The resignation of Argentina’s economy minister and a crisis in the government, amid an inflation rate that exceeds 60 percent, has provoked a wave of fear triggering a surge in the value of the dollar on the country’s parallel exchange markets and a sharp rise in prices in shops.
“Every day is like going out to hunt a lion," says Luis Sacco, speaking from behind the counter of his electrical goods shop in Caballito in the capital. Since Monday, price changes on price tags have been the order of the day in order "to cover against a devaluation."
The loss of value of the local currency is a phenomenon that Argentines have been living with for decades. But with inflation soaring and the differences between President Alberto Fernández and Vice-President Cristina Fernández de Kirchner deepening, coupled with the resignation of Economy Minister Martín Guzmán, the architect of recent foreign debt renegotiations, the day-to-day drama is turning into a feature-length thriller.
"It was the longest Sunday of my life," admitted Sacco, who says he spent last weekend in anxiety, "not knowing whether or not to raise the shutters on Monday, thinking of a catastrophe."
Guzmán resigned last Saturday in a letter posted on Twitter – just as Fernández de Kirchner was delivering a speech.
Buying to 'save'
Despite everything, "there was no earthquake,” he sighs. “There are purchases, more than ever – people are still buying because they know that if they wait, the price will go up. It's time to sell stock.”
He continues: "Prices had already increased 15 percent a few weeks ago and now they have added a 'tweak' to average 20 percent, although imported goods have jumped up to 30 percent [more]," explains the trader.
Argentina has strict restrictions on the purchase of foreign currency and several exchange rates coexist. While the official exchange rate shows a dollar costs 132 pesos, the US currency touched 280 pesos on Monday on the black market. The so-called 'dolár blue,’ or informal dollar, eventually stabilised at around 255 pesos on Thursday, 15 pesos up on last Friday’s rate.
Guzmán was replaced on Sunday night by Silvina Batakis, a 53-year-old economist who is seen as close to the vice-president, who in her first statements to the press said she will continue the president’s current economic course.
Sensitive to any sign of recurring economic crises, the reaction of Argentines was to go straight out and buy in fear of further price rises.
Fernando Agote, the owner of a hardware store, said that although there had been "nervous purchases without paying much attention to price increases, things are calming down."
Only one of his suppliers stopped sales on Monday.
"There was a lot of nerves, a lot of speculation. Nobody knows where the real prices are, they are not set by costs," he admits.
Prices up, sales up
At a paint shop in the Floresta neighbourhood, price increases were also around 20 percent this week. But sales did not slow down.
"Everything was sold," said Leo, the manager. But there was not the same fluidity in the restocking of merchandise.
"Only one company delivered to me, the rest [of the deliveries] were suspended," he confessed.
Although he expects supplies to return to normal next week, "all the price and payment conditions are going to change," he ventured.
With more than 20 years in the business, Leo has already experienced several economic crises.
"This one has the particularity that people have money, they consume. These days we sold like crazy, the digital channels [online shopping] exploded with orders," he said.
In Argentina, the memory of the 2001 crisis is fresh. It was the worst in the country’s history, hitting in the midst of hyperinflation, and the country declared its biggest sovereign default on record.
Last weekend’s change of minister coincided with the payment to wage earners of 50 percent of the famous aguinaldo (mid-year bonus), a development that often boosts consumption at this time of year. Added to this is the decision by many Argentines to buy in anticipation of future price rises.
Price rises are most noticeable in imported products that are paid for in foreign currency.
In the food sector, "the price of fruit, especially those coming from abroad, such as bananas, papaya and melon, have gone up 30 percent since Monday," explained John Quinteros, the manager of a greengrocer's in Floresta.
In the Villa Crespo neighbourhood, Utopia, a natural products shop, has proudly put up a sign saying "Prices have not gone up here."
"We decided to keep them as long as we can stand it," said Liliana de los Santos, the manager, who admits “it’s a risk.”
Argentina's cumulative inflation this year is 29.3 percent until May, but food prices alone rose by 33.7 percent over the same period.
by Sonia Avalos, AFP