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 May.

Continuing in the context of the COVID-19 pandemic, with impacts on both the level of global and local activity, trade flows and capital movements, and in parallel with the progress in the negotiations for the restructuring of the public external debt, customers of financial institutions bought USD 755 million in the foreign exchange market in May. which were covered by net sales of the BCRA and entities for USD 679 million and USD 76 million, respectively.

It is worth mentioning that as of the entry into force of Communication “A” 7030, a reversal was generated in the result of operations of the clients of entities, a situation that allowed the BCRA to accumulate international reserves in the following weeks, starting with net purchases of USD 279 million during the last day of May.

Companies in the real sector were net sellers of foreign currency for USD 23 million.

Within this group, the main sector in terms of historical net sales, “Oilseeds and cereals”, had net sales of USD 1,709 million, with a year-on-year decrease of 37%. It is important to remember that, during last November and December, the sector sold USD 4,600 million net (a year-on-year increase of 84%, basically due to higher income from advances and pre-financing from abroad, whose debt stock has been canceled during 2020), and that the records of foreign sales (which define the payment of export duties) for all of 2019 were above the year’s exports by about USD 8,500 million.

Companies in the “Real Sector excluding Oilseeds and Cereals” made net purchases of USD 1,685 million, mainly to make payments for imports of goods and services. This level of net purchases for the sector has not been observed since August 2019.

“Individuals”, who basically buy foreign currency for hoarding, travel and other consumption abroad, bought USD 534 million net (USD 438 million for banknotes and about USD 83 million for travel and other card expenses that fell 81% year-on-year, given the context of border closures).

“Institutional and other investors,” both resident and non-resident, made net purchases in the month for USD 12 million.

The foreign exchange current account, which includes the net result of foreign exchange operations recorded as net exports of goods and services, and primary and secondary income in line with the definitions of the Balance of Payments, registered a deficit of USD 322 million.

The financial account of the “Non-Financial Private Sector” had a deficit of USD 739 million in May, as a result of net cancellations of financial debt and the formation of foreign assets, partially offset by income linked to direct investments.

The operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 877 million, explained by the decrease in the liquid foreign assets of the entities that make up the General Exchange Position (PGC), partly offset by cancellations of financial loans and credit lines.

The operations of the foreign exchange financial account of the General Government and the BCRA registered a net outflow of funds of USD 4 million, which was basically explained by the net cancellation of financial debt through the use of funds that were previously deposited (“swaps”) and the local settlement of funds that were in foreign currency.

During May, the BCRA’s international reserves decreased by USD 980 million, ending the month with a stock of USD 42,588 million.