Andrés Lerner 
Despite forecasts predicting that economic activity would bounce back in 2025, Argentine manufacturing companies still don’t see light at the end of the tunnel. According to a recent survey, industrial capacity fell below 50%. The report also warned that only 16% of companies said they were planning on raising production. Supermarket sales have also not recovered, and consumer trust is plummeting.
All this was revealed by the Fundación Observatorio Pyme’s most recent report. The encouraging end of last year, which saw a rising economy, stability in the exchange rate, and financial euphoria, has not continued in early 2025. The fragility of the external front has caused net reserves to drop to the levels of December 2023, while country risk is close to 750 points and all industrial economic signs are cooling off.
Data on mass consumption is the most damning. According to consulting firm Scentia, it fell over 10% year-on-year in the first two months of the year. Their survey shows that no in-person sales sector managed to avoid the plunge: supermarkets fell 6.5%, while grocery stores dropped 12.6% and wholesale 7.4%.
Expectations are also falling. The Consumer Trust Index (ICC, for its Spanish acronym), elaborated by Torcuato Di Tella University, dropped 6.7% in March. The number is even worse in Greater Buenos Aires (9.2%), a key district in the upcoming legislative elections.
Mass consumption companies operating in the country are disoriented. According to a seasoned executive from the sector, consumers are not enticed by any sale, promotion, or brand relaunch, and only choose to do “day-to-day purchases.” They also acknowledged that sales are far from what they were in previous years.
Import boom
For local manufacturers, the pie is not only shrinking but also shifting in its redistribution. According to the Institute for Argentine Agroindustrial Development, food imports, which have been surging since mid-2024, broke a new record in January by growing 87% Y-o-Y.
Companies are seeing a different scenario from the 1990s, when the peso was pegged to the U.S. dollar. At that time, imports were largely concentrated on premium goods that were not made in Argentina. Now, that boom is more focused on products that are cheap due to the exchange rate lag, such as milk from Uruguay or spaghetti from Albania.
The jump in imports goes beyond food. Companies in the clothing sector are being forced to shift from manufacturers to importers. “Sales fell again in the beginning of the year and costs are skyrocketing; I just had a prototype done in China to see if that improves things,” a known brand executive told Herald sister publication Ámbito. In order to add incentives to this phenomenon, the government is set to lower tariffs for this sector.
Far from being a sectoral problem, the import boom is a headache for the macroeconomy. Foreign purchases jumped 42% Y-o-Y in February and greatly reduced the goods surplus to US$227 million, which does not come close to making up for the negative balance in the service sector. Less dollars means more pressure on the exchange rate leading up to the deal with the International Monetary Fund (IMF).
Fewer machines operating
The recent report by the Fundación Observatorio Pyme shows that the outlook is not very encouraging for the productive sector. Only 16% of the 421 companies surveyed expect to increase hiring, and less than 35% plan to invest more.
This is all after last year ended with a 10% drop in production and 15% in sales. The report states that “2024 ended with the second largest drop in production after the pandemic as well as the second largest drop in job-hiring, only surpassed by the drop in 2009 in the context of an international crisis.”
Observatorio Pyme warns about the “process of job destruction,” and industrialists believe that the worst is not over. The metalworking sector is beginning to see a severe halt among the main suppliers of the different sectors, with national production being steadily replaced by imported goods.
Data provided by the Association of Metalworking Industrialists has set off a new warning signal: the use of the installed capacity in the sector has fallen again, and currently sits at almost 50%. This means half of the machines in this sector are not operational.