"Province 25", the economic phenomenon of shopping tourism in Argentina

24-05-23

The massive purchases by neighbours from neighbouring countries taking advantage of the exchange rate gap is generating a phenomenon called "Province 25" by some consumer specialists, due to the magnitude of the operations involved.

The "buying tours" are not aimed at goods of the so-called "durable consumption", but at mass consumption products, and generate the formation of a kind of "Province 25" due to the magnitude of the operations involved, according to a report by the Fundación Mediterránea.

The wave of buyers from neighbouring countries crossing the border has recently reached places such as Mendoza, which is several hours' drive from the nearest Chilean cities.

The most popular products are non-perishable foodstuffs, cleaning products and personal hygiene products, among others.

These are not one-off purchases, but increasingly frequent: it is "savings tourism" since, in many cases, visitors - with dollars that are exchanged on the parallel market at a level close to 500 pesos - get these items at a third of the price they would have to pay in their countries of origin, which is of particular concern to Chile and Uruguay.

The Fundación Mediterránea report points out that "to find values similar to those of the blue dollar (490 pesos) you have to go back to periods of very severe crises in the past, to the 1980s or the mid-1970s".

"As a reference, during the years of the 'original' cepo, between 2012 and 2015, the price in the parallel market fluctuated around 300 pesos, at today's prices," he explains.

And it warns that the phenomenon is deepened by other converging factors. In the first place, he mentions the "Fair Prices" programme, which implies cheaper products, if they can be found on the shelves.

Also the fact that some mass consumption products are imported, at the official dollar, which is artificially low.

And that fuels have regulated prices, well below prices in other countries: "Between January-March 2021 and the same period in 2023, fuel sales increased by 9% in the country average, but increased by 35% in Formosa, 29% in Misiones, 24% in Corrientes and 22% in Entre Ríos".

There has also been an increase in the collection of Gross Income Tax in border provinces.

"The variation in real terms of Gross Income collection in a province like Buenos Aires was only 3%, between January-April 2021 and the same period in 2023, while that figure was no less than 28% in Jujuy, 12% in Formosa, 10% in Chaco and 9% in Salta and Mendoza," he said.

A report by the consulting firm Nielsen on sales of mass consumption products (net of inflation) noted for 2022 an increase of 4.6% for the country average, but with a much higher rate in neighbouring localities, such as Clorinda with 33%; Iguazú, 120%; 16% for Posadas and 27% in Gualeguaychú.

"In a context of uncertainty, generated by the elections and by the shortage of dollars in the Central Bank, it is likely that the exchange rate gap will continue to be significant, this being the incentive that attracts our neighbours," he said, at least until the elections.