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 of 2013.

Main aspects

During the first quarter of the year, the international crisis continued to impact the region, causing decreases in foreign sales of its main economies. In the first three months of the year, Brazil’s exports fell by 7.7% in year-on-year terms, Mexico’s by 1.4%, Chile’s by 4.1% and Argentina’s by 2.5%.

This phenomenon, and other specific factors that affected the income from foreign sales of the agricultural sector, caused a reduction in the balance of foreign currency for goods in the Argentine exchange market in the first quarter. In this context, the operations of the entities authorized to operate in foreign exchange with their customers in the Single and Free Exchange Market (MULC) showed an average monthly deficit of US$ 339 million. In any case, the balance of the foreign exchange market changed sign in April, when operations with customers showed a surplus of about US$ 500 million.

The net demand of customers in the MULC in the quarter was covered by the financial institutions’ own positions, with the attention of the net payments of foreign trade operations channeled through the Local Currency System (SML) in force with Brazil and, additionally, with net sales by the Central Bank to the entities for US$ 256 million.

During the period, payments were made for capital services and interest on debt in foreign currency by the public sector and the BCRA for around US$ 1,000 million. Among other operations handled directly by the Central Bank, the net payments for foreign trade operations channeled by SML and ALADI for around US$ 350 million and the net withdrawals made by the entities from their accounts at the BCRA for around US$ 1,000 million stood out.

Consequently, during the first quarter of the year, international reserves decreased by US$ 2,844 million, totaling a stock of US$ 40,446 million at the end of March 2013. This level is around 60% of the stock of total public external debt and 180% of the maturities of that debt for principal and interest until 2015.

The operations of the current account of the exchange balance resulted in an average monthly deficit of US$ 754 million during the first quarter of the year, a situation that tended to be corrected during the month of April.

Revenues from collections of exports of goods totaled US$ 16,639 million, showing a 10% drop in relation to the value of the first quarter of the previous year. The oilseeds, oils and cereals sector recorded revenues from export collections of US$ 4,931 million, with a year-on-year decrease of 28%, while the rest of the sectors made settlements for US$ 11,708 million, without showing variations in year-on-year terms. Within the latter, the increases in export collections from the automotive and chemical, rubber and plastic sectors stood out.

Payments for imports of goods through the MULC reached US$ 15,703 million in the first quarter of the year, slightly higher than the total FOB imports for the period and experiencing a year-on-year growth of 5%. Companies linked to the energy sector registered import payments for US$ 2,143 million, with a year-on-year drop of 3%. In the quarter, approximately 4,600 operations of some 220 companies were registered through the SML for imports from Brazil for the equivalent of US$ 269 million, showing an increase of 19% with respect to the values recorded in the same period of 2012.

During the first quarter of 2013, there was an increase in net demand for services of about US$ 1,500 million compared to the same quarter of the previous year, mainly due to the behavior of the tourism, travel and tickets sector. In this regard, it should be borne in mind that the regulatory changes that took place in 2012 limit the year-on-year comparison of the series. In fact, while in the first quarter of 2012 the acquisitions of banknotes in foreign currency and traveler’s checks to cover expenses abroad were computed within the purchases of free availability, without distinguishing their final use and within the general limits for hoarding, in the first quarter of 2013 they were registered under the heading of tourism and travel.

On the other hand, the total capital and financial account of the foreign exchange balance (including both the public and private sectors) for the first quarter of 2013 showed improvements of US$ 1,311 million compared to the first quarter of 2012 and US$ 2,383 million compared to the first quarter of 2011, ending with a deficit balance of US$ 323 million.

The capital and financial account of the non-financial private sector showed an improvement of US$ 168 million compared to the first quarter of 2012 and US$ 1,537 million compared to the first quarter of 2011, ending with a deficit of US$ 331 million. The demand for foreign currency was destined to the net cancellation of financial loans for approximately US$ 1,000 million, basically due to the cancellation of local credits in foreign currency. These expenditures were partly offset by net income from foreign investments of US$ 548 million and freely available foreign assets of US$ 162 million.