French retailer Carrefour says it has decided to freeze prices of thousands of products in its supermarkets in Argentina until January 2018 in what seems to be an effort to help slow inflation. In a press release to La Nación, the company announced that the prices of 1300 of its products would not increase “even a cent, no matter what happens.”
Carrefour’s decision comes after the INDEC statistics bureau July finding that consumer prices have increased 13.8 percent nationally since December of 2016, and 1.7 percent in July 2017. Last month’s figures were a positive development since analysts expected an increase of 1.9 percent. Although INDEC was unreliable in the past under the Fernández de Kirchner administration, President Mauricio Macri’s restoration of its professional independence was a sign that policymakers would at least have solid estimates to work from. Separately, the International Monetary Fund predicted that consumer prices would increase by 25.6 percent in 2017.
After a series of policy changes regarding the prices of basic goods in Argentina (Cristina Fernández de Kirchner sought to freeze the prices of basic goods, then Mauricio Macri tried it with Precios Transparentes), a critical question at the center of Carrefour’s announcement remains: can an individual company’s decision to temporarily freeze prices help slow price rises elsewhere in the economy?
The short answer is no. Inflation in Argentina occurs vis-à-vis a number of macroeconomic trends that are not affected by only one company’s actions, unless that company holds a gigantic share of a market. The likely impact of Carrefour’s decision is to spark a discussion among industry leaders, and possibly encourage the government to bring such leaders to a consensus in order to slow inflation.
However, it may not be in President Macri’s political interest to lower inflation. As Harvard economics professor Martin Feldstein explained in January, “the public cannot perceive a reduction of inflation from 20 percent to 15 percent. So the government must pay a short-term political price to achieve a long-term economic gain.” With elections coming up in October, Macri’s government may encourage other companies and industries to follow Carrefour’s lead. Yet, Macri’s administration will likely wait before taking drastic actions to tackle the inflation rate.