Business alarm: record debt, stress on the stock of inputs and double financial impact

The food companies they got in front of a claim that hides an endless list of reproaches to the Governmentin the middle of a recession forecast and loss of profitability for the sector. So The Argentine and American factories denounced italmost in chorus. The filtering of a letter of claims from the american red circle not only did it have no negative impact on the caring Amcham, but it emboldened the powerful Copal led by the also president of the Argentine Industrial Union (UIA), Daniel Funes de Rioja. That move would be start of a chain effectif the dollars do not appear for the production.

Business sources confided to PROFILE that the cost of financing that the factories assume before their buyers generates costs greater than 20%which causes a “total loss of profitability”. But this scenario is aggravated by the accumulation of debt with foreign suppliersdue to the non-payment of imports that had been approved in the SIRA system and that had to be settled, but which were frozen due to the lack of dollars in the Central Bank (BCRA) reserves.

Economic activity fell 4.4% year-on-year in June, according to INDEC

“For almost a month there have been problems to pay for imports that had an expiration date, because the SIRAs do not come out. And, in recent weeks, when we wanted to pay, the system logs started to disappear. But the worst thing is that there is no certainty when it will be possible to pay”, complained the owner of a company, which has raw materials without import substitution in the country.

The current background is not very encouraging. According to a consultancy report ecolatin“the commercial debt for imports of goods is the highest in Argentine history, even measured in constant currency”. “To the first quarter of 2023 the stock climbed to USD 34,300 million, due to the accelerated increase experienced since 2022 of USD 12,200 million, which represented 36% of the current total stock. In addition, we estimate that during the second quarter, new net debt accumulated for a total of USD 2.7 billion”, sentenced the study.

Stress in the stock of imported inputs

At the UIA the alarm lit up with him count of imported inputs that some factories havewho began to feel the stress of the lack of dollars to be able to pay international suppliers. “Imported raw materials are running out. And, to sustain the sales chain, if it is sold at 60 days, the financial cost is greater than 20%, that is, all the profit is eaten. But the problem is the rise in costs, because they are influenced by both the formal dollar, as well as the financial ones, and even the informal one, which generates price uncertainty, because the replacement cost is not known.”

Entrepreneurs found that in the world they ran out of “trust”. “If you find raw material in the market, They ask you to pay Mrs. Ticket. Foreign providers they don’t want to give us anymoreBecause they are afraid of getting hooked. Today Argentina became a bad word, in terms of payment”, a member of the small table of the UIA lamented before this medium. In specific events, companies chose to use physical dollars to cover emergencies, but the investment numbers in relation to profitability, both measured in dollars, began to “worry” manufacturers.

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According to other sources from the factory, non-compliance with the SIRAs payment scheme engaged in the system generated that “the Government no longer believes anything”. “If the payment commitments owed begin to be honored, I think we could only maintain ourselves as a few months ago. With this and the recession that is coming, we would barely make it to the end of the year. But in between we have the demand of International Monetary Fund of reduce importswhich will also have an impact on the drop in activity,” said another businessman who saw access to the Single Free Exchange Market (MULC) restricted to zero.

The food, also on the warpath

A press release from the Chamber of Food Industries (Copal) strained the relationship with the government to the maximum. Happens that came out to denounce that the anti-inflation pact announced by the Price Agreement Negotiation Unit with some companies in the sector was imposed and not discussed. This harsh position became known after the leak of a claim letter that Chamber of Commerce of the United States in Argentina (Amcham) had sent to the Government before the infeasibility of its associated companies being able to comply with that agreement. That letter became public and from the private sector they feared that an official was responsible for its dissemination.

“The price control dynamics imposed in the last week by the Secretary of Domestic Trade of the Nation, it is not possible or sustainable if there is no room for understanding and intersectoral dialogue,” said Copal, who also denounced that the signatory companies, which make up the manufacturing center, “They have had to comply to continue supplying”but clarified that “in no way works on firm foundations, even less on the principles of a voluntary agreement.”

The IMF disbursement gives provisional oxygen to the reserves of the Central Bank

With a reproach in between, Copal left the possible continuity of the program uncertain Fair Prices: “Pretending that the food and beverage industry can absorb the impact of the recent devaluation is denying the framework of cost and price imbalances that affects this sector, as well as the rest of the value chain. Only in the last 3 weeks, the main production costs have increased on average between 15% and 30%, compared to the 5% price increase proposed. Parities are also projected to be above 140%. Obviously, the distorting inflationary policy is once again generating pressure on the food and beverage industry, which with great effort has been the only actor in the value chain to absorb the impact of this scourge, which is far from being resolved and has an impact to the whole of society”.


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