Argentina’s firms hit by economic slump

– Argentina’s factories, like many economic sectors, are floundering as consumers hit by sky-high inflation and shrinking income buy fewer goods.

Few hold out hope that things will get better any time soon. “People still have savings [for now]”, Gustavo Avalos, who owns an ink factory outside the capital Buenos Aires, told AFP.

But “the outlook is bleak”.

Indeed, those savings may run out soon enough, with annual inflation approaching 290%, and wage-earners losing about a fifth of their purchasing power.

In February, Argentina’s economic activity slumped for a fourth straight month as self-described “anarcho-capitalist” President Javier Milei’s budget-slashing plans took hold.

The figure dropped by 3.2% year-onyear and by 0.2% from January as Milei has sought to deregulate the economy and undo trade protections, also devaluing the peso by up to 50%. Eight sectors recorded an annual decline, including construction, manufacturing, wholesale and retail.

Some small- and medium-sized businesses (SMEs) “can’t pay salaries, others can’t pay rent”, said Avalos, whose factory sales fell by more than two-thirds in December, and by 40% in March.

Energy prices skyrocketed 500% during the same period. “I can hold on for a year, then we’ll see,” added Avalos. “Without consumption we... die bit by bit.”

The SME chamber Came says manufacturing output among its members dropped by nearly 12% year-on-year last month and by 20% for the first quarter.

By far the majority of the country’s SMEs produce exclusively for the domestic market. “SMEs don’t see a floor (to the downward trend) in the short term,” the chamber said in a recent statement. –