Argentina Devaluation Triggers 30% Whirlpool Price Markup
Source: Bloomberg
Other shopkeepers chose not to wait to see the results of last week’s 15 percent depreciation, raising prices as much as 30 percent on appliances, electronics, wine and other goods that aren’t regulated by the government, while supermarkets seemed to abide by food-price accords reached earlier this month. President Cristina Fernandez de Kirchner left for Cuba over the weekend, days before the start of a regional summit, leaving top aides to try to contain price increases as investors raised bets on further declines in the peso.
“The first reaction has been a paralyzation of almost all the markets for goods and services tied to the official exchange rate,” Domingo Cavallo, who as economy minister in 1991 linked the peso to the dollar at one-to-one, said in a telephone interview from Cordoba, Argentina. “No one wants to sell merchandise at a price if they don’t know what the rate will be tomorrow.”
Twelve-month non-deliverable peso forwards plunged 10 percent last week to 12 per dollar, signaling the currency will weaken 33 percent over the next year from the current 8.0014. The extra yield, or spread, investors demand to hold the nation’s dollar-denominated bonds instead of Treasuries jumped 1.02 percentage point to 10.43 percentage points, the highest since September.
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Argentines had already been coping with annual inflation estimated at about 28 percent, the highest in Latin America after Venezuela, and currency controls that restricted access to dollars at the official exchange rate.
Read more: http://www.bloomberg.com/news/2014-01-27/argentina-devaluation-triggers-30-whirlpool-price-markup.html
Another country in Latin America circling the economic drain.