High prices hit Argentines and companies

Buenos Aires, Argentina – In times like these in Argentina, prices are something that cannot be guaranteed.

Just ask Diego Barrera and Claudio Cayeta, owners of a small aluminum and glass shop in the Buenos Aires neighborhood of Palermo. Trading partners spent two weeks last month navigating virtual paralysis due to the volatile economic situation plaguing the country, unable to obtain the material they needed and, as a result, unable to quote prices to their clients.

“Our suppliers don’t give us anything because the (US) dollar goes up every day, so they don’t want to lose money,” said Barrera, 43, whose shares have fallen as uncertainty around him has increased.

“I understand it because the same thing happens to me,” he said. “I’ve already lost money on the prices I quoted some of my clients.”

This reality has become alarmingly common in Argentina, with its economy crumbling at an accelerated rate. The rise in value of the US dollar is actually a measure of the plummeting value of the Argentine peso, which plunged as much as 25 percent on the black market in April. On April 25 it hit a record low, touching 500 pesos to a US dollar at the unofficial exchange rate, the rate most often used as a benchmark for average Argentines because currency controls limit how much they can buy at the rate. official exchange.

With inflation at more than 104 percent In the last 12 months, according to official statistics, it is increasingly difficult to know how much something is worth, let alone the budget for everyday items. Food prices alone increased an average of 10 percent in March from the previous month in the Greater Buenos Aires region: fruits and vegetables around 15 percent; eggs 25 percent.

Raw materials, such as those handled by Barrera y Cayeta, are also impossible to predict, because prices rise and fall with the value of the currency. The price of glass rose 10 percent in mid-April, Barrera said, and his supplier advised a second increase by the same amount two weeks later.

All of this has fueled a climate of political instability in an election year. The deeply unpopular President Alberto Fernández formally announced I would not seek re-electionand then blamed the depreciation of the currency on rumors and speculation fueled by right-wing politicians.

In a tweet, Economy Minister Sergio Massa said he would use “all the tools of the State to order this situation”, and that included redefining the terms of a controversial agreement with the International Monetary Fund (IMF) to repay a loan from $44 billion. .

After the Central Bank of Argentina intervened and traded bonds on April 25, a move contrary to its agreement with the IMF, the unofficial exchange rate plummeted to 460 pesos per US dollar. Argentina also announced that it would start paying for imports from China with the yuan, instead of the dollar, a move that will help safeguard its dollar reserves.

But on the street, the damage from volatility has already been done.

‘On the hunt for the best price’

“Don’t ask me how I adapt, but somehow I do,” said Emiliano Espindola, 47, as he mixed spiced feta cheese, tomatoes and cucumber in the back of a Middle Eastern take-out shop. . . He is a cook in Belgrano, a prosperous area of ​​Buenos Aires where, he noted, people may have been insulated from the financial volatility of the week. But not him, a worker who travels an hour and a half by bus from the outskirts of Buenos Aires to support his teenage daughter. Espindola will take odd jobs as a construction worker to make ends meet.

“I am always looking for the best price, but at the same time reducing my costs,” he said. “In general, the economic pain is widespread. The cost of the bus ticket goes up every month. And let’s not even talk about groceries. One week you have one price, the next week you have another”.

For Yolanda González, a 53-year-old nurse and main breadwinner, the solution is to reduce the amount of food her family eats. They cannot replace their clothes and limit their outings to those that are free, like a sunny afternoon in the park, with the traditional infusion of yerba mate as a companion. “You work 24 hours and it’s not enough, you work 30 days and it’s not enough,” she said.

Argentina has spent most of the last 12 years in recession or stagnation, said economist Martin Kalos, director of Buenos Aires-based firm EPyCA Consultores.

The latest figures for 2022 show that poverty affects almost 40 percent of the population, with one in two children living below the poverty line, according to the national census taker. This crisis dates back four decades, with the gradual erosion of the country’s productive capacity and the widening gap between rich and poor.

“Argentina urgently needs to recover its growth, but first it needs an economic stabilization that it has not been able to achieve,” said Kalos. “Argentina’s inflation rates are not only above 100 percent, but they are moving faster, and we don’t know how close they will be to 130 or 150 percent in the next year.”

The Argentine government resorted to price fixing schemes to try to soften the blow of voracious inflation, closing deals with large supermarket chains. But even these programs have their limitations: Offerings vary from store to store, and smaller grocery stores are locked out of pricing agreements and have to stock their shelves with wholesalers, preventing them from competing with the lowest price offered.

cheaper alternatives

The relentless increase in prices means that cheaper brands of products are flooding the market.

Victoria Alcober holds a handful of “unofficial” cigarette packs that she began offering in her small grocery store in the city of Ensenada, an hour from the Buenos Aires capital. It was her own customers who alerted her to her packs, which cost about a third of the price of the biggest, well-known brands.

“As a retailer, you have to go find them because that’s what people are buying today,” he said. “There are a lot of alternative brands that they’re using now because of all the price increases.”

Argentines are also looking for political alternatives. Presidential and legislative elections will take place in October, and the deepening recession has revived radical positions, including ditching the peso altogether and using the US dollar as the official currency, a proposal pushed in particular by the candidate. Libertarian Javier Milei.

Barrera, the owner of the glass store, is deeply frustrated and exhausted by the day-to-day financial uncertainty and the inability of the political class to control the chaos. But he fears that such extreme positions as the dollarization of the economy will only make things worse, and he worries that good leadership alternatives will not materialize. “The iron is hot now,” he said. “They know they are going to burn.”