Consumer Purchasing Power Grows
But policies limit brand choice
Argentines live prepared for the worst.
And for a good reason: just a decade ago, unemployment soared, currency devalued, violent protests erupted, wealth fled and Argentina defaulted on a major international debt.
The country rebounded strongly, with GDP improving almost 30 percent between 2000 and 2010, according to the World Bank. While the change is impressive it lags the dramatic improvement in neighboring Brazil, where rose by over 200 percent during the same period.
Still, personal income improved steadily as trade unions lobbied for higher wages and the government implemented social programs. The Universal Child Allowance, for example, distributes money to unemployed or underemployed families with children in an effort to reduce extreme poverty. Liberal extension of credit also enabled more people to acquire consumer goods.
The Argentine economy is expected to expand by a healthy 6 percent in 2012, but that's down several points from 2011, according to the nation's central bank. Inflation is growing by almost 9 percent, according to the National Institute of Statistics and Censuses (INDEC). Other sources suggest that the inflation figure could be double that rate, according to the Economist Intelligence Unit. And economic uncertainty is increasing.
Until recently, the country remained relatively isolated from the impact of the global economic problems. But weakening demand for commodities and Brazil's economic slowdown impacted Argentina. And in the middle of April, Argentine President Cristina Fernández de Kirchner announced the nationalization of YPF, the nation's largest oil and gas company and its most valuable brand.
The move received popular support in Argentina but stirred nervousness about the future of foreign investment. Foreign Direct Investment (FDI) weakened during 2011, rising only 3 percent compared with a 35 percent rise for all of South America, according to United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Brand choice is relatively limited
Despite these issues, Argentines have disposable income and they're spending it, if somewhat more slowly. Cosmopolitan residents of Buenos Aires and other cities look to Europe and North America for brands, especially when purchasing aspirational goods, such as cars or consumer electronics.
They generally select international brands for the perceived quality and implied status. Consumption sometimes is driven by a desire to display wealth. Historically, times of high inflation also have influenced consumption.
In certain categories, especially food and drink, Argentines prefer local brands. Examples include Quilmes, a popular Argentine beer, and Gallo, a brand of rice. The Molinos company markets many brands of packaged goods. Grupo Arcor is a major confectionary producer. La Serenísima markets dairy products.
Brand choice, however, is relatively limited. Regulations designed to protect local industry complicate the market entry for international organizations. And local brand owners seem to focus on brand distribution—getting into the supermarket or other retail outlet—rather than on brand building. The limited brand selection also results from price controls that affect the incentive for brands to compete. In addition, agriculture and livestock, rather than industry, comprise a large part of the country's economy.
Reflecting recent fluctuations in the economy, lower priced brands have become more popular in certain categories, such as personal care. The ability of Argentines to handle economic ups and downs is well illustrated by the past decade, but Argentine resilience has a much longer history.
Resilience and recovery
In the early twentieth century, Argentina was a prosperous country, although wealth was concentrated. For 30 years, from around 1916 until the ascension of Juan Perón to the presidency in 1946, the country was ruled first by a populist government and then by the military, directly or indirectly.
Perón attempted to improve the lives of Argentines with a mix of policies, nationalizing certain industries and implementing social reforms. A military coup deposed Perón in 1955. He returned for a short period of leadership in the 1970s. Then a brutal and repressive military regime governed until losing power in 1983, following its defeat in the Falklands war. The economy continued to suffer under successive democratic governments.
When Carlos Saúl Menem won the presidency, in 1989, the economy rebounded initially with a privatization program that included selling the national oil company, YPF. He also linked the value of the peso to the dollar. When the economy declined precipitously, the government froze personal assets and property values plummeted. Argentina defaulted on a large foreign debt in 2002.
With financial changes, including devaluation of the peso, the economy began to recover by the time that Néstor Kirchner was elected president in 2003. He attacked corruption, paid back international debt and sustained the recovery. Cristina Fernández de Kirchner, the current president, succeeded her husband. Nestor Kirchner died in 2010.
Fundamentals for brand building in Argentina
- Be curious
Argentina is a large and diverse country. About one-third the size of the US, Argentina is the second largest South American country in land area after Brazil. Learn the regional differences and adapt to them.
- Be flexible
The one constant in Argentina is change. Argentines are experts at surviving the unexpected. They tend to be up beat and flexible. And that's that attitude they look for in trusted brands.
- Be emotional
Argentines respond especially well to brands that connect in a human way, that display honesty, humor or audaciousness. It's important to communicate distinctive advantages clearly and continuously.
- Be digital
Traditional media remains important, but Internet penetration is high in Argentina. The people are active on social networks and they look for special offers from brands.
- Be price sensitive
It's not all about price in Argentina, of course. But the country's history of economic volatility and periods of hyperinflation has made Argentines careful shoppers.