REFILE-UPDATE 1-Argentina freezes prices on up to 200 goods

Fri Dec 20, 2013 10:34am EST

BUENOS AIRES Dec 20 (Reuters) - The Argentine government on Friday announced price freezes on up to 200 goods to offset an uptick in already steep inflation, in a move that for the first time affects suppliers, in addition to supermarkets.

Private economists say Argentine inflation is running at more than 25 percent annually. Official figures, widely disputed as manipulated, put inflation in the 12 months through November at 10.5 percent.

The price freezes affect products that represent roughly two-thirds of typical low-income household purchases, the government said.

Unlike this year's two previous price freezes, this new measure affects suppliers as well as supermarkets. The year-long freeze will take effect on Jan. 1, and prices may be revised during the course of 2014.

"It's basically a voluntary price agreement between the national government and the sector's main actors," Economy Minister Axel Kicillof said. "It's a voluntary agreement on prices because we know that controls imposed on the private sector and price freezes imposed on the private sectors aren't successful."

Most of the goods affected by previous price-freezes were not sold in supermarkets.

The main supermarkets operating in Argentina, Latin America's No. 3 economy, include units of Chile's Cencosud , France's Carrefour and the United States' Wal-Mart Stores Inc.

INFLATION WEIGHS

Allies of President Cristina Fernandez took a beating in October's mid-term elections, in part because of the soaring inflation.

Since then, officials have started to publicly acknowledge steep price increases.

Argentine inflation, Latin America's second-highest after Venezuela's, has picked up in recent months due to a weaker peso currency.

The central bank has allowed the currency to lose roughly 18 percent since the beginning of June. The bank had previously artificially kept it strong to avoid stronger inflation pressures.

But the policy in turn hurt the grains powerhouse's key exports, putting Argentina's trade surplus at risk. Maintaining a trade surplus is critical because Argentina has been shut out of international capital markets since its massive debt default more than a decade ago.

The 2002 default pushed millions of middle class Argentines into poverty.

Generous welfare spending under Fernandez has improved the lives of many of Argentina's poor, though the policies have also stoked inflation.

Argentina's 4.3 percent rate of poverty was by far the lowest among 11 Latin American countries surveyed in both 2011 and 2012, a United Nations body said earlier this month.

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Comments (1)
GermanHoldout wrote:
Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!

We, the holdouts, have been suffering for more than a decade!!

Since 2002, Argentina has not paid a cent to the holdouts!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even over.

President Kirchner (by the way a beautiful women) should solve the holdout problem.

President Obama and the IMF should help and talk to President Kirchner to end Argentina’s Horror-Default.

A reconciliation with the holdouts would initiate a firework of investments and also cheaper credits for argentine companies.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion (incl. accrued interest) to the holdouts. It is not much for the 3. largest economy in South America.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc., and with maturities in the eternity.
Such “shares like” financial constructs are inacceptable.

Following simple conditions might be acceptable for the Holdouts .

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- for the accrued interest between 2002-2015 Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Dec 22, 2013 11:07am EST  --  Report as abuse
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