Economy

Argentina Congress gives government power to set prices

Companies warn that the state can now confiscate goods, cap prices and control profit margins.

19.09.2014 - Update : 19.09.2014
Argentina Congress gives government power to set prices

By Charles Newbery

BUENOS AIRES 

Argentina’s Congress approved three bills Thursday that allows the government to step up intervention in the struggling economy, including regulating prices, profit margins and production levels.

The lower house voted 130-105 with five absentees to pass the package of reforms to the so-called supply law, sending it to President Cristina Fernandez de Kirchner to be signed into law.

The reforms, which had already passed the Senate, will allow the government to intervene in manufacturing, distribution and retailing in Latin America’s third-largest economy to protect consumers from price increases and shortages, in particular in sectors dominated by only a few companies.

The government will be able to set reference prices and punish companies that don’t obey the law with shutdowns and the confiscation and sale of goods.

This has sparked concern among companies, with the agriculture sector warning that the government could confiscate grains.

Jorge Capitanich, the president’s Cabinet chief, sought to assuage concerns Thursday.

The intervention will be “to avoid the abuse of dominant positions and the misappropriation of surpluses in the production chain,” he said during a televised press conference.

He added that this will spur investment, given that smaller companies will have more of a chance to gain market share.

The law will “protect those that produce and allow those that consume to access products at good prices and quality,” Capitanich said.

He added that the reforms also have reduced the penalties of breaking the supply law by limiting them to fines, whereas executives faced prison time under the previous version of the law.

Opponents, however, warn that the reforms give the government too much power, allowing them, for example, to confiscate merchandise if the authorities deem that a company is failing to adequately supply the market or charging too much.

Earlier this month, Fernandez de Kirchner slammed automakers for refraining from selling to consumers who want to buy new cars.

Mario Barletta, a congressman for Radical Civic Union, a leading opposition party, said the ruling Front for Victory party has not been effective in defending consumer rights since taking power in 2003.

“This administration has not only failed to fight the monopolies but promoted them,” he said during the floor debate in reference to Lazaro Baez and other pro-government businessmen who have seen their fortunes surge over the past decade. “We cannot let Dracula look after a blood bank.”

Other lawmakers slammed the government for failing to contain inflation, which has surged to an annual rate of 40 percent in 2014 after averaging 25 percent since 2010.

“If the state needs so many controls, it is a demonstration of its weakness,” said Alicia Ciciliani, a congresswoman of the Socialist Party.

Federico Piendo, of the Union-PRO, a conservative coalition, said the government will gain powers for the “arbitrary” control of the private sector.

Even so, Julian Alvarez, the national secretary of justice, called much of the criticism as “absurd,” saying the government doesn’t plan to use the reforms to confiscate grains as widely reported.

“They say we are going to invade the fields,” he said. “How are we going to do that, with tanks of war? With the National Guard?”

Alvarez said the reforms will enable the state to call on companies to produce or distribute more goods if there are price increases or shortages.

“And if they don’t, they will get fined,” he said.

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