On a recent cross-border shopping trip, four friends from Fray Bentos, Uruguay, visited the nearby Argentine city of Gualeguaychú, where they could afford to live lavishly and snap up eye-popping bargains.
Thanks to a huge disparity in the two South American countries’ currencies, Stella Ferreira and a friend treated themselves to a low-cost pampering at a hair salon, while two other friends looked for stylish but inexpensive pants.
With its economy faltering, Argentina’s peso has plunged against the U.S. dollar and its annual inflation is 115.6%, one of the highest rates in the world. In contrast, Uruguay’s economy is more stable, with low inflation and a stronger currency.
The result has been a huge flow of shoppers from Uruguay throwing an economic lifeline to struggling Argentine stores and restaurants in cities like Gualeguaychú, Concordia and Colón.
But there’s a downside for Uruguayan businesses along the border: In the provinces of Salto, Paysandú, Río Negro and Soriano, municipal authorities say 170 stores closed in the first five months of this year. Businesses still open complain they hardly have any customers.
With about $100 apiece, the four friends planned to get their hair done, buy clothing, gasoline and other goods and eat out in Gualeguaychú, in Entre Rios province, which for more than a year has been a shopping mecca for Uruguayans looking for deals. Back in Uruguay, Ferreira, 29, said that same $100 would “get your hair done and not much else.”
Uruguayan businesses just across the border are finding it hard to compete with such bargains.
“Everything is very quiet,” said Susana Guerrero, owner of a shop that sells cheese and sweets in Salto. “I lost an employee, and I did not replace him.”
Guerrero went to Gualeguaychú on an exploratory trip and now sees why Uruguayans are going there to shop. The price differences between the two countries can be staggering. A liter of sunflower oil that costs $5 in Uruguay is 50 cents in Argentina. A jar of skin-care cream that costs $10 in Uruguay can be had for a dollar across the border. And a liter of gasoline in Uruguay is close to $2. In the Argentine province of Entre Rios it is 52 cents.
“Yes, it’s cheap and we can’t fight it,” Guerrero said.
Fray Bentos storefronts, meanwhile, are covered with signs offering specials in a bid to attract customers.
“This year, sales have dropped by 40% or more,” said Alicia Nedor, who works in a pharmacy. She said the sector is seeing its worst crisis in decades.
Nedor, 70, said several small businesses have closed in Fray Bentos and the big ones have laid off staff.
Cross-border bargain hunters also hail from neighboring Chile, Paraguay and Brazil. In Uruguay, industry representatives have called the phenomenon a “border pandemic” and even the country’s president has acknowledged the problem.
“The prices of goods in Argentina are extremely cheap, and naturally its neighbors consume where it is cheaper for them,” President Luis Lacalle Pou said in early May. “This creates an imbalance. We have applied measures, but it is not enough.”
The government then introduced additional measures, including tax breaks for Uruguayan businesses and a 5-kilogram limit on what Uruguayans returning from Argentina can bring with them. But business leaders say the controls are not applied and are demanding a “zero-kilo” border policy, something that Lacalle Pou has rejected.
Lacalle Pou said the government will seek to make sure contraband doesn’t cross the border but added that “it is impossible to solve the exchange rate problem with Argentina.”
The Catholic University of Uruguay has developed a Border Price Indicator for the Argentine city of Concordia, about 200 kilometers (125 miles) north of Gualeguaychú. According to its latest data from May, it is 59% cheaper to buy a basket of food, drinks, clothing and household products in Concordia than in the Uruguayan town of Salto.
The price gap reflects the devaluation of the Argentine peso, which has lost 47% of its value against the U.S. dollar at the official rate so far this year.
Argentina has struggled with inflation multiple times over the last century. Its current crisis started in 2018 but has worsened in the past year and a half, said María Castiglioni, director of C&T Asesores Económicos. The inflation problem arose from several factors, she said, including government overspending and problems in monetary policy.
The country doesn’t have funds to solve its overspending because it has lost access to the international debt market after multiple defaults on its loans. The loss of access means other countries do not feel confident lending money to Argentina.
As this debt crisis arose, the government turned to the country’s central bank for assistance. In an effort to sustain the economy, the central bank hasn’t stopped printing pesos, which has led to the devaluing of the peso. The increase in the flow of pesos also led to ballooning inflation that Argentinians experience every day.
On holidays and weekends, long lines of cars wait to cross the General San Martín International Bridge that crosses the Uruguay River and joins Argentina’s Gualeguaychú with Fray Bentos in Uruguay.
Between June 30 and July 4, which included the first days of the southern winter vacation for Uruguayans, more than 100,000 people left Uruguay for Argentina, most of them through the three border crossings in Entre Ríos. The majority were Uruguayans, although there were other nationalities. Uruguay has a population of about 3.4 million people.
Claudio Gatt, who owns the hair salon Ferreira and her friends went to, said that the flow of Uruguayans into Argentina has been like oxygen.
“If they were not here, sales would drop by a minimum of 50%,” he said.
Signs reading “dollars accepted” hang in store windows in Gualeguaychú and its main streets are filled with visitors from different parts of Uruguay. Half of the purchases of medicines and cleaning supplies in the city are by Uruguayans, according to a local business chamber.
For Alejandro Ramos, a 49-year-old Argentine teacher who lives in Gualeguaychú, the problem is not the Uruguayans, because “they come and buy legally.”
The problem “is us,” he said. “We first have to realize that we are an economic disaster in this country.”
Source : VOA News