At shops all across Argentina, from cafes to kitchenware vendors, scores of small-business owners woke up Monday to find some version of the same notice in their inboxes: their suppliers had hiked prices 20 percent overnight.
The reason, as best they could tell — Sunday’s primary vote, which saw the radical outsider Javier Milei deliver a stunning defeat to the establishment’s presidential candidates, deepened the sense of political, and financial, chaos in the country. On cue, the outgoing government led by President Alberto Fernández announced a surprise 18 percent devaluation of the peso hours later.
The country is certainly no stranger to turmoil. But with annual inflation already running at 115 percent and the Central Bank nearly out of hard-currency reserves, the nation is careening toward the kind of full-blown crisis it hasn’t seen in years. Prominent among the most immediate concerns is that hyperinflation — something greatly talked about across the world but rarely seen anywhere — could return.
Sharp price hikes appeared early for electronics and home appliances Monday. MacStation, an official reseller of imported Apple products in Argentina, raised its computer prices nearly 25 percent while local e-commerce site Precialo, which tracks pricing history, showed refrigerator, washing machine and TV price tags north of 20 percent in the past week.
Monday’s increases only deepened those worries. Some stores went so far as to suspend sales of products like auto parts and toilet paper until prices show signs of stabilising in coming days, according to business owners across Buenos Aires. Others said they couldn’t even get new estimates for shipments or sell dollars on the black market to alleviate the pain, leaving them to guess how high costs will soar and how much to pass onto their own customers.
Milei pulled off an historic upset, winning the primary election over the country’s two established parties after polls had estimated he would finish third. The results sent Argentina’s bonds tumbling to around 30 cents on the dollar and triggered a peso sell-off in the black market to go along with the devaluation of the official rate, which marked the biggest one-day drop since 2015.
Moments like Monday heighten a growing reality in Argentina: Nobody knows how much things cost in pesos. From one street corner to the next, basic items — like paper towels, diapers, milk, eggs — could cost double depending on the store and day of the week. Without a north star, consumers tend to keep their money in their wallets while storefronts jack up prices.
At the same time, Argentines are so used to financial chaos at this stage, that they’re almost anaesthetised to it. They don’t set fire to the street as has happened in places like Chile and France in recent years. Instead, they tap into a long list of inflation survival strategies with varying degrees of success or failure.
Locally-owned businesses are the country’s biggest employer after years of volatility scared off big corporations including Walmart. Like anywhere, mom-and-pop shops often face razor thin margins, and even the most creative ones say there’s no escaping losses.
When one of Lionel Barese’s customers called last week to ask about installing high-end kitchen countertops for his suburban home, Barese quoted him at 3.1 million pesos. But the customer scheduled his official appointment Monday, forcing Barese to revise the price to 3.5 million pesos. At this point, he’s wary of taking on new business because he worries about the rising costs of material he imports from Europe.
“You can try to cover the loss, but I don’t have a crystal ball,” says Barese. “Normally when you have a business sale, you’re happy. But in Argentina, when you sell something, you never know if that’s good or bad.”
Many shop owners are hiking prices and hoping to survive.
Marcela Cina, a cosmetologist who runs her own small business in Buenos Aires’ Caballito neighborhood, saw prices for a skin care mask she uses on clients jump from 6,200 to 7,300 pesos overnight. And one bakery manager, asking not to be named to avoid customers’ ire, said he expects to raise prices 10 percent this week and then see if he needs to hike again later this month. He says the experience feels like buckling up as an airplane takes off.
As most of the world slowly tames the post-pandemic inflation surge, Argentina is going the other way, sealing its pariah status in the global financial community. (It’s defaulted on its debts three times this century alone.) Now, local economists are warning prices could rise more than 10 percent in August alone — triple the rate of price increases that Americans see in a typical year.
Inflation is now at its highest level since Argentina was exiting hyperinflation back in the 1990s. Fernando Iglesias Molli, owner of coffee shop OssKaffe in Buenos Aires, remembers those tough times and says it’s forced generations of Argentines to become financially savvy. But even he says no inflation strategy, no matter how sharp, can fully stop the bleeding.
“This is going to hit us directly,” said Iglesias Molli, noting his imports are priced in dollars. “Argentina always shapes us to have this unique resilience to adapt, be creative with new ideas so we can overcome these huge shocks that crush small businesses.”
by Patrick Gillespie & Manuela Tobias, Bloomberg