Following a 22% devaluation of the peso and tensions after Sunday’s primaries, the Economy Ministry has created a new “price renegotiation unit” as a first measure to combat a potential new wave of inflation. The unit will implement a new iteration of Precios Justos price agreement program in a bid to bring stability.

On Tuesday night, the members of the new price renegotiation unit — including its head, Customs Director Guillermo Michel, Trade Secretary Matías Tombolini, and the head of the Federal Administration of Public Income (AFIP) Carlos Castagnetto — announced the new Precios Justos alongside Economy Vice Minister Gabriel Rubinstein.

The Economy Ministry has been the subject of tensions and rumors after the devaluation was implemented, a decision official sources said was related to Javier Milei’s surprise victory in Sunday’s presidential primaries. “We hope that this [set of measures] can fix a very particular situation caused by the elections on Sunday,” said Rubinstein. 

The new agreement sets out a tax exemption for consumer goods companies, with which the Economy Ministry aims for businesses to reduce spending and therefore cap price rises at 5% a month.

However, companies do not always comply with the price caps — for example, in April, the Trade Secretariat fined multinational companies Coca-Cola and Danone for selling products with monthly price increases up to 10 times over the limit.

On Tuesday and Wednesday, members of the new unit met with representatives of the meat industry, wholesalers, and supermarket chains to negotiate the deal. More meetings are expected to take place over the week.

Tombolini said that they do not expect the prices to go up by more than 25% of the devaluation (5.5%) as the Economy Ministry analyzed the impact new exchange rates have on production costs.

Rubinstein and Tombolini told journalists that the exchange rate will remain fixed until October and that should give stability to prices and that, due to the new agreement, companies will “roll back” any price markups after the devaluation.

The Grocers’ Association in Córdoba province told the Herald that dairy products jumped by 15% and noodles and rice by 12% since last week. On Wednesday, two oil companies — Shell and Puma Energy — increased their prices by 12.5% after the end of a previous price agreement with the government. Meanwhile, the state-owned YPF did not change its prices. 

“With the macroeconomic improvement in fiscal and monetary terms, as well as the support of this price policy, prices may rise much calmly and slower, and not in a crazy way,” said Rubinstein.

On Tuesday, the government published July’s inflation rate, which was 6.3%. However, eight different consulting firms placed this month’s inflation rate between 10% and 15% due to the devaluation.

“The profit margins are very high, there may be a margin for a drop, and the stability of the exchange rate should give them that possibility,” said Rubinstein.

On Tuesday, a supermarket chain and a grocery store association told the Herald that most companies that supply them were not delivering goods.

Asked by the Herald about the shortages, Tombolini did not clarify in what time frame the government expects the supply chain to return to normal.

“The time elapsed between the announcement of the new 90-day fixed exchange rate and the negotiations that have already started with mass consumption companies, and will continue [on Wednesday] will allow stocks to be rebuilt when the new price lists appear,” he said. Senior officials in the Economy Ministry commented that they expect the situation to get under control sometime this week.

During the conference, Rubinstein said that the upcoming International Monetary Fund’s disbursements will “alleviate our international reserves”. Economy Minister Sergio Massa is scheduled to travel to Washington next week to meet with Fund’s representatives.

As for measures regarding income, a senior official told that, if they were decided, they would be announced by Massa, who has yet to make a public appearance after the peso devaluation.

Sources in the Ministry said that he met with his cabinet on Wednesday.

Dollar crackdowns

The official exchange rate increased to AR$350 on Monday following the devaluation. Meanwhile, the informal US dollar exchange rate, popularly known as the “blue dollar,” reached the AR$790 mark on Wednesday, after starting the week at AR$605. At the time of writing, the MEP dollar was at AR$661, and the blue-chip swap rate was at AR$720.1.

In response, several government agencies are taking measures in a bid to bring the financial and informal exchange rate markets under control.

On Wednesday, the AFIP announced that it is investigating traders who made significant purchases of MEP dollars that, according to government records, do not have income or assets to justify them. They are also investigating principals who may have been involved — parties who have the power to make transactions on behalf of others.

The agency calculated that during the last hour before markets closed on Friday, 15 brokerage firms and more than 24 principals carried out operations worth more than US$38 million. Stock brokers are also being investigated for potentially covering individuals who made operations with undeclared income in order to prevent tax evasion.

Over the last two weeks, the government has not only restricted access to US dollar bonds through the National Securities Commission, but the Financial Information Unit has been raiding “cuevas” — informal exchange houses that sell the “blue dollar.”