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Steak-crazy Argentines keep buying beef even after peso crash inflates prices

ForexAug 28, 2019 08:19AM ET
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© Reuters. A butcher chops meat at a local market, in Buenos Aires

By Hugh Bronstein and Marina Lammertyn

BUENOS AIRES (Reuters) - Times are hard in recession-hit Argentina and the peso currency's latest crash has jolted food prices higher.

But in a country where eating beef is considered more a right than a luxury, people are stretching their budgets to keep buying steak while butcher shops see profit margins shrink.

Social life revolves around weekend barbecues for Argentines, rich and poor. The cherished image of the gaucho cowboy, wandering the pampas on horseback and dining on top quality steak around the fire, is as much a part of the nation's identity as the tango, Evita Peron, and financial crises.

The latest economic setback occurred earlier this month when a landslide victory for the populist opposition in an Aug. 11 primary vote sparked a run on the peso and hobbled business-friendly President Mauricio Macri's campaign to win a second term in October's presidential election.

Stunned by the peso's fall, Argentina's cattlemen - who export much of their produce - pulled back from selling and waited for the volatility to pass.

The supply cut had the effect of raising prices. Many Argentines kept buying steak, nonetheless, opting to cut household budgets in other areas before depriving themselves of their main source of protein.

"Argentines can stop buying clothes and other items but they won't stop buying meat, even while they complain about prices," said Orlando Mamani, working a meat counter in a grocery store in the Buenos Aires neighborhood of Belgrano.

And complain they did, even as they lined up to buy at butcher shops across the capital.

"Prices are up 15% to 20% since the primary. The election result was really a surprise," said Julio Basmagian, 70, as he left a butcher's store with purchases under his arms.

"Beef for us is very important. It's very unusual for an Argentine to get through a day without eating beef in one form or another."

But as a retiree living on a fixed income, Basmagian said he may have to cut back if prices keep rising. "I just don't have the budget," he said.

Consumer price inflation is expected at more than 3% this month, Macri said on Tuesday, up from 2.2% in July. But meat price increases seem to be outpacing inflation, according to consumers and butchers interviewed by Reuters. Official price data for August will not be available until next month.

With Argentina's main parties having already chosen their presidential candidates, the primary served as an opinion poll ahead of October's election.

Macri's poor performance caused an 18% slide in the peso, raising default fears by making it harder for Argentina to honor its dollar-denominated debts. It has revived memories of Argentina's 2001-2002 default and economic crisis, which tossed millions of middle-class Argentines into poverty.

GIZZARD KING

"It is not that meat is very expensive. It's that wage earners believe it is very expensive because they believe they have the right to eat beef every day," said Miguel Schiariti, head of Argentina's CICCRA meat industry chamber.

Schiariti said supply had dropped 30% at Buenos Aires' main livestock market of Liniers after the primary.

"When prices go up like this, everyone complains, including me," said butcher Miguel Narciso, 57, while he cut thin slices of beef used to make the popular local dish milanesa.

"The demand is always there. But supply goes down when ranchers get nervous about the peso and wait to see what's going to happen before selling," said Narciso, his white apron splattered with blood at a butcher shop called Nucho in the middle-class Buenos Aires neighborhood of Caballito.

His boss, Carlos Principe, the capital's self-anointed "Gizzard King" - emblazoned in red letters on the shop's overhead sign - has heard complaints from clients over rising prices since the primary threw Argentine politics on its head.

"Ranchers cut back livestock supply due to the uncertainty, so livestock prices rose 18%. But I can't raise my retail price by more than about 10% without losing customers," Principe said.

"So we are losing money for now but what am I gonna do? I have a business to maintain and employees who have to keep working."

Steak-crazy Argentines keep buying beef even after peso crash inflates prices
 

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