Argentine president asks shops to keep prices steady after peso devaluation
Monday, January 7th 2002, 12:00 am
By: News On 6
BUENOS AIRES, Argentina (AP) _ President Eduardo Duhalde pleaded with businesses Monday to keep prices steady as Argentines fretted that a devaluation could unleash inflation and rapidly erode their purchasing power.
Duhalde appealed to supermarket owners, shopkeepers and other businesses as he began abandoning a decade-old link between the peso and the U.S. dollar, hoping to reverse the continuing decline of South America's second-biggest economy.
Economy Minister Jorge Remes Lenicov also said the government would watch for any signs of resurgent inflation after the peso was freed from its one-to-one peg with the dollar.
``The success of this plan depends on keeping prices from shooting up,'' Remes said. ``I'm asking (all Argentines) that they fight and push for stable prices.''
He set the peso's official rate at 1.4 pesos to the dollar for exports and imports, and said a rate applying to most ordinary transactions by Argentines will be set by the marketplace.
But some Argentines are expecting the worst after 10 years of relatively stable prices.
``I'm worried we're about to go back 10 years,'' said 75-year-old retiree Ivan Toros, recalling the hyperinflationary days of the late 1980s, when a devaluation of the previous currency, the austral, led to runaway inflation and price hikes.
Those memories still are fresh for most Argentines.
``The last year has been bad enough,'' Toros said, referring to an unemployment rate that soared above 18 percent, forcing thousands of Argentines and businesses into bankruptcy.
At least one chain e-mail making the rounds in Buenos Aires exhorted Argentines to refrain from buying at businesses suspected of jacking up prices.
``Only we Argentines acting together can stamp out the speculators,'' the e-mail said.
Despite reports of some price increases, other merchants said they were unable to raise prices during a grinding recession that has put left many ordinary Argentines strapped for cash.
``I'm trapped,'' said Manuel Rougier, owner of a Buenos Aires computer shop. ``I need to raise prices because I sell imported goods. But if I do, I fear customers won't step foot in here again.''
As the government talked more openly over the weekend about devaluation, thousands of Argentines crowded supermarkets, buying up televisions, VCRs and food for fear that prices soon might soar.
Many more flocked to stores, unloading pesos they feared could be worthless eventually and taking advantage of the final days of the peso's one-to-one link to buy imported goods.
The Buenos Aires Stock Exchange was closed Monday because of a two-day banking holiday ordered by the government as it shuts down access to dollars.
Some economists were skeptical the new fixed rate could hold.
Similar attempts to fix currencies to the dollar after devaluations in Russia, Mexico and Brazil all failed, they say. Adding to the peso's troubles, the government intends to print more money in coming months.
The peso had been the most stable currency in Latin America until a Nov. 30 run on the banks saw Argentines yank $2 billion in a day. The rioting and looting that followed forced Fernando de la Rua from the president's office and brought a series of interim leaders.
The weakening of the peso heralds a radical departure from the unabashed free market era in which Argentina was the darling of emerging markets.
``The last ten years have been the longest period of stability that I can remember here in Argentina,'' said 45-year-old Jorge Vazquez. ``What comes next is anybody's guess.''