In our last installment we reported that, to our surprise, the blue market was still functioning in Argentina! Reader J.H. provided the likely explanation: once created, the market stuck around as a convenient way to avoid taxes.
The Fernández administration started another program in 2014: “Precios Cuidados,” which literally means “careful prices” but better translates (as much as Argentine Spanish can be translated) as “monitored prices” or “price watch.” Think of it as a weak sort of price control. The government would negotiate of list of products with retailers. The government then posted reference prices for those products on a website. All retailers in the program would have to charge the same price for said product. Retailers that did not go along would face fines, albeit not terribly large ones. (These fines were, in theory, voluntarily agreed to by the supermarket chains.)
The idea was similar to the stronger controls imposed in Panama around the same time. The assumption was that rising prices were a product of an uncompetitive wholesale sector. Under their model, when input prices rose (for whatever reason) wholesalers took the chance to raise prices by rather more than inflation. With little competition, they could get away with it. Consumers would go along, chalking the hikes up to the general rise in the price level. The precios cuidados, then, would break the cycle by proving consumers with a reference point to hold down price hikes.
The precios cuidados were carefully marked in the supermarkets. Competing products were usually available right alongside.
Sometimes the prices were negotiated too low, and goods would occasionally run out. It that happened, consumers could demand compensation from the stores: the newspapers would helpfully explain how.
It wasn’t quite a price control. No Venezuelan-style general shortages emerged. Every so often something would disappear completely (like ketchup for a brief moment in 2014) but that was generally due to exchange controls, not the precios cuidados.
But unlike in Panama, the price controls failed to slow inflation. The reason is pretty simple: unlike in Panama, which uses the U.S. dollar, Argentina really was ramping up the printing presses. Price hikes had little do with an uncompetitive wholesale sector. Just another bit of Kirchnerista control-freakery.
So you might have thought that the precios cuidados would have been one of the first things President Macri got rid of upon taking office.
And you would be wrong! When Leticia Arroyo told me the program was still around in 2017, I was stunned. The program now covers 545 products. Products sold at the watched prices make up about 7% of sales. Now, the breadth of products on offer for the monitored prices is pretty low: Argentine supermarkets offer some 25,000 different items, on average, and some supermarket chains, like Mondelez, offer only 8 brands covered by the program.*
But here’s the thing: some small companies lobby to have their products included! Why? Well, weirdly enough, the Precios Cuidados brand has become sought after. You buy at the precio cuidado, and you can be sure you’re getting the best possible bargain! Consumers love it. And some producers know that consumers love it. So they lobby to get their brands into the program, even if they have to give up pricing control. The supermarkets are less happy, but with upstream producers and downstreams consumers in love with the program, it continues onwards, and may never die.
As the former commerce minister, Augusto Costa, said, “The program has a net approval rating between 50% and 70%. The government doesn’t have that level of approval!”
And so, as with the blue market, Cristina Fernández may have permanently changed how business is done in Argentina in an odd and completely unexpected way.
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* In case of link rot, google El Cronista: “Precios cuidados: pasado, presente y futuro,” from Feb. 24, 2017.
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