“Border prices”: Uruguay tries to tackle potential avalanche of Argentine products at devalued pesos

RIO DE JANEIRO, BRAZIL – The mayors of Salto, Paysandú and Río Negro departments (provinces) on Monday (6) completed their agreement on a set of measures that they will submit to the national government this week in order to mitigate the expected impact that reopening the borders with Argentina will have on trade in those departments.

Andrés Lima, Nicolás Olivera and Omar Lafluf held a “technical” meeting with trade representatives of the region’s commercial areas and defined 3 proposals to be submitted to Presidency Secretary Álvaro Delgado.

BORDER PRICES FOR THE BASIC FOOD BASKET

First, the government will be asked to implement “border prices” for the basic food basket in these areas, in a similar arrangement to that already in force on the coast with respect to fuel, sold at a 24% discount compared to the rest of the country.

Lima pointed out that the proposal does not specify a concrete figure, to be defined by the government. In any event, the mayor of Salta said that it should represent a “significant discount” so that Uruguayan residents in those departments will find it attractive to buy in local stores.

The 3 mayors will also ask Delgado to implement a VAT discount for purchases made in their departments through electronic means. And, third, another discount in this tax to Uruguayans who choose to travel in the area.

The meeting of the 3 municipal heads with Delgado will take place between Thursday and Friday in the Executive Tower, as Lima, Olivera and Lafluf will be in Montevideo on those days.

The mayors’ concern arose from fear of the impact that the reopening of borders may have on local trade, based on the sharp drop in the real exchange rate with Argentina over the past 3 years, which led to a sharp decline in the purchasing power of Argentines in Uruguay and a significant increase in Uruguayans’ on the other side of the river.

Compared to the 2017-2018 season, the exchange rate fell 25% in 2018-2019 and 36% in 2019-2020. Today, the exchange parity indicates that the purchasing power of the Argentine peso was reduced to less than half (45%) of its 2017-2018 level.

The coastal border departments have been suffering the impact of this exchange rate situation for a long time. Today, it is 3 times cheaper for Uruguayans to buy several items of the consumer basket in Argentina, although the pandemic revitalized local trade due to the closure of bridges. Uruguayans stopped crossing into Argentina to do shopping and sales in the coastal departments grew by an average of 30%.