Report on the Evolution of the Foreign Exchange Market and the Foreign Exchange Balance

Report on the evolution of purchases and sales of foreign currency in the foreign exchange market.

Executive summary

The world economy is growing at a modest pace, but with favorable prospects. There is evidence of a
divergence in the evolution of the different economies, mainly between the poor performance of the
advanced economies of Europe and the strong growth of the United States and some emerging economies
. The restrictive monetary conditions that began post-COVID have had an impact
on inflation levels. Particularly for the United States and the European Union, the drop in inflation
allowed the Federal Reserve (FED) and the European Central Bank (ECB) to lower interest rates for the first time
since 2020. The ECB has already done so twice in the year, while the Fed did so for the first time in September, with a half-point cut.

At the local level, within the framework of the “Incentive Regime for Large Investments” (RIGI), the BCRA established through Communication “A” 8099 of August 29, the exceptions in the obligatory nature of the entry and/or settlement of the equivalent value in foreign currency of exports of goods and the provision of services to non-residents. and the requirements to access the foreign exchange market for any concept of expenditure, including payments of profits and dividends to non-resident shareholders. On the other hand, under the “Asset Regularization Regime” established by Law No. 27,743 and regulated in Decree 608/2024 and Communication “A” 8062, a process of regularization of national or foreign currency holdings in cash in the country and/or abroad was initiated. Within the framework of the same, during August the entities received deposits in foreign currency for about USD 500 million while the total amount received since its inception is estimated to exceed USD 9,900 million at the time of publication of this report.

Regarding the result in the foreign exchange market, in August, the clients of the entities sold USD 120 million in the foreign exchange market and the entities sold USD 194 million. For its part, the BCRA arranged net purchases for USD 378 million and made net payments through the Local Currency Payment System (SML) for USD 64 million.

The “Non-Financial Private Sector” was a net seller of foreign currency for USD 504 million in the
foreign exchange market. Within this group, the “Oilseeds and Cereals” sector was the main sector offering foreign currency, registering net revenues of USD 1,745 million, largely explained by its result under the heading “Goods”. For its part, the “Real Sector excluding Oilseeds and Cereals” sector recorded net outflows of USD 861 million, while “Individuals” recorded net outflows of USD 385 million, mainly for expenses for travel, tickets and other consumption made with cards with non-resident suppliers.

In what was the exchange balance of August, the foreign exchange current account registered a deficit of USD 1,269 million in August, explained by net expenditures in the “Primary Income” and “Services” accounts of USD 1,243 million and USD 614 million, respectively, partially offset by the surpluses of the “Goods” and “Secondary Income” accounts of USD 576 million and USD 13 million. respectively. In turn, the foreign exchange financial account was in surplus of USD 1,051 million, a result that is explained by the surpluses of the “Financial Sector”, the “National Government and BCRA” and the “Non-Financial Private Sector” of USD 831 million, USD 346 million and USD 281 million, respectively, partially offset by the deficit of “Other Net Movements” of USD 407 million.

The BCRA’s international reserves increased by USD 317 million in August, ending the month at a level of USD 26,719 million. This increase was mainly explained by the increase in the price in U.S. dollars of the assets that make up the reserves for USD 543 million, by the settlements of net purchases of the BCRA in the foreign exchange market for USD 535 million and by the net capital inflows of international organizations (excluding the IMF) and other financial debts for USD 365 million. partially offset by gross payments of interest and commissions to the International Monetary Fund for USD 854 million (SDR 637 million), for the fall in the foreign currency holdings of the entities in the BCRA for USD 99 million and for the net payments made by the BCRA through the Local Currency Payment System (SML) for USD 64 million.