It’s getting harder to buy in Argentina

(CNN) — A liter bottle of olive oil costs 6.73 euros, half a kilo of sandwich bread costs 2.50 euros, a jar of jam costs 2.76 euros. This could be a price list from a supermarket in Madrid, but it is not. According to a price comparison conducted by CNN en Español, the prices match those of businesses in Buenos Aires and show parity with that European city in the cost of the products that make up the food baskets of millions of Argentines.

Retail prices are similar, but salaries in Argentina are one ninth of the average. According to the latest data from the National Institute of Statistics and Census (INDEC), the average salary of the earning population in Argentina in the third quarter of 2023 was 193,281 pesos, which is equivalent to 149 euros taking into account the euro rate. .In the parallel market (in the second week of January, approximately 1,292 pesos per euro), and 205 if the official exchange rate is taken as a reference (which reached 941 pesos per dollar for sale at the time of writing this report). .

On the other hand, the latest figures available for average income in Spain are almost 10 times higher than an Argentinian’s salary. According to the 2022 Active Population Survey (EPA) published by the National Institute of Statistics (INE), the average salary was 2,128.4 gross euros per month (which is equivalent to about 2.8 million pesos according to parallel euro quotations).

If the city of Buenos Aires is taken as a reference, the average salary is slightly higher than the national one: according to the latest official data, as of the third quarter of 2023, it is 262,142 pesos (202 euros).

In the case of Spain, this number was 1,134 gross euros per month by the beginning of 2024, according to labor agreements establishing the minimum wage. In Argentina, according to the collective agreement, this salary limit is only 156,000 pesos per month (about 120 euros).

“We must understand that as a result of the strong exchange rules that we have in Argentina today, which means that the population cannot buy dollars, is that you have a dollar gap between what we might today call a commercial and a financial dollar. Are,” explains Juan Manuel Telechea, economist and director of the Institute of Labor and Economy of the German Abdalah Foundation, a study center that declares among its objectives the strengthening of union organizations. “This generates a very significant distortion between local prices. And then there is the comparison with the issue of salaries in Argentina. Then one sees that this paradox occurs that, when one compares some prices, some Products come here “similar to” those in Spain or any European country. However, Argentina today has the lowest minimum wage in the region, in dollars, about $250 measured at the official exchange rate. “If we had used the financial exchange rate it would have been even lower.”

According to Telechea, “Argentina already has more than 10 years of stagnation and a very poor level of economic activity, which means that even salaries are not high enough to have good purchasing power.”

Prices go down too low, wages go down too low

Salaries in Argentina are not updated at the rate of inflation. Only between the last four months of 2023 – September to December – the consumer price index increased by almost 73%, compared to the last basic wage update that was agreed in September (ie, sequential increases for the months of September, October with) November and December) was 32%.

But, with inflation at 20.6% during January and still waiting for a new meeting of the Wage Council to update the floor in workers’ perceptions, the gap between income and expenditure in the food basket is becoming wider.

According to Tellecchia, “It’s a vicious circle that’s made up of these three key components: prices, wages and exchange rates and the only way to solve it is to eliminate the root problem, which is to reduce inflation. For that you have to The need is, on the one hand, “you have dollars, you have financing, you have to reduce the fiscal deficit.” The economist says that “there is also a component of excessive circulation of pesos and in the middle you have salaries. You have to take stock so that they can obviously keep up with inflation without any problem, because, on the one hand, if they do not support you, you have a social limitation which is a very serious problem. And if you try to fix it too quickly, you’ll likely make the situation worse as inflation continues to rise. It’s been more than ten years since various administrations “haven’t found a way out of this and we’ll see what happens now.”

When you compare some basic products found in supermarkets you can see how similar their prices are to those found in a store in Barcelona. As the CNN en Español team was able to record in terms of product and quantity parity, a package of noodles in Argentina costs 1,130 pesos (0.87 euros) while in Spain it costs 0.83 euros. In Buenos Aires a package of rice costs 2,995 pesos (2.31 euros) while in Barcelona it costs 1.30 euros. A jar of jam costs 3,575 pesos (2.76 euros), while in Spain it costs 1.65 euros, always taking into account the price of the currency in the parallel exchange market.

According to Telecchia, this phenomenon should not be extended over time due to the delay in exchange rates: “This month has been quite behind, but it has to be corrected in a moment because in the long term it is very difficult to keep the dollar in time so much. Can stay below.

However, he is optimistic about what might happen now with the difference between workers’ real wages and the prices of products: “I believe the main doubt is going to be in wages. Let’s see he is in the first joint negotiations they are managing to get back some of the lost purchasing power, so I would tell you that the ideal outcome would be for all three to come together and we see that at the end of the year we have There is a similar level of prices and salaries compared to Spain and the rest of Europe”, the economist concluded.