According to a study by the International Institute of Finance (IIF), Argentina is one of the five countries in the world with the most pass through, that is, the transfer to prices in the real economy generated by a rise in the exchange rate. It implies that if the dollar rises 1%, the transfer to inflation is 0.45 percentage point.
Sources from an important industrial chamber said that the impact of the rise of the blue is given in the “expectations”, and that this occurs regardless of the size of the companies. “When they think about the replacement cost they look at the blue or the CCL,” added the same source. “You have price lists that have an implicit dollar that you realize is higher than the official one, since they are thinking about the future of the business,” he said.
Along the same lines, from an auto parts company they said that they import the official dollar of $ 100, and they maintain the price list in dollars. When it comes to selling, they update the exchange rate to a dollar of $ 120 or $ 140, depending on the product. They stated that It is about making the “mix” between the official and the blue, and being able to hedge against the expectations of devaluation that generates a gap greater than 100%.
The most favored sectors of the foreign exchange stocks are those that sell dollarized products such as electronics, electrical appliances or construction. A central point is on the importers: many, due to the “replacement cost”, make the products they buy abroad more expensive even though they have access to a cheaper currency.
It is in prices where the greatest impact of the Dolar blue. Despite the government trying to anchor prices, inflation ran above the official dollar. For this reason and for others, inflation still has numbers above 3%.
Another key that the market is looking at is the firepower of the Central Bank to intervene in the exchange market. With the loss of reserves to contain the parallel prices, the general expectation remains around the devaluation despite the change that occurred in the MEP and the CCL this week. The firepower, in the medium term, seems to depend on the government agreeing with the IMF and the increasing volatility and uncertainty of the market is also seen in the blue dollar. Like a wheel, the climate of volatility is reproduced from the largest to the neighborhood merchant.
Beyond these specific attitudes, the UBA researcher Gabriel Montes carried out an econometric exercise with data from the official exchange rate, the parallel, the gap and inflation, from 2004 to 2020. “Prices follow the official exchange rate, The illustrative example being 2015, when the assumption was that it could be devalued and prices were not going to change because they had followed the blue. And what happened is that inflation was devalued and exploded. The theory says that prices are tied to costs and these are affected by the dollar through imports, which are made to the official, “he said.
However, he also assured that there is an “indirect effect”: When the exchange rate gap is very large, reserves are lost, assets in dollars accumulate, financial problems arise and this eventually adjusts the nominal exchange rate, and therefore prices. “An excessively large gap could never be maintained,” added the economist.