Argentina's Macrinflation.
By Sebastián Premici. Página/12. 28 November 2015.
President-elect Mauricio Macri, elected last Sunday on the right-wing "Let's Change" coalition, is still two weeks from taking office. But already there were widespread increases in wholesale food prices and of inputs from different sectors of the economy. Shortages are, moreover, beginning to develop as well because wholesalers and suppliers are now reluctant to ship goods to retailers and manufacturers on fears of a sharp devaluation once Macri takes office on December 10.
Macri's promise to eliminate exchange restrictions and export taxes on raw materials has generated an escalation of prices on key products from across the economy. A 50-kilo (110 lb.) bag of wholesale wheat flour for bakeries began rising the day after the runoff, going from 150 pesos ($15) to 220 pesos by Thursday - and wholesalers have already announced their intention to raise it next week to 240 pesos ($24), an increase of up to 70% from just a month ago.
Farmers and slaughterhouses are not only speculating on the devaluation itself; but also on the elimination of export taxes and export quantity restrictions, which of course creates a strong incentive to limit local consumption. "The other day I heard a PRO Congressman (Macri's party) say that if people couldn't afford bread, they should look in another bakery," Jorge Alonso, owner of the Elca Bakery, said. "They refer to this as a 'shock of confidence'. Is that all they have to say!? As a businessman I need concrete answers."
According to Alberto Williams of the Chamber of Butcher Shops, wholesale meat prices have also jumped recently: various cuts of beef by 30% this week alone; and chicken, by 25%. Feed corn prices, a key staple to ranchers (most of whom, ironically, were enthusiastic Macri supporters), are also rising sharply, which only adds to the cost of meat in a country known for having the highest per capita beef consumption in the world.
Argentina's growing vegetarian population isn't faring much better: fruit and vegetable prices have also come under pressure by speculators, especially in large supermarkets. A kilo (2.2 lb.) bag of potatoes, retail, rose Thursday to 9.90 pesos ($1.10) - a 300% markup. Squash, another popular Argentine staple, was retailing for 15 pesos a kilo (70 ¢ a pound) last week; it's now averaging 22.90 pesos - a 50% jump. Tomatoes have also skyrocketed 200% this past week.
There are alternative to supermarkets, however, even if less convenient. "I'm afraid of the oligopoly supermarkets and hypermarkets control," said Fabián Zeta of the Horticulture Chamber at the Central Market in suburban Tapiales, which supplies grocery stores across the Buenos Aires metro area and retails to the public as well. "They operate on high profit margins to begin with, and are now marking up prices all they can 'just in case'. The greengrocers who work with us at the Central Market aren't raising their prices."
Recent price run-ups are by no means limited to groceries. Dow Chemical, the largest supplier of plastic to Argentina's toy industry, stopped selling a week and a half ago. "They claim they have no material; but are actually waiting for the devaluation promised by Macri," said Matías Furio of the Toy Industry Chamber. Steelmakers, for their part, are shipping product normally; but Juan Carlos Lascurain of the ADIMRA metal product industry chamber confirmed that they're hoarding raw materials and are forcing their customers to accept being billed after December 10 (at a much higher price).
Manufacturers of industrial inputs for finished products, meanwhile, have begun to reference their prices at 16 pesos to the dollar (rather than the current rate of 9.70). "They have generally increased prices and slowed deliveries. Those who do fill orders have reduced collection times from the customary 45 days to 7," said Fernando Lascia of the APyME small manufacturers chamber. Lascia explained that most industrial sectors are rushing to adapt to the new circumstances created by Macri's promised devaluation. "Polypropylene has already increased 26%. Perfume and stainless steel makers are still filling orders normally; but billing buyers in January and at a 16-peso price reference. Stainless steel makers, in fact, are attaching a rider to their sales stipulating that if the dollar rises above 16 pesos a surcharge may apply."
Argentina's supply chain is highly concentrated in a number of monopolies or oligopolies over each sector of the economy, and this allows them to more or less control prices. Many of the executives at these monopolies are also regulars at the right-wing Idea Colloquium events, and are close to Mauricio Macri and his economic team. It is therefore plausible that many of these recent price increases have been made with the consent of the president-elect.
The equation is simple: that the inflationary impact of Macri's promised devaluation be felt before he takes office on December 10.
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The mere forecast of a devaluation is already causing wholesale prices to jump further and faster than any anyone, even the staunchest Kirchnerists, had feared.
How long before Macrinflation, become a Macrisis?
= new reply since forum marked as read
The backdrop is just as you described it. Not so much on the retail side, since big box stores are somewhat less prevalent in Argentina than here in the U.S. - but on the production and wholesale side, where each sector is mostly controlled by a handful of U.S./European/Argentine partnerships.
The price crisis itself, though, was triggered by the election last Sunday of right-wing candidate Mauricio Macri to the presidency. Macri's biggest backers are mostly large landowners (who make most of their income exporting grains and oilseeds abroad) and the financial sector (which is speculating against the peso, and handles most tax evasion in Argentina). A sharp, sudden devaluation of the peso from 9.70 to the dollar, to 16 to the dollar - as Macri has promised his backers - would be a real real windfall for these two lobbies.
But, as the tales of woe in the article show, it would come at everyone else's expense.
It's the story of Argentina - at least whenever fascists like Macri take power. 
