Argentina is teaming up with Mexico, Brazil, Colombia and Cuba to form a regional agreement to contain inflation, president Alberto Fernández revealed to Ámbito Financiero.
The deal includes a presidential summit scheduled for March 17, and the development of an exchange system between the participant countries to lower the cost of importing sensitive products that are susceptible to price hikes and affect the value of local basic baskets of goods.
“I got a call from [Mexican president Andrés Manuel] López Obrador, and he suggested an agreement with Brazil, Colombia and Cuba –which together represent the majority of the region’s GDP– in order to help each other with a common problem: inflation,” said the head of state.
The president defined this exchange mechanism as “a sort of product clearing” and mentioned as an example that if Argentina sees unjustified price hikes in an area, such as clothing, they could turn to one their partners, like Brazil, to access the goods at lower prices for a specific period of time, in exchange for a product that is cheaper locally, such as soybeans.
Alberto Fernández said the conversation with his Mexican peer took place on February 17 during his visit to Misiones province. He said that afterwards there were immediate conversations with Brazil’s Luiz Inacio “Lula” Da Silva, Colombia’s Gustavo Petro and Cuba’s Miguel Díaz-Canel to get them interested in the initiative and schedule a possible summit for next month.
“We also agreed that, meanwhile, the foreign ministers of each country will continue the conversation. In my case, I gave instructions to [foreign minister] Santiago Cafiero and [Economy minister] Sergio Massa to move forward with it,” he said.
The participants of the potential regional agreement not only share an ideological affinity, but have also been suffering from rising inflation. Mexico ended 2022 with 7.8% inflation, the highest in two decades, driven by food prices and agricultural and energy inputs –a global constant due to the war between Russia and Ukraine. Brazil registered an annual rate of 5.8%, a significant deceleration compared with 2021’s 10%, but well above the 3.5% goal set by the Central Bank. Colombia had 13.1%, the highest in 23 years, and in Cuba the figure reached 39%.
In 2022, Argentina saw an inflationary peak of 94.8%, the highest since 1991, driven mostly by rising food, beverage and clothing prices. The president said he was keen on the idea, which was conceived by López Obrador, adding that the countries invited to sign the agreement represent most of the region’s GDP and also form a vast network of food, energy and industrial products. The scheme would have the advantage that members would not need to use dollars as an exchange currency.
Regarding the economy, Fernandez said he was “very optimistic about the general situation, yet acknowledging the problems” in society due to rising prices. He admitted that the upcoming poverty statistics may show an increase compared with the previous period, when 36.5% of the population was below the poverty line. However, he added that the volume of public works, especially those involving water supply and sanitation, should indicate an improvement in those values, since these projects create jobs and also improve living standards.
“We are going to inaugurate a water purifying plant that will provide sewer services to 100% of Morón’s inhabitants. The work has been due ever since it was signed off in 1988 by then-mayor Juan Carlos Rousselot and Mauricio Macri,” he said.
Fernandez was referring to a December 1988 agreement between the three-term, twice-impeached mayor of Morón (1987-89 and 1991-99) and Macri, who at the time was acting as representative of his father’s company, Sideco. The business was awarded the contract directly, without a public tender process.