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ECONOMY | 16-08-2023 17:27

Argentina's business community on alert, expect two-digit monthly inflation

Meetings and calls have taken place between business leaders and executives of chambers of commerce voicing concern over runaway inflation, Milei's proposed dollarisation plan and market unrest.

Argentina's new political setting has put business leaders on alert, with fears over the high level of economic uncertainty spooking private industry.

The unrest, prompted in part by the new open-ended three-thirds scenario for the October presidential election and the Central Bank's devaluation of the peso, is pervasive.

The UIA Industrial Union called together its main leaders to assess the situation after the Central Bank announced what in business jargon is known as a “discrete jump” of the official exchange rate – of more than 20 percent.

The UIA has a complicated agenda with the government, given discontent over the shortage of dollars to pay for imports and the idea from the Executive Branch's idea of a fixed-rate pay rise for workers.

However, some business leaders have disclosed that even though there are causes for concern regarding the electoral platform of libertarian leader and frontrunner Javier Milei, they believe the overall outcome could be favourable.

The head of the Argentine Chamber of Commerce (CAC), Mario Grinman, said this week that “although we are against dollarisation and closing down the Central Bank, we view it as positive that people have voted for order."

Grinman also highlighted the preference by the electorate for PRO leader Patricia Bullrich over Buenos Aires City Mayor Horacio Rodíiguez Larreta in the case of Juntos por el Cambio as proof.

The CAC chair anticipated that his organisation would attempt to meet the three main presidential candidates with a chance in the October election in the coming weeks.

Meanwhile, firms across Argentina are already totting up the inflationary cost that a 20-percent devaluation could bring to prices.

A report by company Portfolio Personal Inversiones (PPI) suggested that “the first thrash will be a leap in August’s inflation, probably above two digits (it was expected to be eight to nine percent before the election) and that pass-through will carry over to September."

At the CGERA Business Confederation, an entity partial to Peronist economic policy, concerns were expressed about the current instability facing the country. 

“What will the inflation be in August, 10 percent or 12 percent?”, said its chairman Marcelo Fernández.

The SME businessman reminded people that Wednesday is National Businessman Day, and that Economy minister and Buenos Aires Province Governor Axel Kiciloff are invited to the celebrations. Fernández has requested Massa announce new measures for the sector.

On the other hand, auto-maker executives are increasingly getting in touch with each other in order to unify complaints.

Their problem lies in the high component of imported parts to produce local cars and the import of finished vehicles, and with a discrete jump they would necessarily have to change their pricing in pesos.



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