The 23-Hour Shopping Frenzy: Argentines Stampede Over Border

[Quilombo]

The article comment about the "strong currency" makes no sense to me. The ARS has been plummeting against all currencies. In fact it's finally at parity with the Chilean peso. So if both currencies are the same domestically, then the real question should be why does it cost 40% more for domestically made products in Argentina? And where is that extra 40% money going if Chile can not only afford to charge less but has a poverty rate of only 5.37%? There's obviously a very strange difference between the two economies. Perhaps rent is a smaller share of disposable income in Chile...

Because Argentina.

Basically what Red said, but the longer answer is because of taxes, corruption, protectionism/monopolies, and ISI with imported components.

For example, the Galaxy S24 Ultra is "made" in Tiera del Fuego the same way you "make" IKEA furniture: all the parts are just shipped here for assembly instead of assembly in Vietnam or South Korea or China. Remember, it's 100% the same device you get in the US, but here's the price difference:

• Dolar Blue: $1,811 USD in Argentina
• Dolar MEP/CCL/WU: $1,977 USD in Argentina
• Dolar BCRA: $2,797 USD in Argentina
• Chile: $1,425
• USA: $1,299

Remember, Javier Kirchner keeps telling us there is no reason for the brecha to be what it is, so we should take this to mean that he and Caputo feel that people soldering phone frames together in TdF suddenly adds $1,498 USD worth of value to a phone instead of importing it from Asia, and you begin to see why nothing makes sense here. Wages sure as hell aren't 115% higher here than in the US for consumers, or Asia for manufacturing, so someone is taking a cut, and it's not all taxes.

IMO It's the phenomenon Red was referring to where basic economics doesn't apply to Argentina. Perishable goods producers would rather let tons and tons of fruit rot than sell it at a lower price and bitch to La Nación about how "nobody wants to work" (without ever mentioning how much they pay), and then there's the ghost showrooms/stores which have furniture or clothing for insane prices in dollars that are always empty in CABA, yet they have to pay a clerk 8 hours a day to work, plus gas/water/electricity/taxes/rent/etc.


Look at the above example. Let's say they eliminate the cepo, maintain the fake 2% devaluation per month, and the new exchange rate is the MEP/CCL. If you live in Mendoza, and want the phone I mentioned, you're just going to take the bus to Santiago de Chile and save $500 USD on a single item, plus all the other items you can buy while you're there. Change it to Uruguay for people in CABA, and Bolivia and Paraguay and Brazil for people up north and boom, the BCRA will be manipulating the exchange rate to keep the peso strong so people can shop abroad, causing a loss in tax revenue, employment, etc. instead of addressing the distortions of local prices.

 

[LuckyLuke]

Taxes.

This makes the most sense to me...import taxes between the US and Chile are 0%. Average import taxes in Argentina is 22%.

IVA Chile 19%, IVA Argentina 22%.

Corporate tax rate Chile 27%, Corporate tax rate Argentina 35%

 

[LuckyLuke]

I do not think it is domestically produced products. I believe it is the same as most years in the past. Certain imported items are more expensive in Argentina because of high tariffs.

The article directly addresses the strong peso question a few times farther down. Starting with this:

It’s so strong against other currencies, after inflation is factored in, that it’s eroding trade and investment flows and heaping pressure on Milei to devalue the exchange rate for the second time since taking office in December.

The article talks about Argentine tourists buying everything they can possible carry, except milk and eggs. These are not foreign imports.

A strong Argentine peso would make everything produced in Chile cheaper, it would make imported tires in Argentina cheaper. But that's not what is happening. Chileans won't even exchange Argentine pesos directly because it's considered a liability.

The dollar is all they want and it buys you much more in Chile. If anything this article is not talking about how strong the ARS peso is to other currencies. It's highlighting how small the Brecha is for the dollar. It's saying that a dollar should be worth way more in Argentina. These are distortions created by the Forex interventions and Argentines can see it clearly by taking their dollars elsewhere.

 

[LuckyLuke]

the BCRA will be manipulating the exchange rate to keep the peso strong so people can shop abroad, causing a loss in tax revenue, employment, etc. instead of addressing the distortions of local prices.

Excellent assessment and fascinating comment. Who is taking the cut for these overspent dollars? To whose advantage is it to make a dollar worth less here? Not the caste, I would think unless they are stockpiling them for a higher brecha. None of it makes any sense to me, other than to try to "contain" the phenomenon of Argentine stores frontrunning their peso sale prices using the blue rate for no domestically good reason. Which is like saying "were going to make your dollars worthless here because you're too greedy to reasonably price anything in pesos".

 

[Ries]

you seem to think there is actually a plan. And that the current government is competent enough, and has enough control over the congress, its ministries, and government employees, to implement a plan. And that a plan by Milei would in any way affect the $7.5 Trillion dollar daily Foreign Exchange Global marketplace.

 

[antipodean]

Anyone here for long enough or familiar with a few decades worth of Argentine history knows that it is the norm rather than the exception for Argentines to travel abroad to get better prices when shopping for most consumer items.

Many things are simply cheaper in Chile than in Argentina regardless of what currency one uses.

Same Zara jacket presumably made somewhere like China/ Bangladesh
- In Chile CLP 109.000 = USD 115 = ARS 174.800 (Dolar Turista) or ARS 152.040 (MEP) or ARS 109.250 (Official) or ARS 165.025 (Blue)
- In Argentina ARS 245.990

Same Samsung Galaxy A55 256GB phone
- In Chile CLP 449.990 = USD 474 = ARS 720.480 (Dolar Turista) or ARS 626.628 (MEP) or ARS 450.300 (Official) or ARS 680.190 (Blue)
- In Argentina ARS 999.999

The "because Argentina" has far less to do with fiscal policy and everything to do with protectionism and the high cost of doing business in Argentina that it generates - which still very much exists untouched until the day Congress and Senate finally agree to change the vast array of laws that contribute to this reality and make it an uncompetitive market. It was that way in the 70s, 80s, 90s (when a peso was a dollar...), 00s, 10s and except for a short period in recent times, is like that the 20s. No sense trying to blame Milei for this or pretend it is something new and unprecedented.

 

[Redpossum]

Everything here on page 2 of this thread is very well said, Quilombo, LuckyLuke, Ries, Antopodean, well analyzed all of you.

And yet, it all boils down to...because Argentina.

This place. I remember some years ago saying to one would-be newcomer who asked what it's like here, "It's a wonderful place, it's a terrible place. You will love it, you will hate it. You will laugh, you will cry, you will laugh until you cry, and you will laugh to keep from crying". And nothing about Milei so far has changed my opinion on that score.

God bless Argentina. I wouldn't want to live anywhere else.