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

This report analyzes the evolution of purchases and sales of foreign currency in the foreign exchange market, corresponding to the first quarter 207.

The operations of authorized entities with their clients in the Single and Free Exchange Market (MULC) in the first three months of the year, yielded a record surplus of US$ 3,368 million for a first quarter. This result represented an increase of approximately 50% over the surplus recorded in the first quarter of 2006 (US$ 2,217 million).

The year-on-year increase in the surplus of about US$ 1,150 million was mainly due to higher net receipts from goods and services, and the reversal of flows from freely available foreign assets of the non-financial private sector (NFPS).

With the first quarter of 2007, nineteen consecutive quarters have been accumulated with positive results in operations with customers of the entities authorized in the MULC, with the trade surplus remaining the main source of foreign exchange.

For the second consecutive quarter, the total volume traded in the MULC reached a new historical record, US$ 64,561 million, an amount US$ 1,650 million (3%) higher than the previous record (US$ 62,906 million), and US$ 12,350 million (24%) higher in year-on-year terms.

The current account of the foreign exchange balance registered a surplus of US$ 2,797 million which, as mentioned for the result of operations with customers in the MULC, is the maximum value for the first quarter of the year, reflecting an increase of about US$ 650 million (30%) compared to the result of the same period of the previous year.

Collections of exports of goods totaled US$ 11,206 million, growing 26% year-on-year, while payments for imports of goods reached US$ 7,712 million, showing a growth of 25% compared to the same period in 2006.

A new quarterly high was once again recorded in net revenue from services (US$ 407 million), basically explained by revenues from tourism and travel and professional and technical services.

The operations of the foreign exchange capital and financial account in the first three months of the year resulted in a net income of US$ 1,803 million, an amount that represented a record surplus for these operations since the MULC came into force. The surplus was driven by both private and public sector net incomes.

NFPS revenues included the net supply of unavailable foreign assets of US$340 million (compared to a net demand of about US$470 million in the first quarter of 2006) and net income from direct investments by non-residents of about US$480 million, with a year-on-year growth of 70%.

The net income of the public sector reflected the new placements of public securities made by the National Government of Bonar VII and Boden 2015.

The increase in international reserves in the January-March 2007 period by US$ 4,813 million was a record for a quarter, and at the end of March it reached a stock of US$ 36,849 million, a level that exceeded by US$ 15,300 million the stock registered at the same date of the previous year and quadrupled the minimum levels of mid-2002.