Sergio
The costs of everything is on the increase and anyone who has been here for a while is noticing.
Greed-v-Inflation - a bit of both me thinks.
A friend of mine who runs a number of businesses in Buenos Aires showed me his purchase ledger over a year ago. He was fighting ever increasing price increases from main suppliers and sought my counsel on a number of issues. My analysis of his purchase ledger over a year ago showed :
2005 + 6%
2006 + 14% (projected)
Two week ago we looked at his accounts again
2006 + 15% (actual)
2007 + 4% (to date)
The above demonstrates an average increase of around 8% each year since 2004. 2007 is looking better than 2005. This may not be a sign of inflationary pressures slowing.
It is more likely due to my first visit to his business last year, when he began managing his suppliers based on a tender process that sought proper agreements from his suppliers.
In that agreement we used the ‘Kirchner school of mathematics’ retail price index from the National Statistics Office (annual, not daily, weekly, monthly price increases based on the whims of other badly run businesses) to manage biannual price adjustments up or down.
I might add that his suppliers were both shocked and dismayed that he sought to formalise their arrangements and I now know that even sharp businessmen in Buenos Aires ‘no entiendo’ with Spanish speakers when they want to avoid a difficult situations. My advice, make them squirm if they want your business, with a smile of course. Make them remember you when they want to increase margins. Suppliers must like you because you are charming and non-confrontational, but hate you for your carefully researched buying process that tears apart their operational mysticism and challenges their margin.
His rent, utilities and wage bill had remained stable, but everything else has gone up considerably, the greatest hikes in prices during 2004/5.
Why was I back? He had been steadily increasing his prices against the market and getting greedy until he noticed in his very late accounts that he had made half the profits he had expected. (he lives from the cash register and administrates poorly).
Why?
He saw gringos, he freely admits it, he only looks for gringo in his businesses, because he used to believed that they spent the money!
His turnover had only grown only marginally, he had expected around 20% more turnover, all profit, on last year. He had done his sums! That indicates he had increased many prices by as much as 30% - he denied this for some odd reason – embarrassment?
Although he still saw the same numbers of people in his businesses each night, his profit had dropped marginally from the previous year. He had two problems – his staff had been robbing him blind because he was not there – he was enjoying the economic recovery ? His loyal Argentine clientele were less loyal then years before, they came later and spent less because his establishment was too expensive. His beloved regular gringos had moved on to other bars where the owner made them feel welcome and forced staff to make them feel special too. This is reported fact my friends – not an attack in any way or form.
It's a valuable lesson!
?greed-inflation-stupidity?
