Fifteen months after the beginning of the health and economic crisis, Guatemala, Honduras and Nicaragua are the economies in the region with the highest inflation rates, a behavior that was influenced by increases in fuel and transportation costs.
In the second quarter of 2020, a period in which the countries of the region were going through a severe economic crisis caused by the Covid-19 outbreak, inflation levels were low and in some economies negative variations were reported.
Discounts and offers, increase in the price level generally and the rise in operating costs due to new health and safety protocols are the main threats to the profitability of companies in this new commercial reality.
Given this context of economic and health crisis, which derives from the outbreak of covid-19 at the global level, Ariel Baños, a specialist in price management and founder of Fijaciondeprecios.com, explains what are the main threats that could affect the profitability levels of companies, and details some strategies that could be applied to mitigate the adverse effects.
After the Economic Activity Confidence Index reported a 19% drop in March 2020, in April the situation worsened with a -43% year-on-year variation, a drop that agrees with the advance of the health crisis in the country.
In April 2020, the level of the Economic Activity Confidence Index stood at 32.64 points, 43.25% lower than that recorded in March 2020 (57.52 points) and fell by 26.83% compared to April 2019 (44.61 points), reported the Bank of Guatemala.
During December 2019, the CPI registered a 3.4% variation with respect to the same month of the previous year, an inflationary rhythm higher than the 2.3% reported at the end of 2018.
The most important inflation levels of December 2019 are the following: a monthly inflation of 0.60% was registered, an inflationary rhythm of 3.41% and an accumulated inflation of 3.41%, informed the National Statistics Institute (INE).
During November, the CPI registered a 2.9% variation with respect to the same month of 2018, an inflationary rhythm higher than the 4.2% rate reported in October.
The most important inflation levels in November 2019 are as follows: 0.44% monthly inflation, 2.92% inflation and 2.79% accumulated inflation, according to the National Statistics Institute (INE).
After falling from 4.4% to 1.8% between July and September 2019, during October the price growth rate was 2.2%.
Out of the twelve spending divisions that make up the Consumer Price Index (CPI), food (1.62%), transportation (0.79%), recreation (0.45%), reflect the rise in the general price level of inflation to October 2019, reported the National Statistics Institute.
For the third consecutive month, the inflationary rate in Guatemala decelerated, since the year-on-year variations reported by the Consumer Price Index during July, August and September, were of 4.4%, 3% and 1.8%, respectively.
The most important inflation levels in September 2019 are as follows: monthly inflation of -0.58%, inflationary rate of 1.80% and accumulated inflation of 1.63%, according to the National Statistics Institute (INE).
After registering year-on-year rises of 7% and 6% in July and August, respectively, in September the Confidence in Economic Activity Index in Guatemala showed a 7% variation.
An inflationary rhythm of 4.08% is forecast for September, of 4.22% for October and of 4.29% for November 2019. Regarding December 2019 and 2020, the Panel foresees an inflationary rhythm of 4.43% and 4.46%, in that order, the report of the Banco de Guatemala needs.
Avoiding hurried discounts, managing price increases according to costs and improving cash flow are some of the strategies that companies can resort to protect their profitability in contexts of inflation and recession.
Ariel Baños, a price management specialist and founder of Fijciondeprecios.com, explains four strategies for maintaining profitability when companies face scenarios of rising prices and low dynamism in economic activity.
After registering a 7% year-on-year increase in July, in August the Confidence in Economic Activity Index in Guatemala showed a 6% variation.
According to the last report of the Banco de Guatemala, an inflationary rhythm of 4.51% is forecast for September and of 4.50% for October 2019. As to December 2019 and 2020, the Panel foresees an inflationary rhythm of 4.64% and 4.50%, in that order.
Between June and July of this year, the inflationary rhythm in Guatemala decreased from 4.8% to 4.4%, mainly because of the variations in the prices of alcoholic beverages and food.
The most important inflation levels in July 2019 are as follows: -0.06% monthly inflation, 4.37% inflationary rhythm and 3.11% accumulated inflation, according to the National Statistics Institute (INE).
Making real sales projections, segmenting prices and designing savings options are some of the strategies that companies can use to protect their profitability in contexts of inflation and recession.
Ariel Baños, price management specialist and founder of Fijciondeprecios.com, details techniques that could help companies avoid negative effects on their finances, when faced with scenarios of rising prices and low dynamism in economic activity.
After registering a 4.5% year-on-year variation in the Consumer Price Index in May, in June the inflationary rhythm rose to 4.8%.
The most important inflation levels in June 2019 are as follows: 0.83% monthly inflation, 4.80% inflationary rhythm and 3.17% accumulated inflation, reported the National Statistics Institute.
After recording a 4.8% year-on-year variation in the CPI in April, the inflation rate dropped to 4.5% in May.
Monthly inflation (0.26%), shows a slowdown compared to May of the previous year (0.47%), while the accumulated (2.33%), and year-on-year (4.54%), show an acceleration compared to the same month last year, according to the report of the National Statistics Institute.
After in March 2019 the Confidence in Economic Activity Index in Guatemala dropped 6% in year-on-year terms, in May the increase was 14% regarding the same month in 2018.
The report of the Banco de Guatemala reviews that "... the inflationary rhythm is forecast at 4.50% for May as well as June and 4.48% for July 2019. Regarding December 2019 and 2020, the Panel foresees an inflationary rhythm of 4.49% and 4.55%, in that order.