Inflation reality will bite Peru hard, and Garcia has to stop playing games

The story so far:

December 07 and January 08: Garcia&Co. tells Peru that there is no inflation in the country. Strangely, Peru finds it hard to believe.

February and March: Garcia&Co. tells Peru that yeah, there is a bit of inflation, but it’s not their fault and it’ll soon go away. Peruvians reply by telling Garcia&Co. what they think of the job it’s doing so far. Garcia, with a 33.8% approval rating (high income earners giving him 66%…not bad for a supposed socialist, left-leaning political party President, eh?) actually beats out his ministers, none of whom score over 30%.

April: The gov’t continues with its “inflation is temporary” line. Unfortunately, reality is about to bite. There has already been strike action from the Peru agro sector, with the price of fertilizers way up on the list of complaints. Here’s a chart to show you why.

image002_33.gif The problem for Alan and company is that fertilizers are not getting any cheaper. They’re not a touch more expensive, either. They’re rocketing, as this story out this week explains.

Potash has just gone to $576/tonne FOB for 2008 delivery. Two weeks ago, delivery price to Brazil was set at U$750/MT. Now check that (now outdated) chart again, and you’ll see that today’s FOB contract price is a mere, trifling U$250/T more than the already inflated prices of last year. The promised Peruvian sugarcane boom might have to put on hold if this keeps up, but frankly, that’s the least of their problems.

And how about the boom in construction we hear about? Do you think that the $250/T price rise for steel announced by Arcelor Mittal today will have any effect on prices going forward?

How about the record prices at Chicago for grains right now? Peruvians are addicted to grain products of all sorts….rice, wheat etc. How long before bread rises yet again?

How about the record crude oil prices being traded right here right now?

It may be true that the inflation is of the imported variety. SO WHAT? The people elect governments to govern, to solve problems and to do right by the people, not to sit there and go “it’s not our fault”. The pathetic attitude of Garcia has to stop right now. This gov’t has to take action before there are serious problems amongst the vast majority of its people that have not seen a single droplet of the long-promised trickledown wealth effect.

If Peru thinks this won’t have an effect on food prices going forward it’s living in its own private cloud-cuckoo land. The time for feeding lies to its citizens is now officially over, and any more excuse-mongering will take the country down the road to serious civil disturbances.