Due to the strong recession, sectors of the real economy shrink by up to a third

2024-02-28 02:08:46

“We support the process, but reality indicates that we must begin to move from the chainsaw and the blender to an economic program.”

The phrase, a synthesis of the moment for the real economy, was launched by a businessman from cordobaknown for its attentive look at the different sectors that involve industry, commerce and services.

It is difficult to find a number to weight the recession that is openly observed in practically all activities, but with more and less, the general criterion is that 2024 depicts a 30% drop in volume and an abrupt decline in profitability.

Mass consumption is the most affected by the loss of purchasing power of salaries. “Old” salaries and new prices. The supermarket is a window to measure this situation, another is the neighborhood businesses, warehouses, butcher shops and greengrocers.

“In the regional supermarket chains the loss of units sold in January is seven percent in the year-on-year comparison. People are doing without perfumery and cleaning, although the contraction is general, with changes in habits already widespread and search for second and third brands,” summarizes Víctor Palpacelli, president of the Córdoba Chamber and national leader of the sector.

A striking aspect is that the number of “counted” tickets has not changed, but the number of units purchased has fallen. That is, the consumer enters the store and may even return more times than before, but he carries few things. “He buys with what he has,” says Palpacelli, “with what he can afford,” explains the leader. Full monkeys and even half-changos are a thing of the past.

Germán Romero, who keeps the statistics for the Córdoba Warehouse Center, places the decrease in the last two months of last year and the first of this year (January and February) at a chilling -42%.

In January alone, warehouses, butcher shops, poultry shops, delicatessens and greengrocers showed a year-on-year drop of -24%, he noted. “The trend continues and even deepens in February,” she warns. One factor is the need to cover the costs of starting classes, which is spread between this month that is about to end and March.

The cost of reforms

The Commercial Federation of Córdoba (Fedecom), with capillarity at the provincial level in its integration, had already measured a drop in sales of 12.8 in January, the largest drop in 20 months.

“The fall hurt us but we were not surprised because we already saw that the drop in inflation came from the cooling of the economy and the recession,” stressed Fausto Brandolín, head of the entity.

In days the data from the February survey will be known, “but we see that it is going to be deeper, March and April will also be very hard,” he said.

But Brandolín clarified that Fedecom, a member of the so-called Group of Six (G6), accompanies the steps taken by Javier Milei’s government in economic matters.

“We are totally in favor of the need to carry out reforms, we have an obsolete structure that is leading more and more activities to informality. “We support changes in labor legislation and we need tax reform,” he noted.

The G6 also includes the Industrial Union of Córdoba, the Chamber of Foreign Commerce, the Stock Exchange, the Chamber of Construction and the Chamber of Commerce.

Even with this understanding of the picture, Brandolín recognizes that this process is critical for merchants. “Many are small structures, they don’t have much support, unfortunately some are going to fall by the wayside,” he said.

Light: 12% of the sale

The thing is that above the recession, higher costs appear. There is a significant increase in electricity rates that hits hard in the range of cooling equipment in areas linked to food. “Any business has three or four commercial refrigerators,” he adds.

With a total monthly turnover of about four million pesos, in his warehouse and delicatessen, Cesar G. verified a three-phase consumption of 928 KWh and paid almost $51,000 with taxes for it. If you maintain the same consumption in March, that bill will go to $174,000, that is, 241% more. Is it a lot or a little? This item alone will absorb 12% of the gross profitability. “The issue is not how much we spend on electricity but how much we sell and it seems to me that this year that is going to be difficult,” said the merchant.

The increase in the electricity bill will take 12% of the gross profitability of a warehouse and delicatessen.

Car dealerships reported a 30% drop in sales in January. The Cronos model, manufactured in Córdoba, for example, showed 33% lower demand during January, according to manufacturer data. The market is heading towards a year where it will lose a third of its demand.

According to the latest projection, of the 410 thousand vehicles sold in 2023 nationwide, 305 thousand are expected for this year. “We know that the macro variables are being adjusted, but what the national government is forgetting is the transition. SMEs suffer and do not have tools to fight day to day,” says Sebastián Parra, owner of Acara Córdoba.

With financing options launched by factories, plus promotional strategies from dealerships, the sector is trying to weather the storm. “The sector is strong because of all the work it has done in these years to be competitive, but in a market that is 30% smaller, maintaining the structures is complex,” describes the businessman.

Parra explained that a client with a used vehicle, available pesos and financing, is encouraged to purchase a zero kilometer. “The customer with saved dollars expects a greater drop in prices, but that is not going to happen, the vehicles are going to continue increasing in pesos,” he understood. The reason? Inflation in production and sales costs. With the “macro” under control, it does not seem that the dollar is going to move too much from its current price.

Paused bricks

Roque Lenti, president of the Chamber of Urban Developers of Córdoba (Ceduc) affirms that in the first two months of the year the sector “had a total paralysis.” “Combined with the fact that there was no demanding market with a very strong increase in costs, we have revealed that all the inputs for construction went to a dollar of 1,300 pesos,” he described.

Development was paralyzed during January and February, they say in the sector.

After the December devaluation, the price per square meter of new construction jumped from US$500 to US$750. Signs of a decline are now appearing, Lenti added. The true cost will be known once salary negotiations have been completed in all areas that make up the construction activity, she added.

Ceduc will evaluate next week how 2024 continues, but from now on the forecasts on the results of the gross harvest, vital for an important client in the real estate sector such as the countryside, conditions the performance of the development sector. If the year starts, it will be in May or June.

In large industry, the difficulties in importing inputs continue to impact daily life, as much as the recession. The old debt, contracted during the previous government, is still in the process of being settled with a “rigged” bond, according to businessmen, such as Bopreal. The new obligations can be paid in four installments, as long as the supplier agrees.

“There is a desert”

The Industrial Union of Córdoba (UIA) will advance in the coming weeks in the sectoral evaluation but, in principle, local food factories (processed and even commodities) show substantial declines in sales volumes. Flour demand, for example, fell 40% year-on-year in January, but has now begun to recover somewhat slowly. In dairy products, the drop in kilograms during January reached 16%, although in February it began to reverse.

Automotive companies, on the other hand, rethought their production programs and auto parts manufacturers are also beginning to review the size of their personnel structures, as recognized by the Chamber of Metallurgical and Components Industries. Meanwhile, agricultural machinery – as is already known – is almost stopped.

Aid. The Province would give credit to promote the sale of agricultural machinery whose activity is almost paralyzed.

At the next start of the agricultural exhibition season, the Province will announce credits through Bancor to sustain some of the demand in that industry that is considered a regional economy.

“We are in a very deep recession, but it is the desert that must be crossed to try to reach fertile land. For economic activity to express its potential, macro regulation, certainty and legal security are required. The private sector is hunkering down waiting for better conditions,” he told THE VOICE that source that asked for something more than a blender and chainsaw.

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