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 second quarter of 2013.

Main aspects

The purchase and sale of foreign currency in the Single and Free Exchange Market (MULC) of the entities authorized to operate in foreign exchange with their customers, showed a surplus of US$ 1,127 million in the second quarter of 2013, a result that meant an improvement of around US$ 2,100 million compared to the result of the first quarter of the year. The improvement in the behavior of the foreign exchange market mainly reflected the higher income from liquidations of the agricultural sector.

The export sector of oilseeds, cereals and derivatives, registered collections of exports of goods for about US$ 9,870 million, raising its settlements by almost US$ 5,000 million compared to the level of the first quarter of the year. In the first half of the year, the sector decreased export revenue by 12% in year-on-year terms. In this regard, it should be remembered that the 2012/13 grain production is estimated at around 106 million tons, which would constitute an all-time record with an increase of 16% compared to the previous season.

The Central Bank made net purchases in the foreign exchange market for US$ 1,539 million in the quarter and made net payments for foreign trade operations channeled through the Local Currency System (SML) in force with Brazil and ALADI for US$ 350 million. On the application side, payments of capital services and interest on debt in foreign currency by the public sector and BCRA stood out for around US$ 4,500 million.

At the end of June 2013, the BCRA’s stock of international reserves totaled US$ 37,005 million, a level that represented approximately 55% of the public external debt. This ratio was around 25% during the period of the Convertibility regime. The stock of international reserves is equivalent to about 195% of the maturities of principal and interest on public sector foreign currency debt if the maturities of the next 30 months are considered.

The balance of current account operations of the foreign exchange balance in the second quarter of the year represented a substantial improvement compared to the previous quarter, with a reduction in the deficit of around US$ 2,200 million.

Revenues from collections of exports of goods totaled US$ 22,296 million in the quarter, showing a decrease of 1% compared to revenues in the second quarter of 2012. This variation is influenced by the extraordinary foreign exchange income for the month of May 2012, based on the established regulation that set the maximum period of 15 working days from the date of collection, for the negotiation of foreign currency in the foreign exchange market, also applicable to collections that were pending settlement.

Payments for imports of goods through the foreign exchange market reached the second all-time high, US$ 18,248 million, showing a year-on-year increase of 17%. Unlike what was observed in the previous quarter, payments through the foreign exchange market in the second quarter were about US$ 800 million below FOB imports for the period (which were around US$ 19,000 million).

Operations recorded for services totaled net expenditures of US$ 2,347 million, highlighting the net expenditures for tourism and travel of about US$ 2,200 million in the quarter, an amount slightly lower than that recorded in the immediately previous quarter.

The capital and financial account of the foreign exchange balance for the second quarter of 2013 registered an improvement of about US$ 3,350 million compared to the deficit observed in the second quarter of 2012. This improvement was basically due to regulatory changes in access to the foreign exchange market for the formation of freely available foreign assets (hoarding) of residents, and to the smaller fall in foreign currency deposits of the private sector. The deficit of the capital and financial account in the second quarter of 2013 of US$ 2,675 million, was basically due to the payments of external debt made by the public sector and the BCRA.