Freezing prices, as requested by the government to trade, is a flawed and ineffective way to fight inflation. You can provide some temporary relief at a time when the Consumer Price Index (CPI) threat approaching double digits. But nothing helps sustainable control inflationary pressures goal for which the government has genuine measures. Except for occasional interventions by the Central Bank selling currencies or changes in reserve requirements or interest rates, nothing can be done to stem the rise of the dollar and its inflationary impact. Not only it is valuing worldwide, but there is no choice but to accompany the devaluation of local currencies in major markets such as Brazil and Argentina, and other countries in the region, unless it is accepted still lose more competitiveness.
There are, however, instruments that depend on the government, but require management firm and a tax system that so far has not materialized. On the one hand there is the moderation in prices of public services, as it did for a while the Mujica administration last year. But it has gone the opposite way with increasing fuel, trying to clean up some deficits pressing ANCAP cost inflation to rise. It can also act on wage policy, which directly affects the CPI. The government says it will impose restraint, both in private settings and public sectors. But it is uncertain how far they face widespread trade union uprising in almost all areas of activity. Another suitable measure is to lower public spending, but little is being done on that front.
Before the horizon inflation overshadowed the government has promised a more restrictive wage policy in line with GDP growth uncertain which tends to less than 2%, plan to depend on its ability to withstand the onslaught union. Also plans to reduce spending in some areas within the constraints of the budget rigidities. But nothing is said about lowering utility rates or adjust spending more severely, even at the cost of postponing some investments.
You have resorted instead to undesirable patch an agreed price controls on items Basic consumer, as it did the previous government. Leaders of business associations, large supermarkets and economists agree the difficulty to freeze or reduce prices at a time when the exchange rate and wage increases to push up. And although trade access somehow the government order, the effect will be short and limited and that in the case of a voluntary agreement, will depend on a business arrangement that not all will comply. The artificiality of any form of price control was evident in his failure ever to be tried. Of more significance is even attacking the symptoms of inflation and its causes, as if a doctor faced the cancerous tumor of a patient with a painkiller instead of surgery.
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