That clothes are expensive is spread like a mantra and leads to conclusions that attack one of the most important industries that has been a common denominator in global development. Let’s discuss whether it is expensive but let’s look for solutions to achieve virtuous objectives that strengthen us.
Let’s start with this reality: Argentina is expensive whether we compare with the purchasing power -affected by increases in rates, transportation and food- or if we compare with the dollar which increases less than inflation.
However, it is not true that clothing was the item that increased the most. Clothing not only recorded smaller increases several months ago but, considering a longer period, seven of the 12 CPI items increased more than clothing: food, health, transportation, etc. Thus, the CPI-INDEC marks an inflation of 4.7% between December 2016 and February 2024 while clothing prices increased by 4.4% (290 pp below average).
This reality remains invisible and is distorted by incorrect comparisons with other countries. With methodological flaws, very different brands – GAP, H&M, Zara or Vuitton – or new collection products are compared with previous seasons. Financing costs or consumer taxes are also not included, nor is the logistical cost of transporting a product thousands of kilometers considered. In addition, prices are compared to the official dollar when it should be done to the card dollar or import dollar.
In Argentina, There are accessible, mid-priced, expensive and very expensive clothes.. There is a huge range of prices: similar garments can cost up to 1200% more depending on where you buy it. Marketing is atomized: more than 17,000 companies throughout the country. And this was even more accentuated with new channels such as online sales and street retailers like those in Flores.
Much of this price variety depends on factors linked to marketing and not to the industry. Rental costs, advertising and marketing, logistics, intermediaries and taxes they make a difference.
And although he INDEC It covers all types of commerce, it gives more weight to premium brand clothing since it is based on a consumer survey from 2005: 20 years ago, much more was consumed in shopping malls and many new marketing channels did not exist. Then, the dynamics of premium brands are extrapolated (incorrectly) to the entire market when shopping represents less than 10% of clothing sales in the country. At the same time, promotions or discounts, which are increasingly recurrent, are not taken and this is not reflected in the price measurement. It also does not discriminate whether the clothing is imported or national, which is crucial given the large imported component of the clothing sold in shopping malls: 65% of premium brand products are imported and, of the remaining 35%, half have imported inputs.
In the premium channel, the highest prices are observed in imported clothing and not in national clothing. If we compare the price of an imported Levis jean and an equivalent national Taverniti jean, we see that the first double the price is sold than the second. Or, a Lacoste cotton T-shirt (imported) is worth twice as much as an equivalent cotton T-shirt from Bolivia (national) and 9 times more than a nationally manufactured one sold in Le Utthe’s own stores.
So, Why is the national industry blamed for clothing prices? The industrial segment is attacked when in reality commercial costs such as rental of premises or logistics or even the tax structure that accumulates in a cascade in a productive chain with many links – from raw materials to the counter – should be discussed.
“Open imports” is a solution? Recent numbers show that there is no direct correlation between prices and imports. Specifically, in the 2016-2019 period, clothing imports were high (around 130 thousand tons) and prices rose below inflation. While in the 2020-2024 period, clothing imports were record high but prices were above inflation. Trade openness in Argentina is an old and well-known problem. Its consequences have already occurred and are difficult to reverse. In the 90s, The opening led to the destruction of the local productive network. Many brands separated themselves from manufacturing: they began to import and/or outsource manufacturing, attacking the formality that never returned to previous levels despite more than a decade of promoting production.
The consequences are aggravate if it is considered that the origin of that imported clothing generates unfair competition. Latin America is the target of surplus products from past seasons from the North and the fast fashion coming from Asia (made under very precarious working and environmental conditions). While Europe is discussing applying high taxes, Argentina does not even have enough regulations to confront this type of unfair practices.
Furthermore, the first world is moving in the opposite direction to unrestricted trade opening, defending work within borders. The report of IMF Industrial Policy (…) shows how industrial and commercial policy is being strengthened in developed countries such that In the last 10 years, restrictive measures on trade in goods have quadrupled.
Having said all this, we must not divert the focus of the discussion from the underlying problems, those that truly affect our economy’s ability to grow in a sustained manner. Before enabling false short-term solutionswe must take care of resolve structural difficulties: stable macroeconomy, financial system and tax pressure compatible with production, generation of quality employment with good salaries, reducing the burden of rents and improving infrastructure to lower logistics costs. All aspects that will allow us to be more competitive and expand markets.
