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 fourth quarter of 2014.

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), resulted in a surplus of US$ 252 million in the fourth quarter of 2014, marking a strong recovery with respect to the deficit of about US$ 5,000 million recorded in the fourth quarter of 2013 and implying a reversal of about US$ 400 million with respect to the deficit observed in the immediately previous quarter.

This result occurred within the framework of a series of measures with an impact on monetary, financial and exchange rate variables, particularly highlighting the implementation of agreements for the entry of funds in addition to those necessary to attend to the operations of the agro-export sector, implemented through Communication “A” 5655 of this Central Bank. the establishment of minimum interest rates for retail fixed terms of individuals in order to encourage savings in local currency and the voluntary early cancellation of the BODEN 2015, together with the option of exchanging these bonds for BONAR 2024 and the extension of the issuance of these last bonds.

In addition, in the quarter, the first three tranches of the local currency swap agreement with the Central Bank of the People’s Republic of China were activated, with the BCRA being able to request exchanges for up to a maximum of close to US$ 11,000 million in total.

The Central Bank made net purchases in the foreign exchange market for US$ 746 million, which net of payments for foreign trade operations channeled by the Local Currency Payment System in force with Brazil (SML) and by ALADI for a total of US$ 143 million, meant a total of about US$ 600 million. acquiring both the surplus in the MULC and the net spot sales of foreign currency of the entities. Also contributing to the rise in international reserves was the increase in the current accounts in foreign currency of the entities at the Central Bank, highlighting the increase in deposits due to the income from disbursements of international organizations destined to different public sector programs, whose agreements were signed during the quarter.

On the other hand, the cancellations of capital and interest services on the public sector’s foreign currency debt totaled US$ 1,425 million, mainly due to obligations with international organizations and with holders of public securities.

As a result, the BCRA’s gross international reserves increased in the quarter by US$ 3,577 million, showing the highest quarterly increase since the first quarter of 2008.

The operations of the current account of the foreign exchange balance resulted in a deficit of US$ 956 million in the quarter, showing a significant improvement compared to the same quarter of the previous year (about US$ 6,400 million). This result was basically due to net transfers of goods from the foreign exchange balance, which registered a net foreign exchange income of US$ 2,176 million, which implied a reversal of US$ 5,100 million with respect to the result recorded in the same quarter of 2013.

Revenues from collections of exports of goods totaled US$ 15,974 million, which implied a decrease of 2% in year-on-year terms, while payments for imports of goods totaled US$ 13,798 million, with a year-on-year drop of 28%.

Within the framework of the sectoral agreement for additional income with companies in the agro-export complex, the oilseeds and cereals sector recorded export collections of about US$ 5,600 million, with a year-on-year increase of 22%, that is, about US$ 1,000 million. In addition to these incomes, the income into the accounts of entities in the BCRA for funds pending agreement within the framework of this agreement, which totaled a stock of about US$ 200 million at the end of 2014, must be taken into account. The rest of the sectors as a whole recorded export revenues of US$ 10,375 million, 12% below the value recorded in the same quarter of 2013.

The foreign exchange capital and financial account was in surplus of US$ 4,683 million, showing an increase of about US$ 1,300 million in year-on-year terms, mainly due to the surplus in the public sector account and BCRA of US$ 4,392 million.