The Argentine peso devalued approximately 35% the next morning after the 'preliminary elections'
Devaluation of the Argentine currency benefits Galician fishing companies
Friday, August 16, 2019, 01:00 (GMT + 9)
The fall of the Argentine currency reduces its operating costs, but the sector fears that if the government changes, the fiscal pressure will rise.
What does the devastating electoral defeat suffered on Sunday by Argentine President Mauricio Macri have to do with the price at which we will buy the prawns next Christmas? Well, it has to do and much, because much of the product that reaches the Spanish market is exported from that country by the large Galician fisheries that capture and process it there.
And this new crisis that in a few hours has caused the collapse of the Argentine currency, with falls of up to 33%, will also have a direct impact on the Galician sector. Although this time with an effect, in principle, beneficial for companies, because while exports are invoiced in euros, the operating costs are paid in the devalued currency, that is, in pesos.
"A devaluation of this type has a first beneficial effect for Spanish fishing investments, because local costs are diluted," sources in the sector explain. They clarify, however, that the impact of this situation is ephemeral, because personnel costs are immediately adjusted. "Crews think in dollars," jokes a broker in the sector.
"The collapse of the currency is a transitory benefit, since the costs will rise again. Although it brings uncertainty in the coming months. A more than foreseeable change of government could bring back more intervention on private initiative and changes on the current status," explains a businessman from the Galician fishing industry.
Threats on the horizon
"We will have to remain vigilant during these months to identify well the opportunities and threats that may appear on the horizon," he adds.
The fear of Galician fishing companies with economic interests in this country is that, whether or not there will be a new Executive, the authorities choose to raise taxes to try to alleviate the situation of a bankrupt State.
A year ago, in September 2018, the still Argentine president launched a series of measures to contain the deficit, including the application of a retention greater than 7% to seafood exports. This tax did not directly affect the profitability of the large Galician companies operating in this country, but it did have an impact on product prices.
Argentina is one of the largest wild shrimp fishing grounds forNueva Pescanova, Iberconsa, Profand or Pereira. The drop in prices of this seafood before this last crisis already worried the sector.
Author: M. Sío Dopeso / La Voz de Galicia