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 2015.

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$ 3,086 million in the second quarter of 2015, resulting in a surplus of US$ 1,000 million lower than the positive result of US$ 4,100 million recorded in the same quarter of the previous year.

Net transfers for goods, the main source of income in the foreign exchange market, totaled US$ 3,421 million in the quarter, decreasing about US$ 800 million compared to the surplus of the account in the same quarter of 2014.

Net income from external capital financing was also recorded for about US$ 2,800 million, exceeding by about US$ 1,300 million those of the same quarter of the previous year. Of particular note were the revenues of the oil sector and local governments from the placement of debt securities in foreign currency for about US$ 2,000 million, the disbursements received from international organizations for different public sector programs for about US$ 500 million, basically for investment in infrastructure, education and health, among others, and those corresponding to different telephone companies due to a new allocation of 3G and 4G frequency bands in the framework of the public tender for radio spectrum, for about US$ 200 million.

On the other hand, net remittances abroad for income totaled US$ 450 million in the quarter, showing a year-on-year decrease of about US$ 600 million. Other demand factors in the market were net expenditures for tourism and travel and tickets, which reached US$ 1,800 million, and net purchases of tickets for treasury, which totaled about US$ 1,400 million, registering between both concepts an additional demand close to US$ 1,800 million in year-on-year terms.

The Central Bank made net purchases in the foreign exchange market for US$ 2,980 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 US$ 336 million, meant a total of about US$ 2,650 million.

Likewise, on the side of the sources of increase in international reserves, the placement in April by the National Government of BONAR 2024 for an effective value of US$ 1,458 million was highlighted.

As for the uses with direct impact on international reserves, the cancellations of capital services and interest on the public sector’s foreign currency debt totaled US$ 2,606 million, mainly due to obligations with international organizations and with holders of public securities.

The operations of the current account of the exchange balance showed a deficit of US$ 315 million, showing a decrease of about US$ 1,500 million compared to the surplus of US$ 1,170 million in the second quarter of 2014, basically explained by lower net income from goods and higher net expenditures from services (particularly tourism and travel and tickets).

Revenues from collections of exports of goods totaled US$ 17,925 million, which implied a year-on-year decrease of 14%. The oilseeds, oils and cereals sector recorded export revenues of US$ 8,742 million, which implied a decrease of 11% compared to the same quarter of the previous year, essentially associated with the reduction in international prices of the main agricultural commodities exported by our country. On the other hand, settlements in the rest of the sectors totaled US$ 9,183 million, registering a decrease of 17% with respect to the value received by this group in the same quarter of 2014.

Payments for imports of goods from the exchange balance reached US$ 14,520 million, which represented a year-on-year decrease of 13%. This year-on-year decline was observed in the main sectors of activity, highlighting companies related to the energy sector and the automotive and chemical, rubber and plastic industries.

The capital and financial account of the foreign exchange balance registered a surplus of US$ 2,615 million, mainly as a result of net income from the public sector and BCRA of about US$ 2,810 million, partially offset by the net outflows of financial sector entities for US$ 130 million and the non-financial private sector (NFPS) for about US$ 20 million.

The BCRA’s gross international reserves increased by US$ 2,362 million in the quarter, reaching a stock of US$ 33,851 million at the end of June 2015. This level, the highest close in the last seven quarters, represented approximately 43% of public external debt. In this regard, it should be noted that this ratio was around 25% during the period of the Convertibility regime.