1/16/2023 - Economy and Finance

Uruguay, a very distant country

By Horacio Gustavo Ammaturo

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Imagen de portada

Within the Eastern Republic of Uruguay is the city of Punta del This, a resort chosen by thousands of Argentinos for their summer vacation, mainly those with the highest incomes in our country.

The distance that exists between its beaches and the City of Buenos Aires is 684 km if it travels by roads or less than 390 if the combination of a ship is used to cross the river of the Silver and follow the Uruguayan routes.

During the last decades, the changing circumstances of the economy have “around and away” the Argentines from the eastern waters with the shuttle of the purchasing power of our weight.

The difference in coins

According to the historical figures published by the Central Bank of Uruguay, on 30 December 2015 the relationship of the Uruguayan weight with the US currency was 29,948 pesos per dollar, while in our country the same conversion with the Argentine peso was 12,90, that is, that Each “our” weight would be worth more than double the weight of “they”.

Currently, only with verifying the quotes of both currencies and the relationship between them explains at least the poor performance that the monetary authority had, the Central Bank of the Republic of Argentina, in defense of the purchasing power of our currency, and consequently of all the assets that are called in this species.

The Uruguayan weight is offered to 39.90 units per dollar, while the consumptions that Argentines perform in Uruguay are settled at a exchange rate of 328.56 pesos per dollar.

In just 8 years the relationship between the Argentinean and Uruguayan weights has varied from 2,32 in favor of the site up to 8.24 against.

Without a doubt, the BCRA team has lost the championship by defending its currency, the main goal of any monetary authority. All the players of this team, in addition to those who summoned them, from one party or another, lost by afano the world would change.

The lack of defence of the local currency is fundamentally repercussions on investments, as Who would change a reliable currency to get as income another that is not known how much it will be worth?, at the entrance of people, for the lack of investment in smaller and worse jobs and mainly in lower purchasing power of all Argentines.

This reality drives away many Argentines, or at least, make them think where to go on vacation. Of course, from the point of view of the national economy, it is preferable that the money for tourism in Argentina, however, the loss of purchasing power does not constitute a market reserve, but rather a restriction on the possibilities of choosing.

It is well known that when competition is limited, consumers end up paying expensive, services that become more and more quality.

However, the distance not only occurs in relation to the denomination of currency prices, but in the relative prices between the goods and services offered in the economy.

Online sales reach all prices of things sold online, which allows you to easily perform similar product comparisons in one Argentine supermarket with another Uruguay.

Here's a brief listing.

The values are quite different. The products in Uruguay are always more expensive than in Argentina, even some like the milk that, in both cases, is of the same brand and elaborated in our country.

Why then these price disparities?

Punta del Este This is a city of temporary occupancy, i.e. that its edilicia and commercial infrastructure spend much of the under-utilised year, forcing to load on season prices costs and margins that will be absorbed throughout the rest of the year.

This could explain a part of the differences, however, the same occurs with Mar del Plata, Pinamar or any other holiday place in Argentina; where prices are quite similar to those of the city of Buenos Aires and smaller to those of Punta del Este. In general, major brands seek to maintain homogeneous prices across the country, so they work with suggested price lists that, by the trade profile on which this consultation was based, should be fulfilled.

In fact, in the same sample list is the answer.

The product that the lowest price difference presents, the fresh salmon, is imported into both markets; that is, it does not occur, either in Argentina or in Uruguay.

Imports are made to an official dollar, 179 pesos per unit, as a result of the price in official dollars of the salmon pound amounts to usd 36.31.

In Uruguay, there are no multiple exchange rates, the price per kilo is of usd 25.64.

Argentina's exchange artilugios allow salmon importers to sell 41% more expensive in dollars their products than in Uruguay, of course, this conditioned to access the blessed type of official change.

Distinct is the case of milk. Argentine exporters receive official dollars for their overseas sales, i.e. $ 180 approximately, however, the price in gondola of a liter of Argentine milk is worth in Uruguay 5.80 official dollars, while in Argentina, the value of the CCL dollar costs less than 1 dollar (considering this exchange rate because it is to what one can access with weights in our square).

The most striking case is presented in the meat cuts.

Using as an example the steak eye, we observe that the price difference between both markets is huge. Of course, Argentina's export restrictions reached prices and, on the other hand, Uruguay's exporting livestock projection put opportunities for breeders to put their products at international prices abroad.

In summary:

  1. Imported products in both squares have lower “parent” price differences. The point is that we employ the type of change that corresponds, official for Argentine imports, are more expensive in our country than in Uruguay.
  2. The products produced in Argentina are much more expensive abroad than in the country. This is because local costs in terms of export dollar are very high.
  3. The products whose international offer is restricted, for certain meat cuts, are those which present the highest price disparity.
  4. Products that, in Argentina, combine local and international costs, i.e. involving imported goods or services, are in the midst of both extremes, i.e., take advantage of the benefits of the type of local change and suffer the punishment of the exchange rate delay in local costs.

In addition to geographical distances, these examples show conceptual distances regarding state intervention in price fixing and consequently in private activity.

In general, market regulations produce distortions which, apparently, could favor consumers; in the present analysis, we can perceive the enormous contradiction that put multiple exchange rates, rewarding those who matter at official price and punishing those who produce locally.

So Uruguay is expensive?

No, Uruguay is clear.

Perhaps this is the longest distance between the two countries.

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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