Government programmes coax Argentines to shop ahead of election

BUENOS AIRES (Reuters) - Two septuagenarians who have lived through countless ups and downs in Argentina's rollercoaster economy may have different views on the government's latest schemes to spur consumption, but they both think it's time to go shopping.

Rodolfo Ravioli, 72, is trading in his old fridge for a new one at nearly half the price through the "Renovate Yourself" initiative. He says Cristina Fernandez is the first Argentine president he's seen "really tackling the problems in the economy."

Monica Padron, 78, bought a television through "Now12," a credit programme that allows payment in 12 interest-free instalments. But she is sceptical of what she sees as a political tactic ahead of presidential elections in October.

"You'd be an idiot if you were the only one who didn't make the most of it," she said. "But it's not right. The president thinks only of the present. The next one will have to pay the price."

Fernandez, who is barred from running for a third term in October, has defied dire economic predictions and kickstarted private consumption. A more buoyant economy could benefit Daniel Scioli, the ruling party's candidate and the current frontrunner.

While some see an electoral ploy, the government says the policies just make good economic sense.

"The state has to implement countercyclical policies to compensate for falls in private investment and exports amid a difficult international context," Commerce Secretary Augusto Costa told Reuters.

The government arranges nationwide deals like "Renovate Yourself" and shops sign up to offer them to consumers, Costa said. The main cost to the state is advertising the initiatives.

It partly subsidizes "Now12," but Costa said he did not have figures for how much that cost. "Now12" has financed 15.8 billion pesos ($1.7 billion) in retails sales since its launch last September.

He does acknowledge a rise in public expenditure to boost Latin America's third largest economy. Primary spending jumped 44 percent on the year in March, according to official data.

The strategy, which included an income tax cut in May, is paying off. The consumer confidence index leapt to 55 last month, its highest level since February 2012, from 38 a year earlier, a study by the University of Torcuato Di Tella showed.

Shop sales started climbing last December and are up 2 percent so far in 2015 after three years of contraction, according to figures from the Confederation of Medium-Sized Enterprises.

POST-ELECTION UNCERTAINTY

Just last year, Argentina was grappling with recession, inflation at 40 percent and a nose-dive in the black-market peso.

And then early this year Fernandez faced one of the biggest crises of her presidency when a state prosecutor who had accused her of criminal behaviour was found dead.

Yet voters' memories are short, say political analysts, and the success of the government's unorthodox measures to stabilise the economy and boost consumption is boosting its popularity. Confidence in the government hit a three-year high in May, a survey by pollster Poliarquia showed.

"Cristina's campaign is focussed like (Brazilian President) Dilma (Rousseff's) was: on telling people that if another force wins they could lose what they have," local analyst Rosendo Fraga said, noting her popularity rating was around 40 percent.

If that support translated to Scioli, it would be enough for him to win in the first round of voting.

Not everyone is keen, though. Many economists say the government's measures to stabilise the economy in the short term spell trouble down the road.

The fiscal stimulus, including schemes like "Now12," is unsustainable, they say, and could lead to another acceleration in inflation. Goldman Sachs last month revised its estimate for 2016 inflation to 35.7 percent from 32.5 percent.

Meanwhile the government has brought inflation down to 29 percent - according to private estimates compiled by Congress - partly by propping up the peso on the black market, which eases devaluation fears and prevents pre-emptive price rises.

It has also stalled its drive to reduce subsidies for utility costs, keeping tariffs uncompetitively low.

Such measures make the economy feel more stable and give Argentines more certainty about the money in their pockets.

But economists warn they cost the government money, make exports uncompetitive due to the over-valued peso, and delay the inevitable upward price adjustments.

The next administration may have leeway to make those adjustments and reduce fiscal stimulus without too much pain as long as the elections prompt an inflow of capital, said Siobhan Morden, an analyst at Jefferies.

In the meantime, Argentines are taking a carpe diem approach. Sales assistant May Coello, 35, said turnover in her clothes shop was up 20 percent this year.

"People are making the most of 'Now12' now because they don't know what will come after the elections," she said.

($1=9.0575 pesos )

(Additional reporting by Walter Bianchi and Eliana Raszewski; Editing by Mary Milliken and Paul Simao)