Argentina’s Falabella Index Suggests Macri Reforms Are Workingby
Domestic-to-regional price differential narrows on some goods
‘Normalization of economy’ begins to benefit consumers
The high prices of consumer goods are one of the most visible manifestations of the distorted economic policies that have prevailed in Argentina for decades. But one economist thinks he’s spotted early signs that the reforms implemented by President Mauricio Macri to open up the economy may be be starting to work.
Federico Munoz has been following prices at Falabella, a Chilean-based retail giant with outlets across Latin America. While Munoz found that the price of 11 goods in Argentina’s Falabella ranging from electronic gadgets to clothes and cosmetics were 81 percent higher than the average price of the same items in Chile, Colombia and Peru, that’s a 27 percentage-point drop from when he measured the prices last August.
The closing of the gap in prices may reflect lower borrowing costs after Macri restored Argentina’s access to global capital markets, lower inflation and more fluid imports, Munoz said. Additionally, some of the narrowing may also be attributed to the nominal appreciation of the currencies in Chile, Colombia and Peru, he said.
“We’re starting to see the fruition of the normalization of the economy under Macri’s administration,” said Munoz, the director of Buenos Aires-based Federico Munoz & Asociados.
Argentina has a long way to go and is still an economy dominated by trade barriers. The government is experimenting with the computer assembly sector by lifting a 35 percent tariff on import of laptops. Only if that’s successful and doesn’t generate large job losses will Macri seek to replicate that in other sectors.