Why Things Cost What They Cost In Argentina

[Dublin2BuenosAires]

Great post, I almost wish I hadn't read it !..but thanks.

 

[internationalguy]

Business friendly country (gag). That's what our nation will look like in a number of years if you know who gets his way.

I also read that in Argentina almost 50% of the workforce is not officially employed.

 

[Crema Americana]

You can't have your cake and eat it too, but Argentina always tries.

It's no wonder why so many people work under the table.

 

[germano]

You can't have your cake and eat it too, but Argentina always tries.

It's no wonder why so many people work under the table.

Yes I agree. With 58% on top no wonder ...

 

[lucha54]

You can't have your cake and eat it too, but Argentina always tries.

It's no wonder why so many people work under the table.

It might just be a dirty rumor, but I heard that even the AFIP has employees working en negro!!!

 

[IABhutto]

Each time you go into that retail store and say to yourself, "geez everything is so darn expensive" well here's why - these are the costs of running a business here: Monthly maintenance bank account fee $175 pesos + IVA 21%
E-Mail monthly statement $15 pesos + IVA 21%
Posnet device (to accept credit cards) $200 pesos + IVA monthly
Each credit card transaction 3% of total sale comission paid to bank + IVA(money credited in 30 days)
Each debit card transaction 1.5% of total sale comission paid to bank (money credited in 7 days)
Visa (Maintenance fee) $10 pesos
Mastercard (Maintenance fee) $10 pesos
Argencard (Maintenance fee) $10 pesos
American Express (Maintenance fee) $10 pesos
Everytime a deposit is made 0,06% impuesto al credito
Everytime a withdrawal is made 0,06% impuesto al debito
Book of 50 checks $100 pesos
So bank fees for a small retail business are easily $1,000 to $1,500 pesos per month
Then, if you have employees, on top of their monthly salary, which increases around 20% per year, you have 58% of their salary addtional to pay in social security taxes. Plus a required 13th salary called "aguinaldo", and there are 19 official holidays, if any employee works any of those days they get paid double wages. Transportation of any goods within Argentina is extremely expensive and uncompetitive. All trucks belong to the same union so prices are the same, no factory can search around for a more competitive price to ship their goods to their customers. Even if you are independent and own a truck you have to pay the trucker's union for an expensive permit to be able to operate on the road if you don't you get your truck impounded. Also what they call here "patente" motor vehicle registration tax can easily cost $500 pesos per month and you have to pay it every single month unless the car or truck is over 10 years old. To ship soybeans by truck from LaPampa to the port in Rosario costs just as much as the shipping costs by shipping them to China by sea from Argentina.
Then the bigger taxes 21% IVA on everything, 3% ingresos brutos, then on any profit you make 35% ganancias tax. And we are just talking about goods produced in Argentina, if you are talking about imported goods add another 50% to the cost for customs and import taxes!
Do you understand why things cost what they cost in Argentina? Unless this changes things will never be inexpensive here. All of these costs are built into that bag of chips, refrigerator, and bottle of soda you want to buy. And remember many these costs are not only being paid by the retail store, but by every other part of the chain so by the time you pay for the item these costs have been magnified many times - producer of raw materials, manufacturer, shipper, retail and finally YOU the consumer!

Your post is interesting but there are several things to consider: When ever you open business you will be paying the expenses without expenses there will be no net income.
Having worked in a bank as an Operations Manager for 14 years I have little knowledge about debit and credit cards, Credit and Debit cards acceptance is solely optional for the proprietor of the business, e.g. if you have shop or super market it is up to you to opt for the services of credit/debit cards, if you won't people who uses these credit/debit cards will not come to your shop or super market what ever (Like I don't go to chino because they don't accept it) You will lose your clientèle. So you are paying for the service to have more business and for that you are paying. Seems pretty fair.

As I said before every business has their expenses even a little kioskos. My problem is, as a business man/woman one should not charge the commission from the consumers.

 

[Dublin2BuenosAires]

Cash only businesses are not without issues, you would lose a lot of customers without letting people pay by card and you would lose out on the constant battle to have the correct change. I saw a chino near me recently offering 105 pesos for 100 pesos worth of change.

 

[Hybrid Ambassador]

Davidglen77-san, very interesting your posting in reference to doin' business in AR. Can I contact you when I go visit AR very soon? Your knowing, know-how could be very helpful in order to deploy my planned venture there. What kind of business have you managed and how long.? Please disclose if is not to your bother.

Thank you.

 

[ElQueso]

There are many cash-only businesses here. I found a perfect chair for my office in one near where I live, didn't have the cash and they didn't accept any cards, so I passed them by because I wanted to put it in interest free payments

Davidglen77, you left out another important part of doing business here (unless I missed it) - the extreme anti-business, pro-worker courts who cause businesses to lose tons of money and encourage a class of workers who feel like they don't have to work to succeed, not to mention the need to retrain within a business that such leanings cause.

One has three months to "try out" an employee. Once that happens, you are committed to keeping that employee no matter what, or paying him off when he screws off and you tell him to get the hell out, or risk going to court and getting a really huge settlement against you. I've heard reports of something like 95% of the labor cases that go to court are found in favor of the employee (not verified, and personally, I find it hard to believe that high a number, but I know it's awfully high just from what I've witnessed in the last 7 years). We're talking people who might work hard for those three months and then start screwing off and daring their employer to fire them. Most of the time the employer seeks a settlement because if he or she goes to court he's probably screwed. The "employee" then gets a month of pay and they are good at figuring out how to make that stretch as well.

It is mandatory under most jobs here (domestic help is one sector that is about half the cost, there are others) that a company pay one month of salary per year worked to anyone fired, unless you can prove that the person deserved to be fired. Very difficult to do under the current court system. Also, companies that are in trouble can't lay off a portion of their workers without giving them the same packages.

And lets not forget the strong unions. The first one I can think of is waiters.

I came here 7 years ago and tried to set up a branch company and hire Argentinos to do programming work. Never got the local company off the ground and I ended up hiring people on a contract basis and paying them from the home company back in the States. That is difficult because even though they earned much more money with me, they were giving up all the wonderful benefits that the laws here give them. But it also turns out that the very same people who are willing to take a risk to earn money and have more control over what they earn also often make the best employees. Imagine that.

Most small businesses here pay their people under the table. Most employ either family members or sometimes good friends because of the high level of mistrust related to people like I mentioned and the labor laws that allow them to operate with impunity.

Maybe a bit off-topic, but this is what happens when you raise regulations and try to remove the market's automatic fairness routines and substitute your own version of that. Many times it gets started with good intentions (which pave what?). Monopolies are the greatest example I can think of - what monopoly has ever existed without the direct or indirect help of the government in which it is born? A free market can't stand monopolies. Those people who manage to corner a market in the free market probably deserve it the benefits (as long as they are playing fair - but a free market has to be fair to all, not only a few fortunates) for having taken the lead and produced something of value to someone. If it is valuable to a whole lot of people, the free market will see other people come in and take advantage of that as well and the monopoly goes away. If it's not valuable, the monoploy will go away because the market wasn't there to begin with.

Having been an entrepreneur for most of the last 13 years, it's one of the biggest things that pushed me into being a Libertarian and really understand what that means. The US has steadily been making it more and more difficult to do business - look for a similar decline in the US (and for many other reasons) in the coming decades as more and more people say "they deserve..." instead of "I'll figure out how to do it."

Argentina (and South America in general) will never improve as long as they look to the government (an imperfect human institution too susceptible to corruption and such) to solve their problems for them. Governments create no wealth and that should be remembered - government should provide a simple legal framework to allow all folk the same possibilities and leave it up to individuals to create wealth and employ people to help spread that wealth, along with the good feeling of being useful that comes along with such.

 

[Davidglen77]

There are many cash-only businesses here. I found a perfect chair for my office in one near where I live, didn't have the cash and they didn't accept any cards, so I passed them by because I wanted to put it in interest free payments

Davidglen77, you left out another important part of doing business here (unless I missed it) - the extreme anti-business, pro-worker courts who cause businesses to lose tons of money and encourage a class of workers who feel like they don't have to work to succeed, not to mention the need to retrain within a business that such leanings cause.

El Queso thank you for your great posting. Actually I only listed "fixed costs" in my original posting and didn't even touch on the incidentals like employee issues and the potential high cost of multiple lawsuits. What you say about employees here is so true, the deck is stacked against the employer in every which way. That is one of the reasons salaries are so low here, because the risk of frivolous law suits and payouts to employees is so high. It's very hard to prove employee wrongdoing even if you catch an employee stealing on camera, they can say you violated their rights and dignity by recording them and they will win a settlement against you. Unless this crazy system changes, businesses will continue to do the things they do to cheat the system. Emplyoyees know this and many but not all take full advantage of it.