Wednesday, February 28, 2024

Portugal rules out intervening to curb soaring food inflation

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March 17 (Reuters) – Portugal’s economy minister ruled
out on Friday any government intervention to stem soaring food
prices that are hitting households hard, seeing the market as
the best price-setting mechanism.

Antonio Costa Silva told TSF radio that enforcing price
ceilings or resorting to value added tax (IVA) cuts on basic
products would simply not work, citing the example of
neighbouring Spain where the effect of such a tax reduction on
prices “was quickly eaten up by inflation”.

“The market is the best instrument for setting prices…and
self-regulation (by retailers) is fundamental, because the other
(public) interventions we’ve seen, even in Europe, may not
work,” Costa Silva said. “Whenever you set prices
administratively, things don’t work.”

The government will discuss and analyse price evolution with
food retailers with the aim of ensuring that they are mindful of
price increases that particularly affect families.

Portuguese inflation slowed to 8.2% year-on-year in February
from the previous month’s 8.4%, but core inflation accelerated,
stoked by prices of unprocessed food products, such as fruit and
vegetables, which surged 20.11%.

Finance Minister Fernando Medina said on Tuesday that food
and economic security authority ASAE’s investigations into the
profit margins of large food retailers, such as Jeronimo Martins
and Sonae, “will tend to mitigate these price
increases”.

Sonae, owner of Portugal’s largest food retailer, on
Thursday reported a recurring loss, excluding one-offs, and a
drop in profitability.

Asked if there was price speculation by retailers, Costa
Silva said that although ASAE’s inspections showed gross profit
margins of 40% on some products, that “doesn’t indicate any
illicit act and it’s necessary to analyse the net profit
margins”.

“The worst that can happen is living in a country with
continued widespread suspicion, we have to end that,” he said.

(Reporting by Sergio Goncalves; editing by Andrei Khalip,
Kirsten Donovan)

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