Argentines turn to durable goods as hedge against inflation

By Veronica Dalto

Buenos Aires, Jul 28 (EFE).- With inflation running at 64 percent, Argentines are scrambling to turn their pesos into dollars and amass savings in the form of durable goods such as automobiles, appliances, construction materials and tech products.

“This a problem typical of the country for a long time, particular to the high inflation of Argentina,” Camilo Tiscornia, director of consultants C&T Asesores Economicos, told Efe.

Since 1945, he said, Argentina has diverged from the rest of the world, “provoking a series of behaviors that are not present in countries that didn’t have that high inflation.”

“To the degree that this level of uncertainty continues, people will continue to buy durable goods to protect themselves against inflation, especially when they don’t have access to financial information or financial instruments to insulate themselves,” Argentine Chamber of Commerce chief economist Matias Wilson said.

Tiscornia pointed out that most people lack the necessary sophistication to play the stock market.

Besides finished goods, people are using their pesos to stockpile construction materials and for travel and leisure, Wilson told Efe.

The supply side of the equation, however, is governed by different logic, as the advice from economists to producers and wholesalers is to hang on to merchandise and dollars in expectation of another devaluation of the peso.

Many Argentine farmers, especially the largest operators, are leaving the harvest in the fields for now in expectation of a more favorable exchange rate in the near future.

Equilibra, another consultancy, estimates that the agricultural sector is holding some $10.3 billion worth of inventory off the market.

The Central Bank, which is badly in need of foreign currency reserves, launched this week a special preferential exchange rate for agricultural exporters in hopes of getting them to start shipping and to liquidate some $2.5 billion of their dollar hoard.

Though the center-left government recently announced austerity measures to satisfy an agreement with the International Monetary Fund (IMF) on rescheduling $40 billion in loans taken out by the preceding right-wing administration, Argentina is struggling to meet the IMF targets.

“We’re beginning to see that the fiscal deficit will not decline,” Tiscornia said.

“The expectation is growing that that fiscal deficit will cause more inflation because the government doesn’t have many alternatives to finance it. It will have to resort to printing money and that implies more inflation,” the economist said. EFE

vd/dr