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Fuel price hikes to drive up inflation in Argentina, warns expert

July 12, 2018


Abstract : Periodic increases in fuel costs in Argentina are set to drive up inflation in the second half of 2018, according to economist Pablo Salvador.

阿根廷

BUENOS AIRES, July 9 (Xinhua) -- Periodic increases in fuel costs in Argentina are set to drive up inflation in the second half of 2018, according to economist Pablo Salvador.

"The increases come with drawbacks because fuel is a very important input in economic activity throughout the country, accounting for a major portion of its costs," Salvador, a columnist and university professor, told Xinhua.

Prices of petrol and gas oil used for heating have grown six times so far this year, increasing 6 percent since the start of July in the South American country.

"When the price of fuels goes up, it has a direct impact on transport, and that implies an increase in the price of cargo and therefore in the price of foods shipped from one province to the other, and as a result, it affects consumers' pocketbooks," said Salvador.

Two basic factors are influencing fuel prices -- the price of crude on the international market and the exchange rate. He said Argentina's peso has been devalued some 30 percent against the U.S. dollar, making imports more expensive.

"When one of these two variables goes up, that automatically affects prices," said Salvador, who writes a regular column for the daily El Cronista.

Those factors raised fuel prices by at least 10 percent in the first four months of this year, he said.

Argentine President Mauricio Macri has pursued economic reforms, including lifting controls on fuel prices, and newly-appointed Energy Minister Javier Iguacel recently confirmed there would be no more government intervention.

But the measure is bound to affect the consumer price index (CPI) based on the basic basket of goods, which is used to measure levels of poverty in Argentina, Salvador added.

That's why the government needs to reach agreements with the private sector to raise wages, he said, otherwise poverty levels will rise in the next few months.

In Latin America, Argentina has the second-highest inflation rate, after Venezuela, which stood at 25 percent in 2017. No official target inflation figures have been forecast for 2018.

"Inflation mainly harms those people who have the least, because generally people who live in poverty don't have a way to pay for credit or don't have savings, so they are forced to pay in cash," said Salvador.

Argentina's central bank is struggling to control inflation, maintaining a high benchmark interest rate in a bid to lower prices, and working to regain the confidence of national and international investors to steady the exchange rate.

"The fight against inflation has been tough" given Argentina's "high fiscal deficit," but Macri and his economic team appear to be willing to do what they can to bring it under control, said Salvador.


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