As the Prices Rise, So Does Argentine Shoppers’ Ire

Maria Soledad Lopez stormed out of a pharmacy in this city’s middle-class Caballito shopping district Saturday and fumed about an overnight increase of 20% in the price of contraceptives.

Like many Argentines this weekend, Lopez had received an unpleasant glimpse of the economy to come in a country bracing for an imminent currency devaluation of between 30% and 50%. Merchants have already raised prices on a variety of goods, from drugs and cigars to chickens and appliances.

“I won’t buy it if they’re going to rob me,” the 25-year-old Buenos Aires law student said as she strode down the shopping district’s Rivadavia Street. “The devaluation isn’t even here yet. It makes me furious. They are raising their umbrellas before the rain has come.”

Other Argentines reacted similarly to widespread price hikes of as much as 30%--a special shock to a country that, despite myriad other economic problems, at least has seen minimal inflation during the last decade. The cost of living actually declined 2% in 2001 while the country endured its fourth year of recession.

“We are very afraid of inflation. We lived through that in the 1980s, and it was a disaster,” importer Mariana Hernandez said as she shopped with her husband and infant in the upscale Patio Bullrich mall in the Recoleta section of town.

Eduardo Duhalde, who on Wednesday became Argentina’s fifth president in two weeks, said Friday that a devaluation of the currency, the peso, is a “given” and that the country will abandon an economic model that has left it “bankrupt and exhausted.” In the short term, however, devaluation will probably lead to high inflation, rising unemployment and a deeper recession.

Late Saturday, the Chamber of Deputies, the lower house of Congress, approved Duhalde’s sweeping economic reform package. It includes a devaluation, budget cuts and a special measure to convert dollar-denominated obligations of up to $100,000 to pesos as a means of softening the devaluation blow.

The legislation also aims to reform the banking system, control prices and protect industry and jobs. Government officials have indicated that they expect a rate of about 1.4 pesos to the dollar for finance and business transactions, with individuals probably paying more to buy currency on the open market.

Package Goes to Senate

The bill is to be submitted today to the Senate, where approval is virtually assured. Duhalde’s Peronist party dominates both houses of Congress.

For consumers prowling the stores and malls Saturday, devaluation was already a fact of life.

On Friday, the giant Fravega appliance chain had raised prices 12% to 15% on its washing machines, televisions and other items, a store manager said. Supermarkets had re-tagged imported meats, bananas and olive oil to reflect the peso’s anticipated drop in value.

Electronics merchant Alicia Nadeshula has raised prices of her Asian-produced video games, telephones and hand-held computers by 10% to 15%.

“Almost everything you see here is imported. What else can we do?” said Nadeshula, whose store is in the Caballito district in the heart of the capital. “We sacrifice for 10 years, and in one day the politicians destroy everything. I hope to leave this country. I can’t tolerate it anymore.”

The price increases have darkened the already abysmal mood of Argentines.

Retailers, including the pharmacy that enraged Lopez, say they are only passing along higher costs that wholesalers and manufacturers have slapped on them.

“The great majority of drugs we sell are imported or are made from imported substances, which now cost more,” said Carlos Caponi, owner of the Subeldia Pharmacy on Rivadavia Street.

Caponi denied that his drugstore had increased prices, saying that it had simply discontinued its policy of offering 20% discounts on most products.

“It’s the same game that supermarkets play,” he said.

Shops Absorbing Costs

Not all merchants are raising prices--yet. Some say the economy is so bad that they must absorb the higher wholesale costs or lose what little business they have.

“In this recession, people aren’t buying now, not only because they don’t have money but because they are afraid,” said Ana Bircz, owner of Games and Toys in the Caballito shopping district. She said her Christmas sales were down by half from the previous year’s.

Uncertainty about what the government will do makes the current business climate “worse than the hyperinflation” of the 1980s, said Silvana Essels, a saleswoman at the Chocolate women’s apparel shop in the Recoleta zone. “You don’t know how it’s going to end.”

“Our economy has been open to the world for 10 years, and now they may close the frontiers, talking about protectionism and devaluation. I don’t like those two words,” importer Hernandez said.

Duhalde used the word “protectionism” in a Friday speech but said he meant it as a new approach in encouraging Argentines to buy more domestic goods.

Much of Argentine business has slowed to a crawl since Dec. 3, when the government imposed a $250 weekly limit on savings deposit withdrawals. That has caused a steep drop in the level of cash in circulation, which has especially hurt retail businesses dealing in nonessential goods, such as newsstands, coffee shops and sporting goods stores. They can’t afford to raise prices.

“Here it is summer vacation, and we can’t even sell a bathing suit,” said Jose Sanchez, a salesman at the Liceo Deporte sporting goods shop, adding that business there had come to a halt since Dec. 3. “The things we could sell--imported Puma or Adidas athletic shoes--we can’t get because wholesalers are keeping them off the market, waiting to see how the devaluation is defined.”

The Coffee Store in the Recoleta zone has lost half its business in the last three months. Sales dived after the bank withdrawal limit was declared.

Asked to predict how a devaluation would affect her business, waitress Julieta Sepich said: “In this country, nothing would surprise me. We are cured of shock.”

‘They are raising their umbrellas before the rain has come.’