Following Javier Milei’s win in Argentina’s preliminary elections, there is clear anticipation for his promise to transition to a dollar-based economy. This shift will affect multiple sectors including, notably, the pet food industry with its strong domestic sourcing and tech expertise. Following are the anticipated effects on this sector.
Price stability
One of the main promises of dollarization is monetary stability and, consequently, price stability. The Argentinian pet food market, which is known for being self-sufficient and locally sourced, can anticipate more predictable costs for raw materials and other goods. Such stability can be an advantage for manufacturers, enabling them to plan better and possibly pass on savings to the end consumer.
Exports: Benefits and challenges
Argentina’s pet food sector, which also supplies to neighboring markets, might face a mixed set of outcomes when it comes to exports. On one side, dollar-based costs could make products less competitive internationally if the dollar strengthens. Alternatively, with the elimination of currency risk, Argentinian pet food products could become more appealing to international buyers, ensuring steady prices without the worry of unexpected variations.
Importing might get easier
Even though the pet food industry primarily relies on local raw materials, occasional imports, such as technology or other raw inputs, might become more straightforward. The eradication of fluctuating exchange rates could simplify and likely ease import processes.
Lower consumer spending due to short-term shock
On the other hand, the early stages of dollarization might bring about economic instability, possibly leading to a recession, and consequently reducing consumers’ purchasing power. If Argentinians feel financial uncertainties, they may adjust their spending behaviors, which could result in a brief decline in demand for pet food products.
Potential for increased foreign investment
With a dollarized economy, Argentina might attract more foreign investment, given the reduced currency risk. This could mean that the pet food industry sees more international players entering the market or existing players expanding their operations, leading to increased competition.
In short, now that dollarization is near, businesses like pet food companies might be preparing for possible changes. Whether these changes are good or bad depends on new economic rules and how quickly the pet food industry adjusts. We'll have to wait and see how this affects pets and their food in a dollar-based Argentina.
