The Year of Living (more) Expensively

“If it’s in focus, it’s pornography. If it’s out of focus, it’s art.” — The Year of Living Dangerously

A LIST OF PRICE INCREASES TO COME:

Buses: 12.5%
Electricity: 20%
Gasoline: 25%
Health Insurance: 25%
Heating gas: 20%
Insurance: 35%
Property taxes (ABL): 19% to 238%
Taxis: 20% (Went up last week)

It was to be expected.

Politicians, particularly those running for office, bend over backwards to avoid saying things that cost them votes. This is one reason Cristina Kirchner avoided the press until the eve of the presidential election last week. Even then, she assiduously avoided saying exactly how she would deal with problems like inflation.

Even now, after the election, Cristina is unlikely to say publicly that she supports raising prices on specific items by specific amounts. But people close to her say this is exactly what she plans to do. She will lift a five-year-old freeze on utility rates and the cost of public transportation. The price increases will not be announced ahead of time. There will be no welcome party for them, no red carpet arrival. They will simply arrive, like freeloading distant relatives.

Two key concepts underpin the plan to increase prices: Gradualism and Fairness. The hikes will come gradually, meaning that instead of certain prices rising 100% overnight they will rise 100% over a period of one or two years. The increases will also be “fair” to those who can least afford them. These two terms were repeated over and over again in interviews I had with private and public sector officials before the election. Cristina has also carefully used these terms in comments to the press and in public speeches.

A third economic concept also underlies the plan to raise prices: The need to attract investment. In some ways, Argentina’s economy has reached a bottleneck. Many factories are producing at full capacity and couldn’t increase production even if they wanted. Rapid economic growth since 2002 has outpaced investment in infrastructure and energy, meaning that demand for things like gas and electricity often outweighs supply.

This is why the government earlier this year forced many businesses to cut power consumption during certain hours. It is why major hotels throughout Buenos Aires had to dim their lights twice a day in the winter. It is also why Cristina is hoping that this summer won’t be too hot. Hot weather means more air conditioning which, in turn, means more power usage. If it gets too hot, the government may further restrict energy use. That could mean rolling blackouts, not just for industry but also for residential users. In my neighborhood, in Nuñez, there have been three blackouts – each lasting about an hour – in the past five months.

To prevent this bottleneck from further stifling economic growth, Argentina needs investment in energy and infrastructure. But this will come only if investors believe they can make a profit. Because of this, Cristina has assured them that she will gradually lift rates on public utilities, giving investors more incentive to invest. If investors come, they will likely do so gradually as they test the market tepidly, just as prices will likely rise gradually.

But “gradual” may mean different things to different people. A 238% increase in property taxes on the owner of a Puerto Madero penthouse may pass unnoticed. But a 19% increase on the struggling owner of a one-room apartment in La Boca may mean the difference between barely getting by and not getting by at all. Meanwhile, a 20% increase in residential electric bills may seem like a lot to consumers but may not be enough to spur investment in the sector.

Despite Cristina’s effort during the campaign to keep policy proposals out of focus, the real nature of inflation and her approach to tackling it will come into focus in the months ahead. During the campaign, the vague nature of Cristina’s message was made clear by her slogan: “We know what is lacking. We know how to get it done.” She never said exactly what was lacking or just what it was that she would get done.

Prevarication, equivocation and ambiguity have become essential tools of the modern political artist. Virtually no politician’s portrait is painted without them. Every word in every message is carefully calculated either to appeal to the greatest number of people or to offend the least. Often, after taking office, politicians continue to use the same kind of evasive rhetoric that got them elected in the first place. This likely will be the case with Cristina. After all, psychologists say the best predictor of future behavior is past behavior. There is no reason to think things will be any different once Cristina becomes president.

One thing will be different, though. Cristina’s formerly out-of-focus ideas will now take shape in the form of specific government policies – policies that pinch people’s pocketbooks. As this happens, her artfully ambiguous economic plan will come into focus, losing its luster. It will begin to appear less like art and more like something else, something much less appealing.

The cost of a “Roll Carne Asada” sandwich at Aroma on
Monday, October 29: 11 pesos
Tuesday, October 30: 15 pesos