Economists’ warnings about exchange delay prompted an angry response from Javier Miley which resulted in a new debate: Is Argentina expensive in dollars? From the president’s perspective, this is an intrinsic phenomenon of the structure of the Argentine State, to be corrected through its economic policy. However, the dominance of inflation over the evolution of the exchange rate marked an increase in the price of the US currency, according to the analysts consulted by PERFIL.
Through a publication on his Central and gradual lifting of the stocks.
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Based on this list, the head of state posed a question regarding the delay in the exchange rate: “Are we facing a case of exchange appreciation or a case of rearrangement of relative prices where Argentina is expensive in dollars given its tax and regulatory structure?”.
High inflation, dropper devaluation: the combo of exchange rate delay
In dialogue with this medium, the director of EPyCa Consultores, Martín Kalos, recalled that in the run-up to the runoff, the then Minister of Economy and presidential candidate Sergio Massa resolved to freeze the exchange rate with double-digit inflation that made the country more expensive. in comparison with the rest of the world.
“Then a very abrupt devaluation took place (already in Milei’s government) that made us cheaper tremendously. From there, it became more expensive again because the exchange rate rose much less than inflation rose. In a few months, we went from being a country very cheap to a very expensive country in dollars based on how accelerated inflation quickly eats up the margin,” he described.
In this sense, Kalos judged that Argentina “is relatively expensive” under the parameters of the US currency. However, the analyst maintained that the increase in prices does not cover all goods and services that are sold on national soil.
Javier Miley
“There are things that are still cheap. Especially if you look at public transportation, which is still subsidized and not updated in some cases. Also the rates for public services in general, which have not been updated as much as they could and are cheap in dollars But everything that is electronic is expensive in dollars. It is more expensive than three months ago and it is likely that it will continue to become more expensive in dollars as prices continue to rise at a faster rate than the exchange rate,” he reasoned.
The director of Macroeconomic Analysis of Equilibra, Lorenzo Sigaut Gravina, agreed, expressing that “there are signs of an incipient exchange rate delay”, perceived in the commercial exchange with border countries such as Uruguay or Chile. The endless lines of cars
“To a large extent due to the closing of the gap, the flow of citizens from neighboring places who came to spend in Argentina is ending. It is beginning to be seen that we are not so cheap with Uruguay. It is once again a business to leave Cuyo or La Patagonia to make purchases of clothing and technology from Chile, where it was always cheaper because it has fewer taxes. Even in comparisons with gasoline, food and electronics prices with the United States, we are practically at the same costs in dollars but with salaries in dollars that are much higher. low,” he explained.
The macroeconomic specialist did not rule out a deepening of the appreciation of the peso against the US currency. With a decreasing inflation dynamic but still around 8%-9% monthly and a crawling peg -controlled microdevaluations- of 2%, Sigaut Gravina predicted a delayed real exchange rate towards the middle of the year.
“Substance intake”: the statement from the Presidency after the accusation of a Spanish minister against Milei
For the director of C&T Economic Advisors, Camilo Tiscornia, the discussion on the exchange rate delay is tied to the historical comparison point that is taken as well as the products to be compared and the country or countries that are included in the comparative exercise.
“From 2015 until now, we are at a higher level than in the worst moments (more expensive in dollars). But we are not as high as in the most comfortable moments that occurred recently, which were at the end of Mauricio Macri’s government” , graphic.
Meanwhile, Tiscornia acknowledged that in comparison with other places, “some signs appear that we are not cheap in dollars.” “The question is whether this is going to persist or change. The problem today is that we continue to get more expensive because inflation continues to beat devaluation, for now. Therefore, the Government is trying to lower inflation as soon as possible “, he noted.
In historical terms, every time Argentina went through a period of high foreign currency prices, it resolved the dilemma with a jump in the exchange rate.
Food prices fell in the last week of April
“The Government wants to avoid having to carry out another devaluation. Now, it is true that inflation cannot continue indefinitely above the movement of the exchange rate. The equilibrium situation will not be very far from what we have now. If the plan of the Government is fiscally successful and the projections that many dollars can enter the Argentine economy through energy and mining are fulfilled, Argentina does not require a highly depreciated currency,” Tiscornia closed.
Is Argentina expensive in dollars?
Regarding the controversy surrounding the exchange rate delay, a report from the Ecosur Foundation contrasts the local and external prices of different goods and services. The analysis takes into consideration the dynamics of Brazil, Chile, Mexico, Peru, Colombia, Spain, Italy, and the United States and the results crystallize the dissimilarities between the different areas, with the disparity in food, public services and products being most notable. electronic
“While there was a rapid slowdown from the December peak (25.5%), The accumulated inflation in the last four months was 90% and in the same period the informal dollar rose only 6%. This indicates that there was a significant increase in dollar prices“, highlights the report.
However, the basket analyzed showed that, at the blue dollar, Argentina is still not expensive in greenback: “If we look at the evolution over time, Argentina is somewhat more expensive than in 2023, but substantially cheaper than in 2017. Yes We make the comparison at the official exchange rate, the basket of goods and services logically becomes a little more expensive in dollars, but it is still cheaper than in the countries with which we compare.
“Clothing and durable goods are more expensive than the average of selected countries, while the rest of the products analyzed (food, services, education, rent) are cheaper. For example, a dress in Argentina costs USD 62 in parallel, while on average it costs USD 39 in other countries; a cell phone that in other countries costs about USD 1,200, here costs USD 1,990,” the study exemplifies.
Regarding the value of electricity, gas, water and public transportation fare, in our country it represents 20% of what it costs on average in the rest of the nations included in the paper. Something similar happens with food and especially meat, which costs approximately half as much as other countries.
“The opposite occurs with clothing and electronics. Clothing is around 40% above the average. A computer costs around 40% more than what it costs on average outside of Argentina and a cell phone costs around 70% more “, adds the text.
Beyond statistical comparisons, Argentine salaries are lower in dollars than those measured in the other examples. In fact, our country holds fifth place in the ranking of the lowest minimum salaries in the region, behind Venezuela, Cuba, Haiti and Nicaragua.
MFN / Gi