Buenos Aires Weather | Argentina’s monetary mess sucks sales from Uruguayan malls

Uruguay’s biggest mall operator is seeing store sales hit by a currency crisis in neighboring Argentina that is fueling a rush of tourists across the border to take advantage of cheap dining and entertainment.

Earlier this year, Carlos Lecueder, head of his family business Estudio Luis E. Lecueder, was optimistic that the nine malls he manages would finally recover from the pandemic to post sales above 2019.

That was until tens of thousands of middle-class Uruguayans chose to spend part of their disposable income in Argentina for a long weekend in August and spring break in September. Another long weekend in October saw nearly 74,000 Uruguayans leave the country, mostly at border crossings with Argentina.

Lecueder now expects full-year store sales to be around 5% lower than in 2019, with estimated year-over-year revenue growth among young teens about half of its original forecast due to Argentina.

“Argentina affects the whole retail sector in Uruguay because in some cases the prices are cheaper and in other cases, where it is not a question of being cheaper, people spend money there and not here,” Lecueder said in an interview at his office at the World Trade Center Complex Montevideo.

Argentina is in the midst of a deep economic crisis as deficits, money printing, capital controls and near 80% inflation undermine the currency. The peso officially trades at 151 to the US dollar on the government-run foreign exchange market, compared to around 287 to the dollar at the black market rate.

Huge price distortions caused by Argentina’s dysfunctional economic policies mean that tourists buying pesos on the black market with foreign currency will pay the equivalent of US$10 for a steak and side dishes at Parrilla Peña near the famous theater Teatro Colón in Buenos Aires. A similar plate costs around US$17 at the family restaurant La Pasiva in Montevideo, the capital of Uruguay. Tickets for two to see an opera at the Teatro Colón will set you back around $10 for the cheap seats, compared to $22 for a play at the Teatro Solis in Montevideo.

Small businesses in towns and villages clustered along the Uruguay River that separates the two countries are also suffering lost sales to smuggling and day buyers buying commodities in Argentina. A periodic survey of 60 commodities by the Salto branch of the Catholic University of Uruguay found that it was 63% cheaper to purchase these commodities in nearby Concordia. According to the newspaper El País, one of the few items Argentines try to buy in Uruguay are car tires due to shortages at home.

Lecueder, whose father opened Uruguay’s first mall in 1985, expects Argentine consumption to decline slowly next year.

These headwinds do not prevent Lecueder from looking for new malls in the interior. His cabinet also plans to inaugurate this year a residential tower on the outskirts of Montevideo for nearly 30 million dollars.

Analysts polled last month by the Central Bank of Uruguay raised their growth outlook by a quarter of a percentage point to 5%. The economy is expected to slow to 3% next year when construction of a $3.47 billion pulp mill and an $839 million railway comes to an end.

by Ken Parks, Bloomberg

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