Why are supermarket prices in #Lebanon so high? I'll explain with the following model.
Any big supermarket needs a loan to bring products to shelves. Loans are in USD.
Today, A, owner of SuperMarket, decides to buy 10 chickpea bags from the Lebanese producer, priced at 1,500LL each, or 1$. So A takes a 10$ bank loan, changes them to 15,000LL and buys the 10 bags.
A needs 11$ to payback his loan (after interests). A makes his calculations and concludes that he should sell the whole bulk for 12$ so that the entire operation is profitable. So it's 1.2$ per bag. Nevertheless, A decides to price each bag at 6,000LL. *EXPENSIVE! THIEF!*
A month later, after A managed to sell all his chickpeas, A is ready to payback his USD loan, but he has 60,000 LBP that he must convert to USD. A goes to the bank and asks to convert his 60,000 LBP to USD. The bank declines, arguing that it doesn't have USD at the moment.
A has 2 options. Either A defaults on his loan and declares bankruptcy, or A looks for other alternatives to convert his LBP to USD. A goes to his friend B, who would only give him 12$ for the 60,000LL, arguing that each dollar in the market is worth 5,000LL.
A accepts the deal, because, after all, those were the 12$ he initially expected. A paybacks his USD loan, making the original 1$ profit he expected.
Did A overprice his products? Maybe, but A did a simple FX hedging plan to protect himself from bankruptcy.
Did A overprice his products? Maybe, but A did a simple FX hedging plan to protect himself from bankruptcy.
Now let's modify a bit the story. A did not price each bag at 6,000LL on day 1. In fact, he kept on changing the price tag as the black market USD rate was rising. Price tag was 1600LL, then 2000LL, then 3000, then (...) jumped to 6000LL. Because, remember, A's loan is in USD.
That's how more or less, for years, supermarkets and other businesses have been functioning for non-subsidized products in Venezuela.
So please, instead of attacking supermarkets and retailers, focus your anger on those who, for years, have led us to this tragedy. #كلن_يعني_كلن
Hey guys. Please check this thread and RT the first tweet if you liked :) @Beirutspring @LeNajib @GinoRaidy @dan_azzi @Omar__AJ
