BUENOS AIRES (Reuters) – For decades, Lumilagro has prospered thanks to the popularity of its steel or glass thermoses, which Argentines use to transport hot water to make mate, the region’s ubiquitous herbal tea.
But now, faced with cheaper imports, rising production costs and falling sales, the more than 80-year-old family business has been forced to scale back its activities, its commercial manager, Carlos Bender, told Reuters. He stated that the company now imports the majority of the thermos bottles it offers, at prices up to 30% lower than the cost of local production.
The company, whose website proudly declares “Made in Argentina,” closed its glass furnace 18 months ago, operates just one of its four assembly lines and has cut its workforce from 160 to 60 people, Bender said, in an office adjacent to its half-empty warehouses, calling the process “very painful.”
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The Lumilagro case is emblematic of a larger challenge facing Argentina under a radical economic reform by President Javier Milei — who US President Donald Trump called his “favorite president.”
Milei’s drastic spending cuts managed to generate a fiscal surplus, no small feat for a country that has long suffered from steep deficits, and drastically reduced inflation.
But the industry suffered as deregulation spurred growing competition from cheaper imports, which also benefited from a peso considered overvalued. Furthermore, there was a reduction in consumer purchasing power.
In August alone, industrial production fell 4.4% compared to the previous year. Unemployment in the factory-heavy suburbs of Buenos Aires soared to 9.8% in the second quarter, up from 9.1% a year earlier, according to statistics agency Indec.
This is undermining support for Milei’s coalition — which already suffered a crushing defeat in September’s Buenos Aires provincial elections — ahead of this month’s crucial midterm elections.
Milei’s libertarian party and its allies need to increase their presence in the opposition-dominated Congress to advance their free-market reform agenda and sustain their vetoes of congressional spending bills.
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After taking office, Milei relied on an inflated local currency, cuts in public spending and high interest rates to reduce annual inflation, which was around 200%. But those policies, especially the overvalued peso, helped trigger a surge in imports, economists say.
Milei’s government declined to comment. He stated that his policies will put Argentina on a more stable position and allow the country to develop an economy based on energy, mining, agriculture and artificial intelligence.
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HARMED MANUFACTURERS
Similar dynamics forced ceramics company Ilva to close its factory in the Buenos Aires suburb of Pilar, leaving 300 of its former employees camped out in front of the factory demanding some form of compensation.
“We didn’t expect this, what they are doing to us today, leaving us out in the cold, helpless and without our salaries,” said Juan González, one of those fired, placing the blame for the company’s problems squarely on Milei’s government.
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“Since this government took office, sales have fallen,” he said. “The company gradually declined because, as sales were low, we produced less.”
Ilva did not respond to a request for comment.
The economic outlook still has some bright spots, most of them in a growing mining and energy sector, such as the Vaca Muerta shale formation.
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Milei’s approval ratings fell to a new low of 39% in September, according to research from the University of San Andrés. Research experts cite fatigue with austerity measures, corruption scandals involving her sister and the perception that Milei’s combative and flamboyant personality has begun to bother her.
“People blame Milei for the fact that the macroeconomic stability he achieved does not help at the microeconomic level,” said Marina Acosta, director of consultancy Analogías.
Acosta said Milei could still benefit, however, from voters’ continued reluctance to support the Peronist opposition party that has dominated Argentine politics since the 1940s.
On October 26, Argentines will elect 127 deputies (half of the Chamber) and 24 senators (one third of the total).
ECONOMIC SALVATION
Milei was alongside Trump at a meeting at the White House on Tuesday. The U.S. Treasury agreed to provide Argentina with a $20 billion currency swap line this month, offering an economic lifeline to support the peso.
Washington’s continued support was conditional on Milei remaining in power and keeping his distance from the Peronists, Trump said. “If he loses, we will not be generous with Argentina,” he added.
Either way, U.S. aid is unlikely — at least in the short term — to improve the situation facing local manufacturers.
The owner of an auto parts factory in Buenos Aires, speaking on condition of anonymity, said sales had fallen since Milei took over and that in response he maintained imports but cut production in half.
The parts his company imports from China cost up to 75% less than those manufactured locally, he added.
Luis Campos, employment analyst at the CTA Autónoma union, acknowledged that Milei’s policies have produced some stability, but that in terms of jobs, “this economic model has already given everything it had to offer”.
“The problem with the winning sectors of the current economic model — large-scale agribusiness, energy and mining… is that they are not labor-intensive activities,” he said.
