Fighting inflation: 'Army' of Kirchner supporters monitor prices in Argentina

Sporting sleeveless jerseys branded with a government campaign slogan, young followers of President Cristina Fernández de Kirchner march down supermarket aisles to check on price freezes imposed by her administration.  

The freezes, which apply to 500 products, are the latest attempt by the Argentine government to tame inflation that private economists put at 24 percent – the second-highest rate in South America after Venezuela. President Kirchner says she is protecting consumers by combating the “big monopolies,” blamed for increasing prices. But critics insist the controls are a superficial measure that do little to tackle the problem of inflation in the longterm, and lead to shortages.

A reported 3,000 pro-Kirchner youth activists nationwide are entrusted with making sure stores do not overcharge for the goods, which range from minced meat and pasta to cooking oil and cookies.

“Our task is to ensure the supermarkets honor the price freezes,” says Laura Farb, a member of the youth wing of Peronismo Militante. It is one of several organizations that support President Kirchner – both fanatically at mass rallies and through regular social work, often in poor neighborhoods.

The measure, agreed to by supermarket chains like Walmart and also implemented by smaller convenience stores, is expected to last until October. It follows a four-month freeze on more than 10,000 products. “Watching prices to protect the people’s pockets,” reads the message printed across volunteers’ jerseys.  

The government also froze gas prices in April and invests in schemes like “Meat for Everyone,” which offers Argentines popular cuts of steak at a knockdown cost.

La Cámpora, meanwhile, the political youth organization headed by Kirchner’s son, sells fruit and vegetables at wholesale prices at its centers across Buenos Aires. It echoes Kirchner's belief that “big monopolies” are largely to blame for inflation, not the government’s economic policies.

'Makeup'

“It’s businessmen that set the prices,” Kirchner said in a recent speech to celebrate 10 years of Kirchnerism, the left-wing political model started by Néstor, her late husband and predecessor, in 2003.  

Freezing costs is “myopic,” however, says Gastón Rossi, director of the consultancy LCG and a former vice-economy minister under Ms. Kirchner. He says the original freezes, which were agreed to in February, curtailed inflation during the salary bargaining season with union leaders. Unions are strong in Argentina and the controls were a “successful tool” for moderating raises.

“But it’s impossible to sustain,” Mr. Rossi says. The current controls are just “makeup” and do not get to the heart of the problem – a fiscal deficit and loose monetary policy.

“The illusion may work for a while but then reality hits,” says Jaime Daremblum, a senior fellow at the Hudson Institute, a conservative think-tank. Mr. Daremblum says Uruguay tried price freezes in the 1960s to stem inflation – but failed.

And in Argentina, controls imposed in the mid-1980s could not prevent hyperinflation by the end of the decade.

Kirchner recently announced a 35 percent increase in government child benefits, claimed by nearly two million families, while other welfare programs also saw hikes. The government hopes that together with the price freezes this will boost domestic consumption, a key pillar of its model, ahead of midterm elections in October.

“The government wants people to maintain their purchasing power,” says Ricardo Romero, a political scientist at the University of Buenos Aires. “It doesn't want to be harmed [in the run-up to the elections].”

Necessary or not?

The official inflation rate is 10.5 percent. But the government statistics agency has been widely discredited since 2007, when the brusk domestic commerce secretary Guillermo Moreno ousted the head of the consumer price index.  

Amid other recent interventionist measures and expropriations, Mr. Moreno has steered controversial import restrictions and now the price controls. Local media reports that these controls have resulted in shortages. In some stores, notices on shelves remind shoppers the 500 products are for family consumption only, not resale. The head of Argentina's main supermarket association has also admitted that the products subject to the price freeze are being rationed in some cases due to high demand.

But the freezes are necessary to stop companies that dominate production from fueling inflation, says Ariel Geandet, an economist at Movimiento Evita, an influential pro-Kirchner youth organization named after Eva Perón.  

“Society is told that government is entirely to blame for inflation,” says Mr. Geandet, a former economy ministry official. “We’re breaking that logic and empowering consumers with the right to fight back.”