Food in Ecuador Imported from Argentina is Cheaper

[sesamosinsal]

I'm in Quito for a few months, and was a bit amazed by this...

Frutigran cookies are $1.05 USD here. So, $4.20 pesos. In Argentina, they run anywhere from 5 ARS to 7 ARS.

Sesamo crackers are .80 cents, or 3.21 ARS. In a Chino, they run anywhere from 3.20 to 4 pesos.

Wine, however, is much more expensive.

The fact that any Argentine food product would be cheaper 4,000 km away (as the crow flies) is ridiculous, no matter what the difference is.

 

[clooz]

Doesn't it just mean that Argentine traders want bananas more than Ecuadoran traders what Frutigran cookies? Bananas are fresh food. Cookies are more like entertainment. So makes sense if you want more fresh food and less entertainment.

 

[sesamosinsal]

An exported Argentine product should be more expensive outside of Argentina. It defies logic to say otherwise. The product would have to pass through too many hands to be cheaper than it is in Argentina... right? Producer ---> Transport ---> Ecuadorean Customs ---> Distributor ---> Supermarket ---> Consumer. In Argentina, it would be: Producer ---> Supermarket ---> Consumer.

Is it inflation? Are the supermarkets in Argentina trying to recoup costs for the numerous wage increases and benefits that they have to give their employees?

 

[steveinbsas]

An exported Argentine product should be more expensive outside of Argentina. It defies logic to say otherwise. The product would have to pass through too many hands to be cheaper than it is in Argentina... right? Producer ---> Transport ---> Ecuadorean Customs ---> Distributor ---> Supermarket ---> Consumer. In Argentina, it would be: Producer ---> Supermarket ---> Consumer.

Is it inflation? Are the supermarkets in Argentina trying to recoup costs for the numerous wage increases and benefits that they have to give their employees?

Perhaps the taxes on these items are also higher in Argentina. That could result in higher prices here in spite of the transportation costs to Ecuador. You are probably right about the effect of "numerous increases in wages and benefits." Also consider possible differences in other costs such as rent, advertising, insurance, and utilities that must be paid by the vendors.

 

[clooz]

An exported Argentine product should be more expensive outside of Argentina. It defies logic to say otherwise. The product would have to pass through too many hands to be cheaper than it is in Argentina... right? Producer ---> Transport ---> Ecuadorean Customs ---> Distributor ---> Supermarket ---> Consumer. In Argentina, it would be: Producer ---> Supermarket ---> Consumer.

Is it inflation? Are the supermarkets in Argentina trying to recoup costs for the numerous wage increases and benefits that they have to give their employees?

I'm not by any means an economist. Maybe there is someone who actually knows how trade between Ecuador and Argentina in food products are cleared and they can fill us in on some of the main transaction path details. But to have a reasonable model of what's happening there are other important things to take into account. 1) Gotta separate the concept of cost from price. Cost-based elements of transfer prices including mark-ups, fees and taxes in a supply chain are only one aspect of pricing. Cost alone is not what typically sets a market price in any good or service. Value-based pricing and market-based pricing are other main price elements. Gotta take a broader view of what is setting pricing in these markets. Inflation is not a cause, it's an effect. 2) Foreign trade settlements are cleared through foreign currency exchange. Exchange rates are significant. Gotta know how trade between Argentina and Ecuador is settled - what the currency flows are - which currencies are used to settle trade, does it go via USD or via others currencies, what else is being traded (bananas) to settle trades and balance the trade accounts. The markets in these other goods and services (bananas) and the markets in currencies are both likely to be having much larger affects on prices than manufacturing and shipping and trade costs. The currency market is as important as the markets in goods in setting international transfer prices. 3) When an export or import market is centrally managed or subject to central intervention by a large cartel or government, it is typical for it to be used to strategically manage exchange rates and transfer prices for other ends than just to settle trades (pay the buyers and sellers). Gotta know which large organizations are playing in these markets to significantly change transfer prices and exchange rates.

The price of Frutigran is probably more like a flea on the hair on the tail of several frantic dogs chasing their tails. How a flea leaps is not likely to reveal much about the plays. Gotta see the dogs and which direction they are spinning to get a handle on the direction and meaning of prices.

This is all basic international economics. Hasn't changed in centuries.

 

[Celia]

I found CBSE mate in Miami and it was the same price as it cost in Argentina. I was surprised, particularly this was in the Art Deco minimart on SoBe!!!

 

[ptolemy]

...for the record, this Fall, I found a bottle of Malbec (Finca Flichman) in Miami, for the same price as here. What gives?

 

[sesamosinsal]

If you're talking about taxes and expenses (wage increases, employee benefits, rising operating costs, etc.) making the price of a good in Argentina more expensive, I'd certainly agree with that.

The fact that those goods can be put on a ship, go through Ecuadorean customs, pass through a distributor, and finally end up on the grocery store shelves and STILL be cheaper than they are in Argentina is shocking.

Foreign exchange would definitely affect price, but it wouldn't make the good cheaper than it is in Argentina, no? (Ecuador's currency is the USD, by the way.) In other words, the transaction fee would be passed onto the consumer at some point.

 

[dennisr]

Dumping (in trade)
Definition
The practice of selling goods abroad below the price charged for the same goods in the domestic market or at a price below the cost of production, usually with the aim of driving competitors out of the market.

Dumping is considered to be an unfair trade practice and, as such, is prohibited under many national trade laws.

 

[gouchobob]

This could have more to do with the cost of doing business and efficiency of the local market. At one time people could buy Japanese electronics in the states for less than in Japan. This was put down to an inefficient distribution system in Japan. Many people still travel from Japan to places like Hawaii. There they do a lot of shopping and save enough on their purchases to pay for their trip. In Argentina taxes and other costs are high. My guess is that the distribution system is probably not that efficient either. It's not surprising you can buy Argentine goods overseas the same or less as a result.