Due to Quarantine, the Consumer Price Index Does Not Reflect the Real Depreciation of the Peso

La Mañana – The economist, Aldo Abram, pointed out that there were prices that did not change because various sectors were unable to work and that the devaluation of the peso will be seen more clearly after the isolation is lifted.

National media reported that the National Institute of Statistics and Censuses (INDEC) released the monthly variation of the Consumer Price Index for April, which was 1.5%, in the framework of the first month that it was entirely covered by the mandatory quarantine following the COVID-19 pandemic, with few shops open.

It was known that the INDEC measurement was carried out by telephone consultation, email and online price survey, because it was not possible to carry out “field work” to measure prices in supermarkets or neighborhood stores due to quarantine.

Regarding this issue, the economist Aldo Abram, executive director of the “Libertad y Progreso” Foundation, told La Mañana that due to different circumstances that are the consequence of the quarantine that has been in force in the country since last March 20, today the Consumer Price Index does not reflect the real costs of different goods and services.

“When the quarantine began, as Argentines we used a lot of cash and we had uncertainty regarding the operation of ATMs or the provision of banknotes through these devices, we demanded a lot of cash. Then, the Central Bank, which is the sole financier of the increase in public spending, issued in excess to cover the cost and give cheap loans”, said the professional.

“At the beginning, this was not noticeable in the price of the dollar, because there was a demand for pesos. But when citizens observed that ATMs were working and the financial system was normalizing, it tended to lower its demand for pesos and require dollars, while the supply of Argentine banknotes continued to grow. So what you have is a phenomenal depreciation of the national currency, which will not be reflected in an ‘artificial’ exchange rate set by the BCRA, but in the parallel legal and illegal markets, ”Abram explained to this newspaper.

Next, the professional assured that the depreciation of the peso will be observed mostly in services and not in goods, because for the values ​​of these products, the cost of the “official” dollar is taken as a reference.

In turn, the specialist said that there were sectors, such as Private Schools and Gyms, that in certain cases lowered the costs of their fees, to avoid further loss of income, and not for other reasons. “Therefore, the INDEC CPI reflects a ‘distorted reality’, because the drop in prices in certain places stems from the inability of customers to use the service in an exceptional context, and not from a real drop in cost of those benefits, “he added.

“INDEC’s CPI does not reflect reality, but not because it conducts a ‘trout’ survey. The same happens when the price of clothing is released, since the businesses of the item were closed. Even if some personnel from these businesses had been contacted by telephone, it would surely have been detailed that the value of the products remained the same as that observed the previous month, because there were no sales. Also, the ‘freezes’ of public service tariffs and the prices of some products are still in force, ”he specified.

“At the same time, in the context of isolation, many people turned more to local shops than to supermarkets; and there were local businesses that increased their prices, due to the increase in demand. In this context, INDEC ‘overweighs’ those businesses that least increased their final costs, which were large supermarkets”, he said.

“Once the quarantine ends, and with the passage of time, the reality that the CPI will mark will be that of a sharp rise in prices, with ‘jumps’ in the costs of products that previously could not be relieved. Therefore, inflation rates will be higher as the period of social isolation comes out, “said Aldo Abram.

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