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 April.

Global economic activity continued to slow in recent months and global growth forecasts continued to decline. This scenario occurred in a scenario in which the persistence of high inflation led central banks in advanced economies to implement the largest cycle of contractionary monetary policy since the global financial crisis of 2008/09. While financial conditions for developing countries improved at the margin, a mostly adverse environment of high interest rates and net capital outflows still prevails.

On April 10, a new edition of the “Export Increase Program” was put into effect, which establishes an exchange rate of $300 for every USD 1 for income through the foreign exchange market for exports of the soybean complex and other products of the regional economies.

In April, the entities’ customers bought USD 226 million in the foreign exchange market, of which the BCRA sold USD 117 million in the market (purchases for USD 1,613 million within the framework of the “Export Increase Program” and net sales for the rest of the flows for USD 1,730 million) and made net payments through the Local Currency Payment System for USD 101 million. while the entities sold USD 8 million.

The “Non-Financial Private Sector” was a net buyer of foreign currency for USD 413 million in the foreign exchange market. Within this group, the main sector in terms of net sales, “Oilseeds and cereals”, recorded net revenues of USD 2,044 million, 39% less than in the same month of 2022, mainly explained by the severe drought that seriously affects the agricultural production of the main export products.

The “Real Sector excluding Oilseeds and Cereals” was a net buyer of foreign currency for a total of USD 1,923 million, exhibiting a year-on-year reduction of 26%. These purchases were mainly intended to make net payments for imports of goods and services.

“Individuals” bought USD 429 million net, mainly for travel, tickets and card consumption with non-resident suppliers (with a net of USD 259 million) and for hoarding (with a net of USD 143 million for ticket purchases).

The “Institutional investors and others” sector, both resident and non-resident, made net purchases in the month for USD 105 million, mainly as net payments for imports of goods.

The foreign exchange current account, which includes net flows from net exports of goods and services and primary and secondary income, registered a surplus of USD 71 million. This result was explained by net income from the “Goods” account of USD 903 million, partially offset by net outflows from transfers for “Services”, “Primary income” and “Secondary income” of USD 506 million, USD 310 million and USD 15 million, respectively.

The financial account of the “Non-Financial Private Sector” had a deficit of USD 852 million in April, highlighting the purchases of foreign assets for USD 395 million, payments for foreign loans and debt securities for USD 317 million, the records for the cancellations of balances in foreign currency with local entities for the use of cards with non-resident suppliers for USD 215 million (which do not entail a demand net of foreign currency in the financial account)1, the records of exchange operations for transfers abroad for USD 56 million (largely explained by the recording of the counterpart of income from travel and tickets without the obligation to settle in the foreign exchange market, for more information see Section III.1.2.), partially offset by net income from local financial loans of USD 76 million and by income from foreign direct investment of USD 58 million.

In April, the operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 170 million. This result is mainly explained by the decrease of USD 179 million in the liquid foreign assets of the entities that make up the General Exchange Position (PGC). On the other hand, the operations of the foreign exchange financial account of the General Government and the BCRA resulted in a deficit of USD 2,823 million, mainly explained by capital payments to the International Monetary Fund of USD 2,668 million (equivalent to 1,975 million SDRs).

In April, the BCRA’s international reserves decreased by USD 4,059 million, ending the month at a level of USD 35,001 million. This decrease was mainly explained by capital payments to the International Monetary Fund of USD 2,668 million (equivalent to SDR 1,975 million), by the fall in foreign currency holdings of entities in the BCRA by about USD 900 million and by net payments settled by the BCRA through the Local Currency Payment System.