This Tuesday the Government implemented a series of measures that, Although the new president, Javier Milei, had said that he was going to adjust to the public sector and not to the people, they are going to have a full impact on the pockets of Argentines.. The hardest is, without a doubt, the removal of subsidies for energy and transportation rates, which has an immediate effect. But, the 54% devaluation of the peso will also be felt very strongly, which implies a 118% rise in the official dollar.
The package included an increase in the wholesale dollar to $800. This is an exchange rate jump of 118% of the wholesale dollar, from the $366.45 that was quoted this Tuesday. That will be transferred to the price of different productssuch as fuel and food, as well as consumption in dollars with cards (tourism, shopping abroad and streaming).
Thus, as pointed out by the EcoGo economist Rocío Bisang“the measures are going to have a direct effect on purchasing power in several ways:
- he increase in the importing dollar It will fully impact imported products or products with components purchased abroad for the local industry,
- he increase in the export dollar It will affect the price of meat via an increase in inputs (since feedlots use corn as feed for livestock),
- the removal of subsidies, although it remains to be seen how it will be implemented and from when it would come into effect, it will raise rates.
Food increases: how far will they go
“All this in a context where the liberalization of price agreements is already putting pressure on the inflation in Decemberwith strong increases in food, medicine and fuel in the first week of the month,” says the economist. The issue is how much these items will rise in the Argentine basket.
“Yes ok It is still unclear how large the subsidy reduction will be.“As far as food and other products are concerned, it is likely that prices will double in most cases,” estimates economist Pablo Ferrari. They will rise. between 50% and 100%.
It must be taken into account that also Food and all products in general have the cost of transportation incorporated into their value chain, Therefore, an increase in fuel prices will increase and will be part of the elements that form part of that aforementioned increase.
Increase in gasoline and fuels and transportation
And, on the other hand, at the pumps, gasoline already seems to be starting to rise. “Shell is now rising 37%“, say sources from the sector this Wednesday. Thus, the liter of super gasoline In the Metropolitan Area of Buenos Aires (AMBA), the $550, Premium is around $685 and diesel costs $590.
However, In some provinces, the increase is greater. “For example, in Misiones, the Premium has already reached $750,” says a source close to the owners of service stations. And another source points out that Shell in Santa Fe has already increased prices and is charging $653 for super gasoline, V-Power is $784, diesel is $706, and V-Power diesel is $807.
Representatives of that sector warn that “The objective of the oil companies is to bring the value of the official liter to around US$1but it seems that the Government wants to start negotiations so that they do it in three tranches between now and March.” Thus, it is expected that the price will rise in line with the percentage of devaluation of the peso going forward.
Also, let us remember that “This increase in fuel will also be transferred to the value of the ticket“he points out Lechter. This will be another impact on transportation costs, added to the reduction of subsidies, so it will be felt in the daily cost of those who travel to work by public means.
With regard to the rise of public transport prices As a reaction to the removal of subsidies, it is not yet known how it will be implemented or the technical value that the ticket will have, but could have a fairly considerable increase, “around 600%” Glustein points out. Of course, it must be clarified that some provinces pay more per case than in the AMBA, therefore, it is an average calculation, but we will have to see case by case.
Prices of streaming services and platforms
“The increase in Netflix and other streaming services and cultural consumption platforms (such as Spotify, YouTube Premium, Disney Plus, Amazon Prime and Paramount Plus, among others) is around 32% on average,” Glustein calculates. And he explains that this calculation is estimated because we must take into account when it was invoiced and the devaluation of the weight. But, on the other hand, it still remains to be defined if the “Netflix dollar“will be the same as the card or there will be a change in the taxes on it.
Prior to the announcements, the dollar card included 100% of earnings, 25% of personal assets, which was added to the 30% of the PAIS tax. This implied an exchange rate with 155% taxes on the value of the official dollar. It now weighs 65% taxes on the official exchange rate, which rose to $800. Consequently, the Netflix basic plan would go from $2,499 to $3,973.
Energy rates: how much will they rise
The energy ratesas a consequence of the removal of subsidies They could have an increase, meanwhile, of 140%. Glustein estimates this, but he clarifies that it will be necessary to see whether or not a tax reduction is applied to the invoices, as had been announced, and if there is an impact on some implicit costs in transportation. And, on the other hand, what is defined with municipal taxes. But he warns that this will surely be defined later.
Undoubtedly, as pointed out by economist Hernán Letcher, director of CEPAwhat was announced by the Government “is a traditional orthodox fit which has effects due to three combined elements: devaluation, which will generate a substantial increase in prices, the deregulation of some markets and the removal of subsidies.” Thus, without a doubt, the hit in the pocket It will be very strong.
Source: Ambito
