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Sunday, February 16, 2014 10:27 AM

Two-Week Price Inflation in Argentina hits 30%, US Products Lead the Way; Currency Devaluations Hit P&G Earnings

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Prices of many goods in Argentina soared in the past two weeks. US brands are at the forefront of the action. Via translation from Lanacion, In two weeks, Warehouse Prices Rose 30%, with mayonnaise, cookies, and coffee leading the way. Officially, prices are up 3.3%. In reality, prices are up 30%.

According to official data, the price of food and beverages was up 3.3%. A tour of various supermarkets in the city of Buenos Aires, found escalating inflation is much higher in stock products, perfumery and milk.

Here are some price increases from the article. Please use relative price increases. They use the $ symbol for pesos.

  • Hellmann's mayonnaise in late January was on the shelves at $10.40 is now $13.55.
  • A can of peaches last month cost about $20 and yesterday were above $26.
  • Coffee 500g [about 1.1 pounds] rose 16% from $33.69 to $38.99.
  • Express cookies went from $15.39 to $20.39.
  • Hamburger buns increased from $13.06 to $14.19.
  • Sancor yogurt went from $15.25 to $ 17.99
  • La Serenissima Long life milk went from $10.7 to $11.59.
  • Shampoo went from $15.77 to $19.
  • Colgate Triple Action toothpaste 180 grams [6.3 ounces], went from $15.70 to $19.96. 
  • Two-liter bottles of water rose from $8.25 to $9.43

Currency Devaluations Hit P&G Earnings

Inquiring minds may be wondering how this affects earnings of US multinational corporations.

Forbes explains Venezuela, Argentina Currency Devaluations Hit P&G Expected Sales And Earnings.
Retail investors aren’t the only ones suffering from the woes of the emerging markets: Procter & Gamble PG +2.06% is feeling the pain of foreign currencies, too. Due to devaluations in currencies like the Venezuelan bolivar, Argentine peso and Turkish lira, to name a few, the consumer product giant said that it is lowering its outlook for its full-year 2014 sales and earnings.

P&G, which in January announced second quarter earnings results that were already feeling the ill effects of foreign exchange rates, said Tuesday afternoon that it would incur a charge between $230 million and $280 million, or 8 cents to 10 cents per share, a one-time charge resulting from revaluing its Venezuelan balance sheet in the wake of a change in the way the Venezuelan bolivar is valuated. Venezuela uses a de-facto dual-exchange rate system, but policy changes recently enacted by the Venezuelan government are affecting the way that certain imports — i.e, certain P&G products — are exchanged.

Specifically, the policy changes dictate that the state-run currency rate between the bolivare and the dollar is now 11.4 bolivares per one U.S. dollar; P&G, meanwhile, had calculated the value of its foreign transactions using the other, 6.3-bolivare-per-USD rate, thus the near-$300 million charge P&G now expects to incur on its third quarter balance sheet.

In reevaluating its outlook, P&G also took into consideration the recent devaluation of the Argentine peso, Turkish lira, South African rand, Russian ruble, Ukrainian hryvnia and Brazilian real. Of the group, the Argentine peso has proven the biggest problem, declining 20% to 8 pesos per dollar.

All told, P&G’s full-year sales growth forecast is 2%, down from a prior range of 3% to 4% for fiscal year 2014. The company also lowered its earnings-per-share growth forecast to 3% to 5%, down from prior guidance of 5% to 7% growth.
Mike "Mish" Shedlock

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