At Boedo Automotive in
Buenos Aires, rows of
shiny new cars are for
sale. But days after the
overwhelming primary election
thumping for President Mauricio Macri sent the peso into a
tailspin, not a single customer is
walking through the door.
Carlos Avoguadra, the shop’s
owner, sat behind his desk, ill at
“We woke up on Monday with
serious problems, with a skyrocketing exchange rate,” said Avoguadra, a 70-year-old who has
been selling cars for more than
half his life. “I’ve been through
a lot of difficult times, but never
After two sovereign defaults
this century, small business owners in Argentina are well versed in navigating times of crisis.
But even they were left floundering by the latest rout this week.
The peso’s historic plunge on
Monday translated into overnight losses for some store owners. Others puzzled how much
to pay for their basic ingredients.
With presidential elections still
10 weeks away, all were left wondering how much worse it can
get. Many small business owners already battered by longrunning economic struggles are
again feeling bewildered and
Avoguadra, who has been
working in the automotive sector for some 40 years, said he was
about to finalise a sale that totaled one million pesos, or the
equivalent of about US$20,000
last week. When the peso slumped following the primaries,
however, the wholesale dealership he buys from wanted to raise
the cost of the car, and the deal
Avoguadra now contemplates
shuttering his business completely amid months of declining
“The idea is maybe to close the
shop,” he said melancholically.
“Or dedicate myself to something else.”
‘OUT OF CONTROL’
“Argentina is a see-saw that
comes and goes,” said Rubén
Haleblian, a vendor in a Buenos
Aires electronics store.
A plunging peso means goods
denominated in dollars soar in
price. With the exchange rate in
free fall, Haleblian was instructed by the store’s owner to price
all products, which are imported, at 62 pesos per dollar. The
result was that everything from
an SD memory card to a Samsung phone got 40 percent more
expensive – and clients walked
out the store as soon as he told
them the price.
“I’m clawing my way to the
end of the month,” he said.
Or take Pablo Ricatti: the company he runs makes buns for
hamburgers and hot dogs in
Buenos Aires province, but the
currency meltdown means he
now has no way of knowing
what is a fair price for flour. After
markets closed, he learned that
his supplier had jacked up his
price 59 percent from Friday.
“I’m not going to accept that
price, it’s way more than the peso depreciation,” said Ricatti,
who faces a challenge of his own
in deciding what to charge his
clients. “We have enough
supplies to sell for the next two
weeks, and we can hold our prices for the time being,” he said.
“But if the peso remains out of
control, we’re raising prices.”
Alejandro Nigro, owner of a
pasta sales business, said that he
is waiting for his wholesale flour
provider to let him know about
“With what just happened, at
some point I’ll hear about the
price increase. Flour is always
bought according to its international price in dollars,” he said.
“When things go crazy, you
have to hold on, wait, keep prices
as reasonable as you can, reduce
[profit] margins,” Nigro said.
“And when you can’t withstand
it anymore, you have to raise the
price. Unfortunately, that’s the
way it is.”
While the result took pollsters
and investors by surprise, it reflected popular discontent over
Argentina’s direction amid recession, austerity and inflation
running at more than 50 percent.
The upshot is a disconnect
between the electorate’s preference for a potentially protectionist and interventionist government to help dig them out of
economic hardship, and investors’ desire for a continuation of
Mauricio Macri’s market-friendly policies to regain the trust of
international markets. That divergence risks more economic
pain for the foreseeable future.
“The currency’s sudden move
is not only damaging to the economy today, but perhaps 2020
won’t be the recovery we had
expected,” said Jimena Blanco,
research director at Verisk Maplecroft in Buenos Aires. “Investment decisions will be on hold
until the second half of next
On the ground, business owners in the downtown area of
Microcentro, where boarded-up
shops dot the landscape, have
resigned themselves to more losses. Rafael Fagenblat, 47, owns
a leather goods store downtown
and has a workshop in Boedo
where he manufactures handbags, belts and jackets. Because leather prices track the dollar,
he’s lost about 25 percent on
sales he made at the end of last
week, as payments were set to
be received through a local mechanism of deferred cheques.
On Monday, he kept his peso
prices at Friday’s level, even
though he knows replenishing
stock will be way more expensive. That’s because sales are
weak anyway, and there’s no
point in hiking prices. Customers are scarce with the economy as it is, and the end of government subsidies mean higher utility prices further adding
to his costs.
“I was doing better under Cristina [Fernández de Kirchner],”
he said. “Now, my fixed costs
keep rising, but sales don’t keep
up. Macri didn’t understand our
Some business owners, like
Julian Díaz, who runs three restaurants in Buenos Aires, are
conflicted. He’s concerned for
customers who can barely make
ends meet, but at the same time
has had to put plans on hold to
open two new restaurants due to
the weak economy.
While he’s glad to see Alberto
Fernández ahead, he said he hopes the sell-off will stop. “I feel
long-term optimism but shortterm concern,” he said.