How new stocks on imports affect prices

Two postcards are enough to glimpse the impact of new stocks on imports. Under the violent excitement of the announcement, a motorcycle dealership owner claims he got it this Thursday the new price list, with increases between 20 and 25%. A hammer. At the same time, a high-end clothing manufacturer suspended wholesaling and justified them as follows: “What do I do with the pesos if I cannot replace imported fabrics?

To stop the “import party”, the Central Bank has stopped delivering dollars to pay for purchases of goods overseas. With resolution A7532 it established new restrictions on access to foreign currency reserves. The uncertainty caused by the measurements generated a “Party of observations”especially in items heavily dependent on imports.

“The measure is not surprising and has been covered in our projections. Nor its effects: there will be less activity and more inflation”Summarizes Andrés Borenstein, of the Econviews consulting firm. The economist underlines a third element, that of credibility. “If this was the solution to the problem, well, it isn’t,” he says. In this sense, he hints that the new trap affects multiple industries such as automobiles, electronics, footwear, auto parts and bicycles. “not much food”, Explains Borenstein.

The new stocks have had a paralyzing effect in many industries. Almost like an exchange holiday. Many wholesalers and distributors have communicated to their customers that “until further notice, sales are canceled due to exchange rate instability“Or that” at the moment we are not delivering orders due to restrictions on payments abroad “. Typical behaviors of uncertain economic cycles.

Feelings in business vary, but what prevailed last week was confusion. “The level of imports has been high, activity has not abated and the exchange rate gap (around 90%) encourages overseas purchases,” says an industry source. Overall, they believe the picture will be clearer in the coming days. “It depends on how much the Central Bank loosens regulations,” she added.

Soledad Pérez Duhalde, of Abeceb, argues that the new trap is to avoid a leap in value and that it has to do with “Strangulation of reserves and delay in exchange rates”. The import block also has its limitations. “Cars cannot be replaced, for example, and at some point you have to loosen up, which implies its risks. This is trial and error”, Evaluates Borenstein.

The government’s currency policy, which is reflected in the gap between the official and financial exchange rates, offers numerous incentives to dollarize assets. “Nobody holds pesos because of inflation”, Explains Claudio Caprarulo, of the consulting firm Analytica. He adds that according to his investigations of his imports were above activity level, which reveals that “stocks have been piling up for a long time“.

They can be goods, machines, parts, spare parts or inputs to be produced. The trap, however, is not harmless, especially at the price level. “Forcing companies to borrow to import is not free, and neither is the uncertainty about the cost of replacement,” she stressed. And all this translates into prices, mainly in those products made with imported components.

Many believe that shortages are likely to occur. “The strengthening of inventories reduces the supply of goods and this implies a drop in the level of activity and consumption of households”, summarizes Sebastián Menescaldi, of the consultancy company Eco Go. The economist does the math: if the availability is reduced of products and demand is maintained, prices rise. “Today a cell phone in Argentina costs 30% more in dollars than abroad“, exemplified.

The Central has informed that this new trap is transitory and that from September the situation will return to normal. Most economists distrust the promise. “It is very likely that the measure will be extended and that it may also deepen,” interprets Pérez Duhalde. “It is very difficult. The clamps generally do not come loose. On the contrary, they harden”Says Caprarulo.

In the real economy, in commercial chains, manufacturers and importers go through the situation with the elements in view. In this still confused landscape on the latest import restrictions, companies adopt defensive behaviors. In the electronics industry concentrated in Tierra del Fuego, they acknowledge that they have already had problems entering the country with components for the production of televisions, cell phones and air conditioners.

Companies in the sector fear that the measure will complicate market supply plans in a context of good demand. “The obligation to obtain funding for 180 days increases the costs of the operation”, they complain on the island. Still with the uncertain landscape on the evolution of obstacles, industrialists believe it the plants will not stop due to lack of input.

“The increased controls on imports will have a direct impact on activity, inflation and the gap. Importers or companies using imported inputs today are unaware of their replacement costs and that is why they are opting for both curb their production and sales, or by setting higher prices as a form of hedging in the face of uncertainty “, says Lorena Giorgio, economist at the consultancy firm Equilibra.

The increase in the price of products is an unintended effect of the new trap, but it is inevitable. “This changes supply and demand. Fewer imports, lower GDP and lower supply of goods and services. This drives up prices and diminishes the purchasing power of income. And this is why consumption is decreasing ”, describes Menescaldi. On the possibility of making actions more flexible, most say not under these conditions.

Football boots and tires, hard to find figures

The shock of the A7352 Central Bank communication is still being felt. The entity led by Miguel Ángel Pesce has substantially changed the conditions for the payment of imports with dollars from reserves. “The measure goes against what the economy needs: it will cause more inflation and business will suffer, ”reads a report prepared exclusively for Clarione from the consulting company Abeceb.

There is more: the study indicates that new restrictions are expected: “A strengthening of stocks, probably to tourism, and an extension of the measures (initially foreseen until the end of September) are foreseen until the end of the year”. The diagnosis is shared, with nuances, by most economists.

A surprising fact is that the government tries to discourage imports in order to accumulate reserves, which carries the risk of cooling the economy. The reason is simple: “89% of imports supply the local production activity. And imported consumer goods represent only 11% of the total and are already repressed ”, underlines the Abeceb study.

The latter, products imported for final consumption, is a headache for many economic sectors with a shortage of specific key elements. A senior executive at a sportswear chain noted that “a little bit of everything is missing and prices are rising significantly.” For example, he said that “shoes in the last year accumulate an average increase of 80%“.

Sports shoes are in short supply, but “football boots are almost gone”. It is one of the key items for sales in this sector, taking into account that there are less than 5 months to go until the World Cup in Qatar. “Many producers have already told us this T-shirts from other countries will not be imported“, graphic. This is not the case with the Argentine jacket, which Adidas produces and distributes in the country.

In the current context, with restrictions on imports, other items related to sports considered to be niche are also missing. “Clothing and footwear for tennis, rugby or volleyball, for example, they are very difficult to obtain ”, confided a owner of another commercial chain. There is no shortage just for obstacles: “People want to translate their pesos into purchases of goods and sporting goods compete with cell phones,” he explained as an example.

The difficulties expand to other items, including auto parts. Raúl Amil, head of the Association of Automobile Component Manufacturers (AFAC), stressed that all companies in the sector are forced to import in order to produce. “Whether it is inputs or components, in all cases it is necessary to import elements for production,” said the businessman, who in turn owns the auto parts company Ventalum in Buenos Aires.

As of this Monday, and as a result of stock strengthening, messages have started circulating among wholesalers and their customers. “Yesterday the Central Bank established new guidelines for the import of goods up to 30-9-22”, begins one of them. In it, he informs that they will start billing on the basis of a $ 150 dollar (this is $ 20 more than the official one) and that “we may be forced to limit the amounts to be delivered”.

It was one of many statements reflecting the concern and uncertainty of manufacturers and suppliers in industries such as electronics, apparel, footwear, auto parts, motorcycles and bicycles, among many others, due to the strengthening of the import trap.

Other messages have circulated that “sales are being canceled until further notice due to exchange rate instability” or that “we are currently not delivering orders due to overseas payment restrictions.”

Many traders and importers have opened a waiting period until clarifying the extent of the new stocks prepared by the Central, whose goal is to accumulate reserves as agreed with the IMF.