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.

Main aspects

Inflation in advanced countries has been persistent, and central banks in those countries have continued to raise interest rates and tighten liquidity. This, added to the financial turbulence that began during March, increased recession risks, especially in advanced economies, which had a downward impact on commodity prices, which, in general, registered levels prior to the war between Russia and Ukraine. Added to this international panorama is the drought that has been experienced in the national territory, which has generated a great decrease in the quantity and quality of the exportable product that was expected for the year.
In this context, on July 24, the National Government established through Decree 377/2023 the application of the “PAIS Tax” to imports of a large part of goods and services with rates of 7.5% and 25%, respectively, with exceptions. In turn, the Federal Administration of Public Revenues (AFIP) published on the 25th of the same month General Resolution 5393/2023, which raises the advance income tax applied to the acquisition of foreign currency for hoarding, remaining at 45%.
Along the same lines, and in order to encourage exports, the National Government modified the current
“Export Increase Program” through Decree 378/2023 of July 24, providing an exchange rate of $340 for every USD 1 for income through the exchange market for exports of products from regional economies. Additionally, through Resolution 216/2023 published on July 24 by the Ministry of Agriculture, Livestock and Fisheries, new eligible products (including corn) were included within the group of regional economies.
In this context, during July, the customers of the entities bought USD 213 million in the foreign exchange market, while the entities made purchases for USD 36 million. For its part, the BCRA sold USD 179 million in the market (purchases for USD 1,227 million through the Export Increase Program) and made net payments through the Local Currency Payment System for USD 71 million.
Likewise, the National Treasury directly acquired USD 1,193 million from the BCRA.
The “Non-Financial Private Sector” was a net buyer of foreign currency for USD 186 million in the
foreign exchange market. Within that group, the main sector in terms of net sales, “Oilseeds and cereals”, recorded net revenues of USD 1,583 million, 41% less than in the same month of 2022. The lower net income from goods in the sector during July is due to the effects of the drought on exportable output.
The “Real Sector excluding Oilseeds and Cereals” was a net buyer of foreign currency for a total of USD 1,269 million, exhibiting a year-on-year reduction of 57% of its purchases, mainly explained by the deficit of the Goods and Services accounts.
“Individuals” netly purchased USD 518 million, mainly for travel expenses and other consumption made with cards with non-resident suppliers (with a net result of USD 319 million) and for hoarding (with a net of USD 171 million for ticket purchases).
The “Institutional investors and others” sector, both resident and non-resident, made net sales in the month of USD 17 million.