If you look at it on paper, growth in Argentina’s prestige cosmetics market looks healthy, even in volume terms. Market-research company Segmenta reported that for 2013, prestige retail sales were up by 39.67% in value and by 10.83% in units. (Segmenta covers 51% of the prestige market in Argentina.) However, the reality for cosmetics firms—manufacturers, distributors and retailers alike—is another story.

Argentina’s economy has long been troubled, but since 2012, the government of President Cristina Fernandez de Kirchner has been tightening restrictions on imports—first, by enforcing a system whereby for every dollar of product imported, the same amount must be exported, and then by introducing a pre-registration and approval system for all imports.

At the same time, consumers in the country—accustomed to the devaluation of the peso and to saving in dollars—saw strict currency controls enforced to prevent capital leaving the country. Most recently, the tax on credit card purchases in dollars was increased from 20% to 35%, to discourage the population from spending in foreign currency when traveling abroad or buying in the duty-free channel.

“Argentines are big consumers,” says Beauté Prestige International general manager for the Americas, Gérard Pichon-Varin. “A large part of this is because their peso devalues so quickly that as soon as they have any money, they spend it.” He continues, “If they put a thousand pesos into an account, three months later, it would be worth 10% less—so what’s the point in saving?”

To read BW Confidential’s full report on Argentina’s market click here.