The “Province 25”: Consumer tourism from neighboring countries increases sales and tax collection in neighboring cities

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In crises there is always someone who ends up winning. This is what is happening with businesses located in border cities, where the rising dollar attracts thousands of visitors from neighboring countries. Looking for take advantage of the prices of goods and services, which are much cheaper than they pay in their places of origin.

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Thus, businesses in the border areas receive visitors from Chile, Uruguay, Brazil and Paraguay and experience a sales boom that their competitors desire. A recent report from consulting firm Scentia shows that supermarket and self-service sales fell 4.5% in the Metropolitan Area in April, but they grew by 2.6% within the country, essentially due to the greater demand from foreigners.

According to a report by IERAL, “the wave of buyers from neighboring countries crossing the border has come to places like Mendoza, which is located several hours away of the nearest Chilean cities. The ‘shopping rounds’ are not aimed at goods of the so-called ‘sustainable consumption’, but to consumer products, achieve the formation of a kind of ‘Province 25’ due to the scale of the operations involved,” he said in a report.

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Precisely as a result of this situation, the Central Bank (BCRA) has taken the measure that foreign tourists can pay with electronic wallets at an exchange rate whose reference is the financial dollar.

The most requested products, according to IERAL, are non-perishable foods, cleaning and personal hygiene products, among others. They are not one-time purchases, but more and more frequent. Regard “Save Tourism”since in many cases the visitors – with dollars that are exchanged in the market forallele- they get those items at a third of the price they should pay in their home countries.

“As regards the exchange rate gap, to find values ​​similar to those of the blue dollar ($490) one has to go back to very strong crisis periods in the past, from the 1980s or mid-1970s. For reference, during the ‘original’ stock years, between 2012 and 2015, the price on the parallel market fluctuated around $300 at today’s prices,” according to the Mediterranean Foundation.

The phenomenon is deepened by other converging factors. First, the program “Fair prices” implies cheaper products, if they are found in the gondola. Secondly, some consumable items are imported, to the official dollar, which is artificially low. Third, fuels have regulated prices, well below prices in other countries.

Between January-March 2021 and the same period in 2023, fuel sales increased by an average of 9% for the country, but they did 35% in Formosa, 29% in Misiones, 24% in Corrientes and 22% in Entre Ríos.

there was also increased collection of gross income tax in the border provinces. The variation in real terms of the collection of Gross Income in a province like Buenos Aires was only 3%, between January-April 2021 and the same period of 2023, while this figure was a good 28% in Jujuy, on 12 % in Formosa, 10% in Chaco and 9% in Salta and Mendoza,” IERAL stressed.

A Nielsen report on consumer product sales (adjusted for inflation) found a 4.6% increase for the country average for 2022, but with a much higher rate in neighboring municipalities, the case of Clorinda with 33%; Iguazu 120%; 16% for Posadas and 27% for Gualeguaychú.

Will these massive purchases continue? the study is finally called into question. And he concludes: “No delinquency is foreseen and, in a context of uncertainty, generated by the elections and the shortage of dollars in the Central Bank, the exchange rate gap is likely to continue to be significant, this being the incentive that attracts neighboring buyers.

Perhaps, next year, according to Ieral, “these massive purchases could decrease in the medium term, hand in hand with a smaller exchange rate gap”.

Source: Clarin

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