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 2015.

Main aspects

The operations arranged by the entities authorized to operate in foreign exchange with their customers in the Single and Free Exchange Market (MULC), showed a deficit of US$ 1,021 million in the first quarter of 2015, compared to the deficit of US$ 1,500 million registered in the same quarter of the previous year.

The difference in the result of about US$ 500 million compared to the deficit of the same quarter of 2014 was explained by several factors. First, net merchandise revenues of about US$ 1,700 million were recorded, exceeding the surplus observed in the same quarter of 2014 by about US$ 1,100 million. In second place, net income from external capital financing was recorded for about US$ 1,200 million, exceeding by just under US$ 400 million the revenues of the same quarter of the previous year.

Likewise, foreign direct investment inflows of about US$ 400 million were observed, doubling the income observed in the first quarter of 2014. Remittances abroad in the form of income were around US$ 500 million in the quarter, showing a year-on-year decrease of about US$ 150 million.

In the first quarter of 2015, net demand for tourism and travel and tickets reached US$ 1,900 million and net purchases of tickets for hoarding US$ 1,400 million, registering between both concepts an additional demand close to US$ 1,300 million in year-on-year terms.

The Central Bank made net sales in the foreign exchange market for US$ 1,062 million, which together with the payments of foreign trade operations channeled by the Local Currency Payment System in force with Brazil (SML) and ALADI for a total of US$ 324 million, meant a total of about US$ 1,400 million.

As for the uses with direct impact on international reserves, the cancellations of capital services and interest on the debt in foreign currency of the public sector totaled US$ 1,484 million, mainly due to obligations with international organizations and with holders of public securities.

For its part, the Central Bank continued to make partial use of the local currency swap agreement with the Central Bank of the People’s Republic of China.

The balance of operations of the current account of the foreign exchange balance registered a deficit of US$ 1,830 million in the quarter, showing a decrease of about US$ 300 million compared to the deficit of US$ 2,110 million in the first quarter of 2014.

Revenues from collections of exports of goods totaled US$ 12,885 million in the quarter, which implied a decrease of 15% compared to the value of the same quarter of the previous year. After the sectoral agreement with companies of the agro-export complex in the fourth quarter of 2014 for the entry of additional funds, and in a context of generalized fall in the international prices of raw materials, exports of oilseeds and cereals were recorded for some US$ 4,000 million in the first quarter of 2015. showing a year-on-year drop of 20%, that is, about US$ 1,000 million less, while the rest of the sectors as a whole totaled settlements of US$ 8,892 million, registering a decrease of 12%.

Payments for imports of goods from the exchange balance totaled US$ 11,191 million, which represented a year-on-year decrease of 23%.

The capital and financial account of the foreign exchange balance registered a surplus of US$ 2,169 million, mainly as a result of net income from the public sector and the BCRA for about US$ 2,400 million and from financial sector entities for approximately US$ 370 million.

The BCRA’s gross international reserves increased by US$ 47 million in the quarter, reaching a stock of US$ 31,490 million at the end of March 2015, a level that represented approximately 40% of the public external debt.