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 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), showed a surplus of US$ 4,100 million in the second quarter of 2014, marking a strong recovery with respect to the deficit of about US$ 1,500 million registered in the first quarter of 2014 and the surplus of about US$ 1,700 million in the second quarter of the previous year.

The year-on-year improvement in the result of the foreign exchange market in the second quarter of the year by about US$ 2,400 million, was mainly due to two factors. First, due to the higher income of about US$ 1,600 million in debt placements and direct investment contributions, basically aimed at financing investments in the oil sector, and due to the fall of about US$ 1,500 million in net expenditures for services mainly due to the 56% reduction in net demand for tourism and travel and tickets.

The favorable balance of operations in the foreign exchange market with customers allowed the Central Bank to make purchases for a net of US$ 4,042 million, to meet payments for foreign trade operations channeled through the Local Currency Payment System in force with Brazil (SML) and by ALADI for a total of US$ 372 million. and other obligations, and increase international reserves in the quarter by US$ 2,271 million. This increase came after registering declines for eight consecutive quarters.

On the side of the use of international reserves, the cancellations of capital services and interest on the foreign currency debt of the public sector for US$ 1,632 million stood out, mainly for obligations with international organizations and with holders of public securities. Within the maturities of public securities services, payments for Discount maturities in foreign currency for US$ 833 million stood out. Of this total, US$ 539 million corresponded to funds that were deposited in the account of the payment agent bank, Bank of New York Mellon, at the Central Bank of the Argentine Republic, to be applied to the payment of the interest services corresponding to the Discount in US dollars and euros with foreign legislation.

After seven consecutive quarters with a deficit, the operations of the current account of the foreign exchange balance registered a surplus of US$ 1,170 million, reversing the result of the same period of 2013 by about US$ 1,200 million.

Net transfers by goods in the exchange balance registered a surplus of US$ 4,207 million, which implied an increase of 4% in year-on-year terms. The increase in net income for the period compared to the same quarter of the previous year was the result of a greater decrease in import payments compared to what was observed in export collections.

In the quarter of the year in which an acceleration of the marketing of soybeans and corn is usually observed due to the seasonality of their harvests, the oilseeds, oils and cereals sector recorded export collections of US$ 9,860 million, a level similar to those reached in the same quarters of 2012 and 2013. In the first half of the year, the sector’s export collections totaled US$ 14,862 million, remaining without significant variations in year-on-year terms.

The rest of the export sectors as a whole recorded collections for exports of goods for US$ 11,049 million, showing a decrease of 11% with respect to the value entered in the same quarter of 2013.

On the side of the main import sectors, the lower net payments of imports from the automotive, chemical and textile industries, and from the machinery and equipment and other manufacturing sectors, were practically offset by the higher import payments of companies linked to the energy sector, both debt for purchases from previous periods and for higher consumption as a result of the arrival of the winter season.

The different companies linked to the energy sector registered import payments of US$ 4,353 million during the second quarter of 2014, with a year-on-year increase of 38%. It should be noted that the level of payments in the sector for the first half of 2014 represented a record value of about US$ 7,300 million, with a year-on-year increase of 36%.

The capital and financial accounts of the non-financial private sector (NFPS) and the financial sector recorded surpluses of US$ 473 million and US$ 91 million, respectively. These revenues were partially offset by net expenditures from the public sector of US$ 36 million.