Uruguay’s largest shopping centre operator is seeing store sales dented by a currency crisis in neighbouring Argentina that is fuelling a stampede of tourists across the border to take advantage of cheap dining and entertainment.
At the start of the year, Carlos Lecueder, head of his family-owned firm Estudio Luis E. Lecueder, was optimistic the nine malls he manages would finally recover from the pandemic to post sales above 2019.
That was until tens of thousands of middle class Uruguayans opted to instead spend a chunk of their disposable income in Argentina during a long weekend in August and spring break in September. Another long weekend in October saw almost 74,000 Uruguayans leave the country, mainly at border crossings with Argentina.
Lecueder now expects full year store sales will be about five percent below 2019, with estimated year-on-year revenue growth in the low teens about half of his original forecast due to Argentina.
“Argentina is affecting all of Uruguay’s retail sector because in some cases prices are cheaper and in other cases where its not a question of being cheaper people are spending money over there and not here,” Lecueder said in an interview at his office at the World Trade Center Montevideo complex.
Argentina is in the midst of a deep economic crisis as deficits, money printing, capital controls and inflation near 80 percent undermine the currency. The peso officially trades at 151 per US dollar on the government-managed currency market, compared to about 287 per greenback at the black market rate.
The massive price distortions caused by Argentina’s dysfunctional economic policies mean tourists who buy pesos on the black market with foreign currency will pay the equivalent of US$10 for a steak and fixings at Parrilla Peña near the famed theatre Teatro Colón in Buenos Aires. A similar plate costs about US$17 at family dining venue La Pasiva in Uruguay’s capital Montevideo. Tickets for two to see an opera at Teatro Colón will set you back about US$10 for the cheap seats, compared to US$22 for a play at Montevideo’s Teatro Solis.
Small businesses in the towns and cities clustered along the Uruguay River that divides both nations are also suffering lost sales to contraband and day shoppers buying staples in Argentina. A periodic survey of 60 basic goods by the Salto branch of Uruguay’s Catholic University found it was 63 percent cheaper to buy those products in neighbouring Concordia. One of the few items Argentines try to buy in Uruguay are car tyres due to shortages back home, according to newspaper El País.
Lecueder, whose father opened Uruguay’s first shopping mall in 1985, expects the drag on consumption from Argentina to slowly wane through next year.
Those headwinds aren’t stopping Lecueder from scouting locations for new malls in the interior. His firm also plans to break ground as soon as this year on a residential tower on the outskirts of Montevideo for almost US$30 million.
Analysts surveyed last month by Uruguay’s Central Bank raised their growth outlook by a quarter of a percentage point to five percent. The economy is seen slowing to three percent next year when construction of a US$3.47-billion pulp mill and US$839 million railroad wrap up.
by Ken Parks, Bloomberg