Argentina faces post Macri era: “hard times” for a billion-dollar market for fashion

“Hard times are coming.” These are the words of the new president of Argentina, Alberto Fernández, who won over Mauricio Macri in the elections held last Sunday. Fernández takes the reins of a country drowned by adjustments, hyperinflation and devaluation of the Argentine peso, which, despite its critical economic situation, continues to be closely watched by international operators.

With a Gross Domestic Product (GDP) of 922.1 billion dollars, in line with The Netherlands and The Philippines, and a GDP per capita of 20,900 dollars, Argentina is the third largest economy in Latin America, after Brazil and Mexico.

The country ended 2018  with a 2.5% drop in its GDP, and the International Monetary Fund (IMF) anticipates that the crisis will worsen this year, with an even larger decline of 3.1%. However, the organizatoin expects a moderation to 1.3% by 2020.

The country owes 56,000 million dollars to the International Monetary Fund (IMF) and, since August, the Central Bank has lost 22 billion dollars in reserves and only about 11 billion still remain.

The previous president, Mauricio Macri, assumed the final position of 2015 with the promise of adopting free trade, but according to a Bloomberg analysis, his government has continued to impose import barriers at the same rate as the previous president. 

In fact, the country’s tariffs are the highest in the G20, according to trade-weighted averages calculated by the World Trade Organization (WTO). These borders managed to sustain in part the local textile fabric, since many brands chose to maintain or install their production in the country.

However, given the economic drift of the last quarters, the sector has been gradually dismantling, with massive layoffs in factories such as Alpargatas, Nike, Paquetá or Cheeky.

However, in the following months an international opportunity could open and that would bring Argentina a little closer to the world. In June 2019, Mercosur signed a free trade agreement with the European Union after twenty years of negotiations. The historic pact will generate commercial exchanges worth 100 billion dollars.

While production is weakening, some international companies have taken advantage of the situation to land in the country. In the last year, international companies such as Pandora or Zadig&Voltaire landed in the Argentine market, while Louis Vuitton resumed operations in the country with a pop up store in Buenos Aires.