Argentina’s government on Monday announced it would set up a fund drawn from the “unexpected gains” of certain sectors, such as the food industry, from the war in Ukraine, to cushion the inflation shock for the most vulnerable. “We want to build a mechanism to ensure that the war shock does not have a regressive impact on our society and does not produce inequalities,” said Presidency Economy Secretary Martin Guzman alongside leader The Peronist (centre left). ) Alberto Fernández.
Also readArgentina: Transporter strike paralyzes agricultural exports
“In the coming weeks we will gather the productive forces to work on setting up this mechanism,” said Martin Guzman, who plans to introduce a bill on these “unexpected war gains”. The minister did not name specific sectors, but the grain sector (corn, wheat), whose prices are rising, is a major Argentine exporter, and soybeans (flour and oil) account for almost 30% of exports.
According to him, only companies with annual net profits of more than 1 billion pesos ($8.5 million) should pay into the fund, which he says represents a “very small fraction of the country’s business structure,” of the order of 2 .1% in 2021 would only be contributed by companies that had significantly increased profits between 2021 and 2022. And those who invested those profits in productive investments would be partially exempt, Martin Guzman pointed out. “There is urgency in the most backward sectors of society,” said Alberto Fernandez. “Those who made windfall gains from the war must help ensure fairness.”
Inflation is raging
The government has set a key target for 2022 of controlling chronic inflation, which is among the highest in the world (50.9% in 2021), a target at the heart of its recent agreement with the International Monetary Fund to refinance its colossal Inflation faces $45 billion in debt. But the global inflationary context and the impact of the war in Ukraine are already undermining this goal, and in the first three months of 2022 inflation rose (+16.1%), demonstrations followed one another and the government was forced into measures to mitigate the Price shock for less advantaged households.
Also read Argentina: Thousands Take to the Streets as Inflation Rises
After a recent 50 percent boost to the “ration card” (a type of coupon), he announced on Monday a one-time “top-up” of 18,000 pesos ($152) for informal workers and 12,000 ($101) for retirees. Martin Guzman assured that this spending remained within the framework of the agreement with the IMF. “Fiscal, monetary and international reserve targets are being met,” he said of a 0.25% budget deficit in the first quarter. From 3% in 2021, the government has committed to lowering it to 2.5% in 2022, gradually reaching equilibrium in 2025.