflation. Venezuela has expanded price
caps on food products to include as many as 15,000
goods ranging from rice to toothpaste since November
2011. Since then, shortages have mounted, inflation
has doubled and the bolivar has lost 90 per cent of
its value on the black market.
"The fact that there s a law doesn t mean it will
be applied like it is in Venezuela or that the conse-
quences will be like those of Venezuela," Commerce
Secretary Augusto Costa said in a telephone interview
from Buenos Aires yesterday.
Argentine business groups, including the Group
of Six that represent industry, agriculture, commerce,
banking and construction sectors, say the government
is seeking to intervene more in the economy as infla-
tion accelerates and companies face dollar shortages
for imports. The move comes less than two months
after Argentina defaulted.
The inflation rate rose to 38 per cent in August,
according to Buenos Aires-based Elypsis. The gov-
ernment hasn t issued a figure for annual inflation
since February, when it unveiled a new index.
"Argentina is following in Venezuela s footsteps,"
said Diego Giacomini, an economist at Economia
and Regiones, a Buenos Aires-based consultancy
firm. "You only have to look at the past eight years
to realise that Argentina is on that path."
Costa said that comparisons with Venezuela are
disingenuous and the government is improving a law
that has existed since 1974.
While companies can be fined and be shut down
for as many as 30 days at a time without a need for
a court order, business owners will no longer face
prison for not complying with the law, Costa said.
Nor will the government be able to freeze prices,
intervene in companies or expropriate merchandise,
In May, after Argentina agreed to what it said were
voluntary price accords with supermarket chains,
the government fined suppliers, including France s
Carrefour SA and Bentonville, Arizona-based Wal-
Mart Stores Inc, as much as US$4 million for failure
"What businessmen are coming out and saying is
that the government s objective is to fix all prices
and profit margins in the economy - that s not the
case," Costa said. "What needs to be clear is that
this will be for specific cases" such as abuse of dom-
inant positions or speculation that generates short-
Business groups will probably appeal against the
law in courts, delaying its application until after Pres-
ident Cristina Fernandez de Kirchner s government
is out of power at the end of 2015, said Daniel Kerner,
head of Latin America research at the Eurasia Group.
While the current law was rarely used, the fact the
government is revising the legislation shows it plans
to increase its grip on the economy, he said.
Fernandez is returning to the interventionist policies
after the July 30 default closed the door on an imme-
diate return to global capital markets, Kerner, who
covers both Argentina and Venezuela for Eurasia,
Argentina defaulted on its foreign bonds after a
US$539 million interest payment was
blocked by a US judge, who said the country
must first compensate holders of debt from
the nation s 2001 default that successfully
sued for full payment.
Fernandez shared views with former
Venezuelan President Hugo Chavez on what
the state s role in the economy should be,
"There is a philosophical underpinning
which is the idea that the private sector left
on its own will never do the right thing and
that the state needs to be the one to guide
them," Kerner said in a telephone interview
The son of Venezuela s current president,
Nicolas Maduro, visited Argentina last month
and met with lawmakers allied to the gov-
ernment to explain Venezuela s experiences
with price controls, Ambito Financiero
reported August 26, without saying how it
obtained the information.
Inflation in Venezuela has tripled to 61
per cent in May, the last month for which
figures are available for, from 28 per cent
in November 2011 when price controls were
The central bank hasn t provided data on
product scarcity since January, when it said
28 per cent of basic goods were out of stock
at any time.
"If Argentina applies the law they ll have
to do it with a lot of prudence because the
reaction is going to be to increase uncer-
tainty," Carlos de la Vega, president of the
Argentine chamber of commerce, said in
an interview. "The law can only be effective
for a very short time. It doesn t correct the
Argentina says it's no Venezuela as price cap law debated
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