Over two years ago we highlighted just how out-of-touch with reality our central planners are when we exposed Bill Dudley’s infamous inflation comments. Now it seems, Argentina is taking over the mission of totalitarian supreme command (or government gone mad). While not publicly admitting they have a problem, despite the price of bread doubling to 20 Pesos in the last year alone, Bloomberg reports the government plans to apply a 1974 law that forces holders (on penalty of fines and prison) of wheat and flour suitable for bread-making to sell it in the domestic market. This entirely un-free-market response to the dreadful reality in the nation comes on the heels of the freezing of prices on 500 goods at Supermarkets back in February and, unbelievably, suggestions that citizens combat higher prices by “baking bread at home.” How long can a country plunge into a hyper-inflationary spiral before the people ‘coup-like-an-Egyptian’?
Argentina plans to apply a law that forces holders of wheat and flour suitable for bread making to sell stock on the domestic market in a bid to contain inflation.
Interior Commerce Secretary Guillermo Moreno announced the measure in the official gazette today. The 1974 law allows authorities to freeze prices and obliges companies to maintain supply. Those in breach are subject to fines and imprisonment.
“If the law on supply is applied, the one who should go to jail is Moreno himself,” former Economy Minister Martin Lousteau said in an interview with Radio Mitre today. “He’s to blame for the lack of wheat in Argentina.”
Argentine wheat production has decreased since 2006, when President Cristina Fernandez de Kirchner’s predecessor and late husband Nestor Kirchner set export quotas. Lousteau was appointed by Fernandez in December 2007 and resigned four months later amid disputes over a bill that sought to increase export duties, a move that led to a four-month farmer protest and failed to move through Congress.
The rising cost of wheat locally has pushed up the price of bread to 20 pesos per kilo ($3.70), double year-ago levels, according to Abeceb.com research company.
Moreno closed stores owned by Wal-Mart Stores Inc., Carrefour SA (CA) and Cencosud SA (CENCOSUD) for a few hours yesterday after the government found shortages of some goods. Grocers agreed last month to freeze prices of 500 goods and ensure supply as part of the government’s efforts to stem inflation.
While the national statistics agency said prices rose 10.3 percent in May from a year earlier, private economists estimated prices rose 23.4 percent in the same period.
Last week, the consumer protection agency recommended Argentines combat price increases by baking bread at home, posting recipes on its website under the title, “hot bread, flour at frozen prices.”