Argentina bets on price controls

As our readers know, Argentina is in bad shape.  It should not be.  It is a rich country with an educated population, strategic location and the 4th largest GDP in Latin America.  Great tango, delicious beef but lousy politicians.

So what do you do when your economy is a mess and investors are concerned about the country?

In a serious world, you would sit down with banks, creditors and potential investors and try to deal seriously with the collapse.  You'd provide these folks a sign that the country is serious and ready to tighten its belts and move forward.

Sorry, I'm talking Argentina, or the land with a political class that does not understand the word serious.

According to news reports (via Fausta's Blog), the "politicos" are going further to the left than a kick from their beloved Messi of World Cup fame.

This is from PanAm post:

In yet another aggressive move against private enterprise, Argentinean officials introduced a new bill to the Senate on August 5: the New Regulation of Production and Consumption Relations.  

This legislation aims to replace the current governing Law of Supply by establishing limits on prices, production levels, and profit margins, and has already received harsh criticism from certain industries.   

The Kirchner administration’s goal with this proposal is to “prevent abuse and the misappropriation of the value-chain surplus.”

The existing law has been in place since the military dictatorship of 1974, which established prison sentences for business owners convicted of “induced shortages.” The principal difference with the government’s new proposal is that it provides further state control over the market in the form of price controls. Once signed into law, it will legally codify the government’s current agreement with suppliers and distributors of products subject to the Careful Prices program. 

“It is essential to observe the behavior of the price system and the extent to which economic concentration allows certain economic groups to abuse their dominant position,” reads the proposal. 

In addition, the bill further defines the state’s role in “defending the interests of consumers in order to make the price and quality of services consistent with offers proposed by companies.”

I guess that a couple of thoughts are in order:

1) Did anyone in Buenos Aires tell the politicos that this system failed in the USSR, Cuba, Venezuela and now Bolivia?  What economists are these people talking to?

2) What investor in their right mind is going to come in and subsidize this crazy place any longer?  Do the politicos think that investors will keep investing because they like tango, good Buenos Aires beef or love Messi?   (By the way, Messi plays in Europe so the peso problems are foreign to him!)

They are going from "loco" to "muy loco".

Maybe the next version of the movie "Dumb & Dumber" will be about the people running Argentina.

P. S. You can hear CANTO TALK here & follow me on Twitter @ scantojr.

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