Already from the year 2021, but particularly in 2022 and shockingly in 2023 the relative prices with Argentina had an alteration like few times seen in the bilateral economic relationship between both countries of the Silver. In such a way that every weekend thousands of Uruguayans They crossed the pond to shop and walk, and not only for Buenos Aires but for several other places in Argentina. Many Uruguayans with medium and lower-middle purchasing power also had the opportunity to get to know -perhaps for the first time- the neighboring country, with its undoubted attractions.
The situation impacted the Uruguayan macroeconomics significantly, particularly in the tourism sector, although not only. In such a way that – for the first time – the tourist balance with Argentina (balance of income and expenses from tourism), was negative for Uruguay. This affected Uruguayan tourist services, which continued to be felt in this last season with the notable absence of the so-called middle class Argentina, once a great driving force of Esteña activity.
It should also be noted that the relative cheapening of Argentina was exacerbated by the sharp increase in income in dollars in Uruguayan homes, due to our country’s own virtues but also due to the anti-inflationary policy that has been developed in Uruguay, which has associatedly generated a exchange delay which is estimated to be between 10 and 15%. In fact, Uruguayans not only increased tourist spending in Argentina, but also in many other places in the world.
Causes
In addition to what is indicated for Uruguay, One of the main reasons for the wide price difference between both countries is the application of the stocks in the Argentine Republic. This allowed through the informal dollar or cash with settlement (accessible through cards), Uruguayans will have a much higher exchange rate than the official one in Argentina, which was kept artificially low for a long time to contain internal prices.
For tourists it was playing and getting paid: they arrived with a strong dollar to a country with artificially low prices. The other component of the chaos is the unusual subsidy to energy rates in Argentina, with the costs of transport that did not exceed 25 or 30% of the similar service costs in Uruguay.
The new government in Argentina is seeking – among other things – to make prices honest, in a framework of high political uncertainty, with an economic plan that – beyond the particularities and the evolution of the variables week by week – is going to be obviously recessive. . And one of the measures was to increase the price of the official dollar.
This boosted internal prices in Argentina, generating a peak in inflation which brought the annual rate to 250%. Meanwhile, the parallel dollar also rose in January, but in February it has remained stable, even falling, which raised prices in dollars in Argentina for Uruguayan tourists and visitors. Although the inflation data for February is not yet available, projecting 15% monthly, the increase in prices in dollars in February would be 30% (graph).
With this increase in dollar prices in Argentina it does not mean that a favorable situation has been reached. Yes – perhaps – less bad, and it is to be expected that the unprecedented exchange difference What we had in 2022 and 2023 will not be repeated again. In other words, we will surely continue to see a price relationship favorable to Argentina in the coming months, but not of the same magnitude as last year.
That said, it should be noted that -obviously- a high degree of uncertainty economic and political. For now, it seems difficult for the government to apply a new devaluation step, although this cannot be completely ruled out. It is estimated that towards the months of March-April, with the arrival of the harvest of soy and other crops, the availability of dollars increases and the parallel dollar can be stabilized. The most optimistic point to an upcoming exchange rate unification, although the gap is still at 25%. While the recession it stops inflation the hard way, which must be seen if it is politically and socially sustainable.
Perspectives
In 2023, the Uruguayan economy had a poor performance, for its own reasons (exchange delay and currency problems). competitiveness) and foreign, like the drought and the aforementioned Argentine crisis. This significantly reduced the growth of GDP in Uruguay in 2023. Although it is a difficult account to estimate, between the decrease in the arrival of Argentine tourists and the increase in spending by Uruguayans in the neighboring country, it could well exceed half a point of GDP.
One of the regions most impacted by this situation was -obviously- the western coast of the Uruguay. According to the latest survey of the National Chamber of Commerce and Services, While this sector had an average drop of 2% in 2023, on the coast the drop was 7.1%.
In recent weeks, merchants and businessmen on the coast have stated that it is no longer so attractive to cross Concordia, Gualeguaychú or Colón. One of the important factors is that the price difference in fuels. In the case of super gasoline, coastal residents have a discount on Imesi, which makes the price 40% lower than in the rest of the territory.
In turn, the price of naphtha In Argentina it rose sharply due to the devaluation and the withdrawal of subsidies. So that today, the price of super gasoline on the coast (with a discount) is around 46 pesos, while in Argentina it is worth the equivalent of 34 Uruguayan pesos, (taking the parallel dollar at 1060 Argentine pesos). It is still an appreciable difference, but not the unprecedented difference from last year.
If this relative improvement in prices compared to Argentina is consolidated, a less adverse 2024 can be expected from the other side of the river. But to return to the great seasons full of Argentines in the East, everything indicates that we will have to wait years.
Source: Ambito
