Analysis-Argentine IMF concessions risk further fueling red hot inflation
By Lucinda Elliott, Anna-Catherine Brigida and Rodrigo Campos
BUENOS AIRES (Reuters) — Argentina's last-ditch effort to secure International Monetary Fund cash with measures that will weaken the peso risks pushing triple-digit inflation even higher and angering voters just three months before national elections.
Economists said steps unveiled on Monday by Economy Minister Sergio Massa, himself a presidential hopeful, were unlikely to dampen inflation that is already running at over 115% a year.
«The government was pointing at the two slight declines in monthly inflation as a sign of success, but that is likely to change,» said Buenos Aires-based economist Eduardo Levy Yeyati.
Eyeing October's elections for a new president, Congress and some provincial governors, the ruling Peronist party is trying to secure funds from its $44 billion IMF agreement while avoiding a big currency devaluation or more sharp price rises.
As part of that tricky balancing act, it announced this week a raft of new and weaker trade-related exchange rates, while keeping the peso's official rate stable.
With some 40% of the population plunged below the poverty line by an economic crisis that has worsened over the past year, the cost of living will be a key issue for voters in polls which start with presidential primaries on Aug. 13.
«August inflation will accelerate,» economist Marina dal Poggetto from local consultancy firm EcoGo said, primarily due to the preferential dollar exchange rate being extended to corn. That will make animal feed more expensive for meat producers, she said, and in turn raise production costs.
The government hopes this week's new measures will satisfy demands made by the IMF and help Argentina unlock $4 billion of
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