Volume 43, Number 171,
October-December 2012
Argentina and Brazil:
Macroeconomic Challenges
Eduardo Bastian and Elena Soihet

The problem is that because the Argentinean strategy is based on a stable and competitive real exchange rate, currency appreciation cannot be used to ameliorate inflationary pressure resulting from the cycle of increase in commodity prices. Although currency appreciation allowed Brazil to weather the commodities shock, Argentina suffered the impacts of this shock. This statement is confirmed by Figure 3, which presents the evolution of the CRB index in reales and in Argentinean pesos, showing the much greater impact of the commodities shock on prices in Argentina.28

Figure 3. crb Index (pesos and reales)

Source: Prepared by the authors based on data from the Central Bank of Brazil,
the Central Bank of the Republic of Argentina and unctad.

Figure 4 complements the information from Figure 3 by showing the different evolution of consumer price indices in Brazil and Argentina (ipca and indec) starting in 2005.29

Unable to appeal for change, the Argentinean government sought to make price-freezing agreements, emphasizing price stabilization for goods in the basic basket (Cunha & Ferrari, 2009: 19). The old policy of export taxes (rates over exports) was used to combat inflation, and to ameliorate the inflationary problem, at least partially, by protecting salaries from the effects of devaluation. The problem is that although these export taxes certainly contributed to preventing an even bigger increase in domestic prices, freezing and export taxes are tools with limited capacity to combat inflation. Freezing prices, for example, must be temporary, because it can cause speculation and a surge in the black market. Export taxes create political problems with the agricultural sector, like during the political crisis in 2008, when President Kirchner’s government tried to institute sliding export taxes.30

28 According to Amico (2010), the Argentinean currency policy increased the cost shock. The competitive exchange rate and the structure of the export basket explain the differences in inflation levels be

tween Argentina and Brazil, but also differences with Chile, Colombia and Mexico (Amico, 2010: 13).

29 If we take some alternative price index as a reference — like IPC 7 provinces calculated by the Center of Studies for Argentinean Development (Cenda) — the difference between consumer price indices in Argentina and Brazil would be even greater than what is shown in Figure 4.

30 Sliding export taxes consist of taxes that accompany the dynamic of international prices for agricultural commodities, in such a way that the difference between the international price for these commodities and the rate charged per exported unit becomes a constant. Assuming a fixed exchange rate, with sliding export taxes, increases in international prices for agricultural commodities are not transmitted to domestic prices for these goods. In this way, sliding export taxes can protect the Argentinean economy from the pressures of commodities inflation, unlike traditional export taxes that are fixed and only partially affect inflation tendencies (Amico, 2010: 3, 18-19).

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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