Argentina leads this luxury market, but the exchange rate hedge is putting it in check

The foreign exchange restrictions have multiple effects on the Argentine economy.

One of the sectors that could not escape its consequences is wool production, a luxury market that Argentina leads worldwide and used to generate revenues of up to US$260 million annually.

While the economic team is trying to preserve and strengthen the scarce international reserves, the sheep industry is going through a limitation in its growth in a context in which its main strength is exporting, but which currently has an unfavorable exchange rate and a gap that affects the operation of the activity.

Thus, after going through a sharp drop in sales in the face of the Covid-19 pandemic, last year did not achieve the expected recovery, while 2023 is shaping to be another complex year.

According to data released by La Nación newspaper, 98% of what it produces is sold abroad at the official exchange rate.

Almost 80% is exported through domestic ports with some degree of industrialization.

In the last harvest (July 2021/June 2022), the sector generated revenues totaling US$165.6 million, an amount considered meager considering the product’s added value from processing to sale abroad.

This is a far cry from the level recorded, for example, in 2018, a year with historical numbers in which revenues reached US$260 million.

With profitability not aligned with the industry’s expectations, producers are looking for alternatives, such as keeping wool stocks, absorbing costs by renting fields, or directly selling them.

WHO BUYS WOOL FROM ARGENTINA?

Germany is the first country that demands wool from Argentina, with 33% of the total.

China follows with 18%, Italy with 12%, Turkey with 9%, and Peru with 7%.

With information from Bloomberg