Tough times for Argentine factories as consumers penny-pinch

Tough times for Argentine factories as consumers penny-pinch

Gustavo Avalos, CEO of an ink factory near Buenos Aires, says 'the outlook is bleak' for economic production in Argentina, as the country struggles with soaring inflation and shrinking income
Gustavo Avalos, CEO of an ink factory near Buenos Aires, says 'the outlook is bleak' for economic production in Argentina, as the country struggles with soaring inflation and shrinking income. Photo: LUIS ROBAYO / AFP
Source: AFP

PAY ATTENTION: Celebrate Youth Month with Briefly News! Nominate a young entrepreneur under 35 with an inspiring story to be our 7th 'Young Money Maker'. Let's shine a light on their achievements together! Nominate now

Argentina's factories, like many economic sectors, are floundering as consumers hit by sky-high inflation and shrinking income buy fewer goods.

Few hold out hope that things will get better any time soon.

"People still have savings" for now, Gustavo Avalos, who owns an ink factory outside Buenos Aires, told AFP. But "the outlook is bleak."

Indeed those savings may run out soon enough, with annual inflation approaching 290 percent and wage-earners losing about a fifth of their purchasing power.

In February, Argentina's economic activity slumped for a fourth straight month as self-described "anarcho-capitalist" President Javier Milei's budget-slashing plans took hold.

The figure dropped by 3.2 percent year-on-year and by 0.2 percent from January as Milei has sought to deregulate the economy and undo trade protections, also devaluing the peso by 50 percent.

Read also

Meta sees profits soar in first quarter

PAY ATTENTION: Watch the hottest celebrity stories on our YouTube channel 'Briefly TV'. Subscribe now!

Eight sectors recorded an annual decline, including construction, manufacturing, wholesale and retail.

In February, Argentina's economic activity slumped for a four straight month
In February, Argentina's economic activity slumped for a four straight month. Photo: LUIS ROBAYO / AFP
Source: AFP

Some small- and medium-sized businesses (SMEs) "can't pay salaries, others can't pay rent," said Avalos, whose factory sales fell by more than two-thirds in December and by 40 percent in March.

Energy prices skyrocketed 500 percent during the same period.

"I can hold on for a year, then we'll see," added Avalos. "Without consumption we... die bit by bit."

Cutting back on cupcakes

The SME chamber CAME says manufacturing output among its members dropped by nearly 12 percent year-on-year last month and by 20 percent for the first quarter.

By far the majority of the country's SME's produce exclusively for the domestic market.

"SMEs don't see a floor (to the downward trend) in the short term," the CAME said in a recent statement.

Read also

Markets bounce as MidEast fears ease, US inflation in view

Big business doesn't, either.

Steel company Acindar said in March it was stopping production for a month at four plants to compensate for a 40-percent drop in sales of the commodity.

The Dulcypas cookie factory is working at half its capacity, having stopped two production lines
The Dulcypas cookie factory is working at half its capacity, having stopped two production lines. Photo: LUIS ROBAYO / AFP
Source: AFP

In Caseros, elsewhere in Buenos Aires province, cookie factory Dulcypas is working at half capacity, having stopped two production lines.

The founder's grandson and current owner Fernando Martinez said he has had to fire staff, reduce salaries and limit output.

"The biscuits sell very well because they are cheap," he told AFP. "The cupcakes? More expensive, not so much."

The International Monetary Fund has forecast Argentina's economy will contract 2.8 percent this year before rebounding with growth of about 5.0 percent in 2025.

Calls for regulation

Paper mill owner Daniel Rosato, who is also president of the Industrial Union of Berazategui -- a grouping of factory owners on the outskirts of the capital -- said some 600 SMEs that exported manufactured goods had closed in Argentina since last year.

Read also

IMF calls on EU to deepen single market integration to boost growth

"The other side of that is a rise in informal work, which represents less income for the state," he told AFP.

For Alejandro Bartolini, who owns oil pump producer Metalcrom, fair competition is the only way out.

"We don't believe in closed markets, but we also don't believe that indiscriminate opening can lead to success," he said.

"Labor and capital will be lost if we do not regulate the external market."

Some 600 SMEs that exported manufactured goods have closed in Argentina since 2023
Some 600 SMEs that exported manufactured goods have closed in Argentina since 2023. Photo: LUIS ROBAYO / AFP
Source: AFP

On Monday, Milei hailed his country's first quarterly budget surplus since 2008 as "a feat of historic significance on a global scale."

Libertarian economist Milei won elections last November vowing to reduce the deficit to zero.

To that end, he has instituted an austerity program that has seen the government slash subsidies for transport, fuel and energy even as poverty levels have reached 60 percent, according to a recent study,

Thousands of public servants have lost their jobs.

Read also

Taiwan chip giant TSMC's profits surge on AI demand

"Don't expect a way out through public spending," Milei warned.

Source: AFP

Authors:
AFP avatar

AFP AFP text, photo, graphic, audio or video material shall not be published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium. AFP news material may not be stored in whole or in part in a computer or otherwise except for personal and non-commercial use. AFP will not be held liable for any delays, inaccuracies, errors or omissions in any AFP news material or in transmission or delivery of all or any part thereof or for any damages whatsoever. As a newswire service, AFP does not obtain releases from subjects, individuals, groups or entities contained in its photographs, videos, graphics or quoted in its texts. Further, no clearance is obtained from the owners of any trademarks or copyrighted materials whose marks and materials are included in AFP material. Therefore you will be solely responsible for obtaining any and all necessary releases from whatever individuals and/or entities necessary for any uses of AFP material.