Trade crisis, informality, and unprofitable tourism: Diego Stornini's analysis on Aconcagua Radio

The Mendoza economy is going through a critical and complex moment, according to the diagnosis of Diego Stornini , vice president of the Economic Federation of Mendoza ( FEM ) , who analyzed in depth the situation of commerce , tourism and employment in the province.

During an interview with Aconcagua Radio , Stornini warned that "there is a very sharp contraction in commerce," with an estimated "around 10% year-over-year decline in formal employment," according to data from the Superintendency of Labor Risks. "There's not much to discuss: there is a very sharp contraction in the commercial sector, and, along with gastronomy and tourism, it is one of the hardest hit sectors," he noted.

The leader emphasized that this crisis has multiple causes. On the one hand, he explained that the economy was experiencing a "very high inflationary process" and an exchange rate gap with a parallel dollar that was "double or triple the official rate," which generated accelerated consumption and a large flow of trade from abroad. "With high inflation, people consume more because hoarding money means losing purchasing power," he said.

He also emphasized that in the new context of greater stability, "consumers now have a very important tool: waiting." According to Stornini, this cultural shift is causing many to postpone purchases or prioritize savings, directly affecting local businesses.

"Yes, there is a contraction. It was natural, it was expected. It's not good, but we have to see how we, as business leaders, can reinvent or reconvert without leaving the system," he stated.

But not everyone is able to adapt. Stornini warned of a growing trend toward informal businesses: "Many businesses that lose profitability move into informality. This is seen as closure, but in reality, they are surviving outside the system."

For the FEM vice president, one of the main reasons is the extremely high tax burden. “In this country, no one lowers your taxes. We're still as squeezed as we were three years ago. At the provincial level, nothing has been lowered,” he criticized. “The only possible explanation for so much informal employment and informal trade is the tremendous tax burden on entrepreneurs.”

Along those lines, he explained that many choose to close their businesses and continue their business on social media or from home, selling via WhatsApp or displaying online catalogs: "They can't access the financial system or formalize their business, but it's the only way to continue."

Stornini also addressed the situation in the Uco Valley, where he lives and operates. “The situation isn't very different from that of Greater Mendoza or the southern region. There's a decline in trade, merchants are lowering fixed costs and trying to survive,” he described.

Although he acknowledged that the real estate market has "normalized" in terms of prices and conditions, he warned about the difficulties in accessing good sales locations: "In towns like Tunuyán, it's much more difficult to rent on main streets, which are crucial when consumer spending is depressed."

He also explained that there's additional pressure in the interior: comparing prices with the city of Mendoza or Chile. "Purchases are starting to be postponed, and 'shopping trips' to other cities or neighboring countries are growing," he commented.

Regarding tourism, Stornini was emphatic in criticizing the lack of official information from EMETUR. “The publication of statistical data has been discontinued since December 2023. Without data, there are no decisions, and without decisions, there is no management,” he warned.

Despite a recovery in domestic tourism thanks to a degree of wage stability, the leader stated that the sector's profitability "continues to be in free fall." "Tourism used to have high profitability rates. Today, that's been lost," he noted.

Among the causes of this decline, he identified the end of the exchange rate incentive for international tourism and the inability to pass on cost increases to the price of services. "Wages have adjusted, gas and electricity rates have skyrocketed, but hotel and restaurant prices have not increased accordingly. Therefore, profitability is extremely low," he explained.

Finally, Stornini was clear about the crux of the problem: “The three major components of a tourism provider's costs are personnel, energy, and taxes. And all three are subject to extremely high tax burdens. For every million pesos in salaries, 700,000 more must be paid in social security contributions. In energy, the tax burden can reach 40%,” he explained.

And he concluded with a warning: "Mendoza has a wonderful tourist infrastructure. It would be a shame if it were lost due to lack of profitability. We must be careful, because it is at risk."

Listen to the full article here, and you can listen to the radio live at www.aconcaguaradio.com .