The Government instructed banks under its jurisdiction — like the Banco Nación and Banco Ciudad — to start offering its clients the possibility of buying certain products, especially home appliances, in 50 fixed payments over the weekend.
According to press reports, the Government plans to do the same with privately held banks this week. You’ll be able to buy that blender you always wanted now and for a small monthly payment. Though chances are you will probably end up paying for it long after it breaks.
This kind of strategy aimed at boosting consumption is not a foreign concept to most Argentines. During the months leading up to 2014’s World Cup, Cristina Fernández de Kirchner’s administration launched financing plans that broke purchases up into 48 and 60 payments, especially aimed at TVs, so people would start paying for a TV during one World Cup and finish paying for it by the next.
What may be strange in this case is the message this initiative sends to consumers, taking into account that the implementation of the “Precios Transparentes” (Transparent Prices) payment plan actually ended up increasing the price of several products.
In theory, the prices of financed goods shouldn’t have increased. What the Government wanted to do was make it clear that the products people bought through plans like “Ahora 12” did, in fact, have a financing cost, hidden in the final price. Making things worse, this was also the price that people who bought the same products in only one payment had to pay despite not opting for financing.
Under perfect conditions, the price of products purchased in one payment should had cost of financing subtracted, making the final price lower than the price of goods bought on a payment plan. The financed purchase should have remained the same, clarifying how much people paid for the product alone and how much for the possibility of getting it in payments.
However, the Government forgot to take note of a key factor in the equation: stores and companies selling and making these types of products don’t usually play by the rules and many ended up using the measures to create confusion and turn a profit.
A little over a week from Precios Transparentes’ implementation, different reports indicated that the price of many products lowered if bought in one payment. But at the same time, the cost of doing this using more than one payment increased: based on a survey of 13,000 products, Elypsis private consultancy reported that 45 percent of product pricing decreased by 5.7 percent on average.
However, 18 percent of goods saw an increase of 5.5 percent on average in their pricing. In theory, this should not have happened, but the Government’s inability to enforce the initiative prevented it from implementing it effectively.
This disconnect between theory and practice, paired with inconsistent experiences at the cash registers is leading many to accuse the Government of sending mixed messages to consumers.
Do they want to boost consumption in the long term or would they rather prioritize a short term boost in consumption? Maybe they want to do both, or maybe the new priority comes as a result of failing to implement the first plan effectively. We can’t know for sure, but it’s likely this whole thing will increase the demand for calculators, as people might need to do some serious math to determine the best way to buy that blender.