Chilean companies used to be among the main investors in Argentina, but in recent years they led the exodus of companies that left the country. Parque Arauco left, the airline Latam left the cabotage business, Falabella closed and Masisa sold its forestry assets.
But, according to the Chilean newspaper La Tercera, those who stayed are experiencing "a real nightmare" in their attempt to account for the sales and results of their Argentine subsidiaries in their balance sheets.
They have two problems: on the one hand, according to international accounting standards, Argentina is considered a country with hyperinflation. On the other hand, the gap between the official dollar and the MEP or stock market dollar also changes the value that Chilean firms can assign to their subsidiaries.
"On July 1, 2018 – just five years ago – the International Accounting Standards Board (IASB) declared the Argentine economy as hyperinflationary. This category is acquired by countries that exceed 100% inflation for a period of three years, a record that has been broken until today. In 2022 punctually, inflation in that market was 94.8%, and annualized to April it goes at 108%, the highest in three decades, "says La Tercera.
This situation means that they have to rewrite the balance sheet of their Argentine subsidiaries. They must correct the financial statement according to inflation and then restate the balance sheets at the cut-off date. But this is done with assets and liabilities, not with sales or results, which generates distortions.
The beers of CCU, another Chilean that operates in Argentina.
Among the companies that are suffering from this situation are Embotelladora Andina, CMPC, several wineries, such as Trivento or Finca la Celia and Bodega San Juan, CCU and Cencosud.
"Hyperinflation is the least of the problems, because in the end it is an accounting mechanism, which reexpresses everything in currency of purchasing power of the closing, but it is in the same Argentine currency," says Sergio Tubio, partner at PwC Chile, according to the newspaper.
"The greatest difficulty," he adds, "comes in the second step: adapting these results in local currency to the currency in which the results are consolidated: in the case of most Chilean companies, to the peso."
To convert the results of the Argentine peso to the Chilean one, the accounting regulations establish that the official exchange rate of the countries must be used. The problem is that in Argentina the official wholesale dollar (to which almost nobody has access) is $ 235, against the blue, which is double ($ 493) or the MEP, which is worth $ 460, and that according to La Tercera, are the ones that "most are consistent with economic reality."
"This is a concern that is increasingly discussed on boards. It is very common for the issue to come up, there are even directors who are concerned because they are aware that they are signing and approving a financial statement that complies with the rules, but where what they show is not so real, "says Tubio.
The operation to which Argentines are accustomed (think in MEP or blue dollars because they are the only ones they can access) leaves Chileans dismayed. "The problem is that the official exchange rate does not reflect economic reality. So I say that I have one million Argentine pesos and I divide it by 100 pesos when in reality if I want to bring the money I should divide it by 200, in half, and receive half," says Tubio.
And he adds: "That is the effect that companies that incorporate companies from Argentina in Chile are suffering today, without any solution."
Possible changes in the regulations
According to Tubio, the IASB (which regulates global accounting standards) is about to make an amendment to the regulation that aims to stop using the observed dollar, and that they are the exchange rates that are really used by business to make the conversion.
"By accounting standard, nothing can be done until this project is approved. Meanwhile, what many analysts do is say, 'let's see how much of Argentina is involved in this financial state'... Well, they divide it by two and calculate the effect," says a PwC analyst to La Tercera.
NE
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