Impressions about a specific argentinian region

Shame on me since there has been a long time I don´t write on this blog, but I´m back and I commit myself to be more disciplined.

On my blog return, I would like to talk about a very recent travel to Argentina. I´ve been to Patagônia visiting 3 relatively small towns: El Calafate, El Chaltén and Ushuaia. The later is the most famous one known as the "Tierra del Fuego". In Argentina, as we had already been told, there is a lively FX black market in which we can exchange Dollar, Euro and even brazilian Real for an advantageous rate (better than the official one). This is a sympton of an economy in which there is constant expectation of Peso devaluation under a situation of increasing inflation rates. Actually, as well as the official FX rate is not considered for FX transactions, the effective inflation rate seems to be way above the official one.

I would have to stay longer to have a better impression of the economic situation of the region, however, the few days I´ve been there let me the impression Patagonian population seems not to suffer from the economic crisis. There are two possible explanations for that: Firstly, given the Peso devaluation trend, it has been cheaper and cheaper to travel to Argentina, and obviously touristic cities are the most benefitted ones. Secondly, Nestor Kirchner (husband of the current president Cristina) was governor of Provincia de Santa Cruz, which is located in Patagonia. In  this sense, Patagonia may have been benefitted somehow during the recent presidential mandates. But this is just an impression from a Foreigner who has been there for a few days, and not necessarily fits to reality, thus I should beg the argentinians pardon if I´m partially wrong on my impressions.

Anyway, travelling is always an interesting manner to have a closer look to the socioeconomic situation of a country, which may be somehow different from what is reported by the international media.

Historically, the automotive sector has a relatively large weight in the brazilian industrial sector, by considering the entire productive chain. This naturally translates politically into a large lobby within the government. In this sense, the automotive sector has been benefitting from constant tax incentives (such as a temporary tax cuts) that provides lower prices and stimulate the purchase of vehicles.

Furthermore, the purchase of vehicles has been driven by the incorporation of about 30 million people to the so-called new middle class over the last ten years, mainly due to the increase of the average real wage in the economy. This segment of the population had easy access to credit (for example, in 2010, when there was lengthening of payment terms and lower interest rates) which increased the number of people who have bought their first vehicle. Before that, we have to highlight the stabilization of the Brazilian economy under the success of the so-called ´Plano Real´ (implemented in 1994) providing solid roots for the real increase of wages.

Increased vehicle fleet in Brazil is clear when analyzing the evolution of the number of inhabitants per vehicle in the chart below. That is, the lower the ratio of inhabitants per vehicle, the greater the number of vehicles per capita.

 

However, we are still far from developed countries such as: United States, Germany and Japan. In these countries, the ratio of inhabitants per vehicle is close to 1. That's almost 1 vehicle per inhabitant. And Brazil is still short of the ratio of inhabitants per vehicle in emerging countries like Mexico (3.5) and Argentina (4.0). Obviously beyond the issue of lower real income in Brazil (among other factors, due to the relative low-skilled Brazilian workers), there is the issue of the price of the car in Brazil that is much more expensive than in other countries mainly due to the high tax burden.

Furthermore, it is interesting to note that there is a large discrepancy between inhabitants per vehicle among Brazilian regions. In the Northern and Northeast region, where per capita income is relatively lower, the ratio of inhabitants per vehicle is relatively higher (ie, less vehicles per capita) than in the richest regions of Brazil and South, Southeast and Midwest. In the latter, we highlight the Federal District (where the capital of Brazil is located). The largest number of vehicles per capita has to do with the high real wages of federal civil servants.

 

 

 

 

Brazilian economy has to improve its growth models. I will talk about it in the coming months...