Concerns about high inflation in Argentina extend beyond the national territory. For columnist Mary Anastasia O’Grady, of the American newspaper The Wall Street Journal, Although Russia’s invasion of Ukraine is a factor explaining the global rise in food prices, is not the main reason to understand the phenomenon in Argentina. “Let’s put the blame where it belongs,” he said..

“The conflict in Ukraine is one of the reasons for rising food prices that now threatens the world’s poorest population. But it’s not the only reason. And in Argentina it’s not the first reason,” he pointed out at the beginning of his O ‘Grady column.

For the specialist, central bankers and politicians around the world “want to blame the situation in Ukraine for high food prices. However, there are two elements that contribute to the pressure.” And he continues: “The first is the change in relative costs, that is, wheat becomes more expensive relative to consumer goods due to the reduction in world supply. The second trigger of prices Higher prices for food are largely based on inflation throughout the economy.

In this sense, O’Grady asserted that “the market is the remedy for change in relative prices; the more knowledgeable the economies are, the faster the changes will be made.” “The remedy is to correct financial, tax and regulatory mistakes. And Argentine politicians have failed on both fronts. “

According to the analyst, Russia and Ukraine are the required international food providers. From 2018 to 2020, according to the International Food Policy Research Institute, part of Russia in the world barley trade it is more than 14% and in wheat 24%. The share of Ukraine’s trade in barley in 2018-2020 was 12.6%, in corn 15.3%, and in wheat 10%. Almost 50% of global trade in sunflower oil in the same period came from Ukraine.

Putin’s decision to attack his neighbor disrupted those supplies. He added: “Russia’s production has not been eliminated, but the sanctions mean that most of the former goes to the West and its allies are indebted to Kremlin allies or neutral parties, sold domestically or stored. It puts pressure on prices. Meanwhile, Ukraine’s production is disappearing. “

“With less global production and the same demand, the price of the affected commodities rose. Higher wheat prices mean that the flour became “expensive” in comparison along with other products in the food basket of consumers in many countries ”, explains Mary Anastasia O’Grady in her article.

After the detailed situation, the editorialist focuses on the situation in South America in the midst of the global context and in this regard suggests that “among the exporters of goods in South America, this change was accompanied by an opportunity. Peru pays more for flour, sugar and fertilizers but as an exporter of minerals and coffee you can benefit from increasing production and sales abroad at a favorable price. Unfortunately, this potential has been thwarted by President Pedro Castillo’s anti-market agenda, which has frightened investors. “

“Let’s put the blame where it belongs”

In verse 10 of her text emerges the harsh analysis made by the woman about the country: “When it comes to economic mischief, it is hard to beat Argentina, the breadbasket of the region. In March it registered a monthly inflation of 6.7%. Some analysts now expect 2022 inflation to approach 60%, followed by 2021 inflation of more than 50%. “

“As always, this inflation is a monetary phenomenon, to paraphrase Milton Friedman. The government of President Alberto Fernández, following the old tradition of Argentina, deepens the country’s debt to finance its deficit spending ”sentence.

To complete the picture of Argentina’s situation, O’Grady cited economist Pablo Guidotti, professor of economics at Torcuato Di Tella University in Buenos Aires. “Since 2000, public spending, as a percentage of gross domestic product, has doubled, from 20% to 40%. Public debt as a percentage of GDP is now at 100% ”. “To pay the bills, the central bank prints pesos, which drives prices to the roof,” he said.

“The recent change in the relative prices of wheat and other agricultural products should be a blessing for Argentina”. emphasizes the expert. He added: “In a free market, higher prices will serve as a motivating factor to grow, sell and export more.”

And in this regard, he continues: “The country will also be enriched because the influx of dollars will strengthen its purchasing power. In other words, improving trade terms will boost GDP. “

however, “Instead of riding the wave of commodity prices there are policies promoting production and export, the government is trying to lower local prices forcing producers to sell domestically ”.

“The policy mix for this strategy consists of high export taxes and export quotas that limit the amount that can be sent abroad. Both of these things reduce exports and make it better not to plant or store excess stock in noodles. “he assured.

In March, “the Government announced that it would try to‘ decouple prices to protect the domestic market in a global context of war and high and sustained wheat prices ’by subsidizing 800,000 metric tonnes of wheat in domestic millers “.

Regarding the conclusion, O’Grady said: “It may be possible, in the short term, to make bread and pasta cheaper for the public. But it is an expensive ‘fix’ and provides fewer incentives to consumers to find substitutes for wheat, which is a way to lower high prices. ” And ends: “These policies are detrimental to the citizens of Argentina and detrimental to the world’s poor because they reduce the global food supply. Let’s put the blame where it belongs. “

YNang