Truck and Barter: Argentina

May 04, 2005

Argentina

By Bob

Argentina is, as everybody knows, for the most part a basket case. I ran across an article on Bloomberg which exemplifies why:

Consumer price rises have quickened this year after Kirchner, 55, granted all non-state workers a monthly wage increase of 100 pesos ($35) in January and allowed people to defer income tax payments that were due in December. He has raised the average salary 38 percent since taking office two years ago in a bid to bolster the country's recovery from its worst recession on record.

Of course, if the government wasn't in the habit of granting "wage increases", they probably would be a heck of a lot richer. It could be worse, you could try running an atuo company in the country:

Manfred Muell, president of DaimlerChrysler AG's local unit, said the 42 percent wage increase auto workers are demanding would make the industry unprofitable.

``It's just not reasonable,'' Muell said at a news conference on April 21 in Buenos Aires.

President Kirchner sounds like he knows how economics works:

``We will win the battle, the battle of justice, of fair profits, the battle to defend people's purchasing power,'' Kirchner said in a speech on April 6 to union leaders. ``If people have the right behavior, we will put a lid on that perverse behavior that says that when people gain in purchasing power, prices go up.''

I can't say he doesn't sound a lot like politicians in this country though. Unsurprisingly, the reason people have more money is that they printed more:

The central bank boosted May 3 the seven-day call rate -- the rate it borrows from commercial banks at -- half a percentage point to 3.75 percent, leaving it up 1.25 percentage points since Jan. 9. The bank has also cut the money supply -- as measured by the monetary base -- by 4 percent this year to 36.1 billion pesos, following a 24 percent surge in 2004.

Posted at May 4, 2005 01:45 AM

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