Argentina allowed the peso to devalue by 17% on January 23, 2014, from $6.8 to over $8.0. Immediately, many merchants started raising their prices. The government decried these tactics as unwarranted and pushed to keep prices down. But, aside from the prices of staple foods which were frozen in advance of this, prices on most other goods have risen. Imported items have been especially affected as many foreign suppliers increased prices.
Here’s a personal example – We bought two imported Avent baby products from MercadoLibre on January 19, 2014:
- Avent Bottle Sterilizer – $899
- Avent Bottle Warmer – $599
At the dollar blue price at the time ($11.60), that worked out to U$S 77.50 and U$S 51.64 respectively. (For comparison, the bottle sterilizer from Amazon is $52.72 and the bottle warmer is U$S 29.51. So, we paid a bit of a premium, but not too bad for Argentina.)
Had we waited a few days longer to buy those items, we would have paid:
That’s a 55.84% and 21.04% increase in the peso cost! And, as the gap between the official rate and the blue rate has also been reduced (it’s only at $12.00), the dollar prices have also increased significantly – U$S 116.75 and U$S 60.42. That’s a 50.65% and 8.78% increase and now puts them at more than double Amazon’s prices!
So, even though the peso only devalued by 17%, we’re seeing price increases of 21% and 56%. That’s crazy. In addition, even holding dollars is not enough to maintain your purchasing power as the dollar blue rate has not kept up.
Here’s one of my favorite examples of the price increases from a Reddit user: the price of the Samsung Galaxy S4 at Garbarino went from $7,999 pesos to $11,518 pesos – in 6 hours! (on January 23, 2014)
Consumer purchasing power has been dramatically reduced and salaries have not been increased. Inflation is on track to hit more than 30% this year and at the moment, there’s no end in sight as the government’s foreign currency reserves continue to dwindle.