The “Real Estate Radar” report prepared by the consulting firm Fabián Achával indicates that, at the beginning of the year, the activity recovered. In the first quarter of the year, 6,460 deeds were completed in the City of Buenos Aires, which represents a 21.8% increase over the same month last year. “However, the record is on levels similar to those of the country’s worst economic crises”, the study clarifies.
This incipient housing rebound came to a sudden halt during the latest rally in corporate finance dollars (CCL and MEP) and also in the April blue. Which is logical, since it is a market particularly sensitive to exchange rate fluctuations. However, economists and industry analysts point out that no sector is immune from the devaluation leap. Much less for people.
Over the past three weeks, anti-crisis actions have been deepened, such as the advance purchase of production factors and goods, minimum sales with “cover” values.little or no funding e work at “open price”this is that the final cost of the product is only fixed when the blue stabilizes.
What happens with the construction and real estate market is illustrative. “With the exchange rate (the variable that has the most impact together with mortgages), activity today is 27% below the historical average”, sums up Achával. However, he clarifies that, in number of operations, “the peak of the last 4 years had been reached”. Now, this economist and businessman adds, the sector entered a holding scheme due to exchange rate volatility.
“When this happens, applications to real estate agencies are frozen and those who were building or renovating stop doing it because they prefer to keep the dollars,” completes Germán Gómez Picasso, of the Real Estate Report consultancy.
The expert also points out that the decline in prices over the last 4 years (40% measured in dollars) has stopped. “These prices have not been seen for 13 years and the owners are reluctant to go down, because they imagine (we’ll have to see if it’s true) that a bull cycle is coming,” explains Gómez Picasso. Is the price drop over? “I would be very careful with this. What is certain is that as long as the exchange rate uncertainty lasts there will be no recovery in prices”, replies Achával.
The prospects for construction have worsened in parallel with the economy. Economist Claudio Caprarulo, of Analytica, adds that “since payments for public works were encumbered, construction companies shut down. This happens in all departments that carry out work, including decentralized organizations, such as Aysa,” he says.
Specialists agree that most companies, in this context influenced by the lack of dollars and high inflation, apply defensive strategies and “I’m in financial survival mode”. They translate it into two practices that are fashionable today: “accumulating shares and dollarising through the purchase of inputs and machinery and raising prices to increase profit margins,” describes Sebastián Menescaldi, director of Eco Go.
“For companies – concludes Caprarulo – the priority is to keep their treasuries adequate so as not to be decapitalised. This is why the placement of futures, mutual funds and indexed securities has grown a lot in recent years. And this practice has been extended to SMEs, which have used this kind of tools much less”. The logic of this financial engineering is to protect against inflation.The crash of the pesos results in losses of 8% per month”, emphasizes the economist.
The government faces the challenge of going into elections without enough dollars to avoid a recession. “The only source of foreign currency is the countryside,” recalls Menescaldi. Producers liquidated just over $2,000 million in the 4-week soybean dollar reissue, well below what the Economy Ministry expected.
Faced with this, “companies adopt very defensive positions. That is, taking care of the stock, raising prices and selling something, as little as possible, to pay fixed costs”, lists Menescaldi. Fernando Marengo, of Arriazu, also highlights the possibility that some importers have the possibility of buying official dollars (the cheapest on the market), as long as they obtain official permission amid overloaded stocks.
What prevails in the corporate and consumer universe is the expectation of a devaluation. “The struggle, after all, is not to stay in pesos with inflation raging. Those who receive them want to get rid of them quickly by buying goods, anticipating suppliers, buying inputs or goods, which are almost dollars”, concludes Marengo.
Speculative practices flourish in all spheres and sectors, even among the people, in the dealerships it is said that the problem today is supply rather than demand.“Today we have waiting lists of 2 to 5 months, depending on the brand”an industry source told a clarion. He also explains that the prevailing method is to take the reservation at an “open price”, a method which implies that the final price is established on the day of payment. “And this has been done for at least 10 years,” she pointed out.
The practice of fixing the price in dollars is also spreading on the used market, but the biggest obstacle today is the “impact of rising interest rates”, which makes the cost of financing the purchase more onerous. Similar things happen with other durable goods, including electronic devices and household appliances, motorcycles and computer equipment.
In smaller businesses, with 5 to 10 employees,”what has grown the most is informality. As a survival mode, they try to declare less due to rising costs, lower profitability and falling sales”, reveals Salvador Fermenia, director of CAME, the sector body.
Until the storm passes
Working at “open price” is one of the ways that many companies adopt to face a year with an economy complicated by the lack of dollars, the rise in interest rates (which makes credit more expensive) and high inflation.
The open price, wholesale manufacturers and suppliers explain, “implies that a supplier delivers the goods to you in confidence (fabrics, plastics, sheets, materials, among other things) and you only know how much it costs at the time of payment or when the kind of price stabilizes. change”.
“The production gears are clogged”, ironically says Natacha Izquierdo, chief economist of the consulting firm Abeceb. High inflation conspires against business logic and common sense. Almost all companies, connoisseurs agree, try to take care of and accumulate goods, limit sales to the bare minimum (just enough to cover costs), raise prices to increase margins, advance payments and purchases.
“Companies are trying to hedge against a possible devaluation. One way is to import, buy inputs or capital goods, but today it is very difficult to do this due to stocks. The scenario is very complicated and the very short-term vision prevails, and the month-by-month budget reviews“, he adds.
The latest exchange rate rush has compounded the complications of businesses, which receive frequently updated price lists. When the blue dollar was about to pass the $500 barrier, the typical behaviors of crises multiplied:suspension of delivery of goods, preventive surveys to cover and purchases with debit notesas the sale at open price is known.
Pesos burn for both companies and ordinary people. Analysts underline that, despite the crisis and the drop in the purchasing power of incomes, the gastronomic establishments work to full rooms for most of the week. The same goes for the entertainment industry: Coldplay’s latest visit, for example, broke all records: the British band filled 10 River stadiums, a number never seen before.
The reality is different in other areas, especially after the latest exchange rate run. “Almost all manufacturing sectors are affected, including textiles, metallurgy and optics. But that comes from before the exchange rate flip. Many suppliers were already ramping up and some have doubled their dollar prices”, complains Marcelo Fernández, manufacturer of closures and director of the CGERA, the chamber that brings together small industrialists.
“There are no price lists and suppliers only deliver at open price because they don’t know what dollar their costs will correspond to,” says Norberto Fermani, head of the chamber of optical industries. It is an article that depends on imported inputs, such as acetates, alpacas, different types of plastics and lenses.
The same situation is repeated in most companies. The exchange crisis has produced a preventive brake on the activity of distributors, wholesalers, small producers and businesses. “Whoever has the goods does not know what the replacement price is. Suppliers either discount it or deliver it at an open price, for which an estimate is used. The price lists are updated every day because there are no reference prices”, explains Ricardo Diab, from CAME.
“I sell wholesale without prices (get it and we’ll see later), but at the level of detail I try to highlight as little as possible,” slips a clothing manufacturer that has its own stores. The entrepreneur lists the enormous difficulties he is experiencing in an industry that constantly looks at prices in dollars.
“Those who have merchandise don’t want to let it go, because it’s very difficult to get buttons, zippers, shirt linings (which I pay in dollars), and even wrapping paper,” he points out.
Source: Clarin
