Calling King Canute

It seems that the Argentine government is trying to hold back the tide of inflation by demanding that supermarkets hold down prices:

Argentina's commerce ministry has asked consumers to monitor prices in the chains.
It wants them to keep receipts and has set up a hotline for shoppers to call if they spot any price rises.
The way this is being spun is "prevent the evil big supermarket chains profiteering at the expense of customers" which should at least get the customers on board with the idea. With actual inflation around 30%, however, one wonders what the supermarkets are going to do.

Assuming that they manage to get an average 20% margin from the sale of goods, goods that sell at 1000 pesos now will cost them 800 pesos to buy and cover the cost of sales (rent, wages etc.). 30% inflation will make that 1040 pesos in a year's time. The only way to prevent operating at a loss is to hold down their costs; they're out of luck for everything imported, so they will definitely have to hold down wages and rent payments. I'm assuming that unemployment is enough of a problem in Argentina that holding wages down is actually feasible, though of course the purchasing power of those wages is going down with inflation so supermarket employees are going to get it in the shorts. They are probably big enough to hold their rents down since the other major retailers are likely being hit by the same problem, but it's immediately making commercial property an unattractive business to be in.

The dominant cost in many cases is likely to be the wholesale cost of the goods themselves, and this is where the problems lie. For domestically produced goods, the supermarkets may be enough of a purchasing cartel to force farms and household goods producers to accept price freezes or single-digit inflation at best. If I were a farmer, however, I'd be looking to sell my products closer to home; set up my own farmer's market and sell goods for more than my wholesale price, yet less than the supermarkets' marked-up price; people have to eat, and all my competitors will be in the same situation.

I would bet, then, that the natural consequence of this approach will be a near-immediate vanishing of imported goods (say, medicines) from the supermarkets, and a gradual decrease in the availability and quality of fresh fruit, vegetables and meat. If you want reasonable quality fresh food you'll need to go to a farmer's market - and expect prices to rise in line with actual inflation.

It may also make it more attractive for the farmers to export their goods, especially Argentine beef. If I were a major beef purchaser (such as McDonalds) I'd be planning to spend some quality time in Argentina really soon in anticipation of a surge of good quality beef becoming available for export. The only obstacle would be if the Argentinian government imposed export controls on goods to stop this happening. I'm sure they wouldn't stoop that low...

The problems of price controls are covered well in this eponymous 2001 Cato Institute piece:

Consumers, in competing for a limited amount of the controlled product, may waste as much as they gain from getting it at a low price. For instance, the people who waited in the 1970s gas lines probably shouldered as much cost from the lost time queuing as they saved from the price controls on gasoline.
The additional time spent by Argentine consumers trying to get hold of fresh food and imported goods that they need is going to be a serious productive hit to the economy. This is absolutely the last thing that the Argentine economy needs at the moment, and yet the government is trying to sell it as an economic win. It'll certainly be popular initially, but just wait a year.

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