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Across much of Latin America, inflation is the top issue

In 2008, Venezuela's inflation rate is projected to be 25 percent – second only to Zimbabwe's.

By Staff writer / May 21, 2008

Protest: Planes flew over Salto, Argentina, to show support as farmers began their second strike in two months over higher export taxes on soybeans.

Natacha Pisarenko/AP

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Buenos Aires

At a take-out restaurant here called Deliverate, where homemade empanadas and quiches line a glass counter, each menu is freshly stamped with a new addendum: "Our prices have gone up 20 percent due to a situation that is public knowledge."

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"The price of eggs is up;, milk, cheese, meat," says Ricardo Maringolo, the manager of Deliverate. "We had no choice; and we are still losing money. We are not raising our prices as much as prices have risen."

Global price spikes in food and fuel have impacted the entire region, but in pockets of Latin America – notably Argentina and Venezuela – double-digit inflation has led to serious questions about their governments' handling of the situation, and the political ramifications are already being felt.

Farmers in Argentina called a second strike in two months over export taxes that their president, Cristina Fernandez de Kirchner, said were justified to tame inflation. Grocery bills have also gone up in Bolivia and Nicaragua, making waning earning power the top concern of many Latin Americans – and perhaps the biggest challenge for governments.

"The inflation here is incredible," says Oscar Gill, whose earnings as a taxi driver in Venezuela's capital, Caracas, no longer cover his family's expenses. "I'm middle class, but I feel poor."

Denting presidential support

In the past five years, inflation across Latin America has been largely under control. Even in Argentina, the current, unofficial rate – estimated by economists to be as high as 25 percent – is not catastrophic, but could undermine the presidency of Ms. Fernandez de Kirchner, says Federico Thomsen, an economic analyst in Buenos Aires.

(Officially the number stands at 9 percent, but the statistics are widely discredited by independent economists. "The official number doesn't mean that people aren't paying more in the supermarket," Mr. Thomsen says.)

Fernández de Kirchner's approval rating fell from 42 percent to 30 percent in her first four months in office. Pollsters say her move to raise the tax on soybean and sunflower seed exports ­to more than 40 percent – which sparked massive, nationwide strikes – is to blame. It hurt her government, too: Economy Minister Martin Lousteau resigned in the midst of the crisis.

"Every time we buy less and it costs more," says Patricia Maldonado, a nurse in Buenos Aires, carrying her baby on her hip. "[Fernández de Kirchner] doesn't have to worry about food bills, but we do."

In Venezuela, rising prices – the average inflation rate from March 2007 to March 2008 was 29.1 percent – have also hurt President Hugo Chávez's popularity. One poll by Keller & Asociados showed Mr. Chávez's support fell to 37 percent in February from 50 percent in the middle of last year, though other polls show greater support.

Inflation in Latin America

Venezuela's inflation is projected to increase to 25.7 percent for 2008 – making it second only to Zimbabwe's. Other forecasts for this year:

Global inflation: 5.5 percent

Venezuela: 25.7 percent

Bolivia: 15.1 percent

Nicaragua: 13.8 percent

Argentina: 9.2 percent

Source: International Monetary Fund, World Economic Outlook Database, April 2008. Research by Leigh Montgomery.

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