For the first time, in December 2023, since the current Consumer Price Index (CPI) began to be published, we have observed that the devaluation of the official exchange rate was much greater than inflation and the devaluation of the exchange rate called “ “free” or parallel market.
Official TC devaluation 2023: 352%
Free TC devaluation (Blue) 2023: 196.2%
Annual Inflation 2023: 211.4%
(See graph as of January 2024)
During the planning of the budgets for the year 2023, we mentioned to our clients the possibility that, in an election year and considering the unsustainability of the exchange rate delay, the official exchange rate could appreciate again. This was because the dollar was perceived as the lowest price in our country’s economy.
How to take care of the company this year?
First, it is important to make a distinction between service companies and those that market products.
In the middle, we could differentiate, for example, those that can provide services abroad or those that manufacture products or export. Let’s simplify, even if we are not used to doing so.
But, returning to simplification, property companies, to the extent possible, are selling for cash or securing a financing rate that matches what they access. Even, in the same currency, if they managed to pay in a longer term than what they charge, they would be gaining financially considerably.
On the other hand, in companies that market services, focusing on those that are labor intensive to simplify, one of the main challenges will be to maintain stability and compliance with their main resource (people) in this inflationary context, without losing customers. in the attempt. Here it is recommended, in the medium term, to shorten the periods for updating prices due to inflation or the update index used by the industry and, to the extent possible, evaluate the situation of each client to accompany them in the inflationary process without generating a great damage. What they must be very clear about is the margin of the business, the increase in their costs due to parity or increases due to inflation and try to pass it on to clients to the extent that the elasticity of the margin allows it. Why do we put so much emphasis on this issue? Currently, being out of date on prices for only one month, if costs increase at the rate of inflation, it will imply a considerable decrease in the profit margin. For example, costs can increase at a rate of 25.5% per month, based on the December inflation rate, the most recent available so far.
Juan Pablo Perojo – Co-founder at PMP – Accounting & Consulting
Email: [email protected]
Cell: +54 9 11 2469-7504
Linkedin: linkedin.com/company/pmp-estudio-contable-consultora
Instagram: @pmpestudio
by CEDOC
