March 25, 2023

If someone thought that the reduction in VAT on food that the Government discovered was going to serve to lighten the cost of their shopping cart, they may be misled or they do not know how trade margins work on these types of products. basic, widely consumed, but at low prices. If the VAT cut had occurred in all meat and fish, which move more volume and more price in the Spanish diet, another rooster would sing. But starting now to make speculations or launch complaints against supermarkets because the drop is not noticeable in the shopping cart or is not even seen in the daily price of basic foods, is an exercise in demagogy that seeks more social alarm founded than anything else.

The margins of supermarkets and large stores are adjusted to the maximum and do not usually exceed 2%, something that has been very difficult to maintain with the sharp rise in costs they have suffered, both wages and, above all, fixed costs (electricity, transport, logistics, heating, cold, etc…) and those that have already been produced in food at source, which is where energy has the greatest impact (diesel, fertilizers, light, seeds, etc…) and where the great rise and the beginning of all the males that now want to blame the supermarket shelves. And in the case of small businesses, the reduction in the lowest VAT does not leave room to handle or manipulate anything either. They need more to adapt their businesses to what they find every day in the ‘mercados’ or what comes to them from the suppliers, with which the drop in VAT can be seen or not, depending on what happens each day and the scandal that has to be done.

And if someone is capable of monitoring all the prices in supermarkets and small stores every day, setting up an excel and starting to report them, they should not be too upset because time will take care of making the data meaningless from one week to the next, as the market evolves and a whole series of costs that fluctuate every day throughout the food value chain, those that are with reduced VAT and those that are not. The opposite is setting maximum prices and fully intervening in the business of distribution and merchants in this country, something inconceivable in a free market economy like the one we have and with which we are not doing so badly as to reach quasi measures. ‘Soviet’ that reminds us of other times and other places where people were (and still are) hungry.

It will be better that instead of entering into that demagogic game of who removes or puts a few more VAT cents on the dozen eggs, we closely monitor the measures of greater depth that the Government has launched to curb inflation. For example, everything that begins with the generation and distribution of checks for 200 euros for vulnerable families, so that they are not badly late and never. Or, well above all that and more in the medium and long term, the evolution of the gas and electricity market, which despite currently enjoying a good run, could turn everything upside down very soon.

The Iberian exception of which Sánchez and Bolaños are so presumed (lately even more so than Ribera) has an expiration date. It will last just to fuel the speeches in the regional and municipal elections in May. Even very justified, because by that date it should already have been decided whether to propose to the EU an extension of that very low gas price for Spain and Portugal, which they reluctantly granted us, or to opt for the maximum limit set by the EU, which is well above what we have now. Portugal will not care, because their energy generation is different and they do not pay compensation to the electric companies (we Spaniards do), but if the EU stands up and we are all equal with the 180 euros per megawatt cap (as it would be logical), the difference between the maximum of 70 that there will be in May and that level could be very harmful for Spain, in the middle of a fight with inflation.

In May and June, after the winter, they will have taken a serious cut in gas reserves, which will have to be replenished. In other words, the demand will be on the rise, without having yet separated from the Russian supply. It is not likely that in just five months the market reform that Europe is preparing to determine the price of each day will be carried out without going through the yoke of the Dutch TTF that Putin dominates, at the gates of a summer that aims to be so hot like the one that has passed, with little wind, the unfinished plot and the only option to resort to gas at peak demand. They are not speculations, it is the scenario last summer, in which gas rose so much that the compensation paid to the electric companies became higher than the price of the Iberian exception, the one we now boast about because there is more wind, nothing else

The question is, is Brussels going to allow Sánchez to continue with his cap reduced to gas so that he can boast of measures in the general campaign, which is what really matters to him? Or are we going to be at risk of what the market and Russia say again, with movements of large strategic companies in the making that will also have to go through the Moncloa tables? With all that is coming up, the least important thing is the VAT centimillos reduced by half. If energy is not controlled, inflation does not go down and rates do not stop rising, and that translates into the electricity bill and the mortgage. That is the key. Let’s not get distracted by the supermarket.

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