It’s the Politics, Stupid

What has changed since the strike?

It is clear that inflation has now taken center stage in economic discussions and that it is becoming all but impossible for the government to avoid confronting the issue. Inflation is now for the first time the main concern in opinion polls as it now stays above insecurity and unemployment.

The government is in a difficult position because the official indices still show an absurdly low inflation rate while it does not have a strategy to deal with the problem. The price controls that Secretary Moreno has been leading since mid-2006 and whose use he intensified in 2007 have lost their bite and have proved to be ineffective to address the problem. Unions have obtained wage increases that are in the midtwenties range and there is widespread perception that inflation is now again on the rise and reaching levels of around 25% per year.