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 third quarter of 2013.

Main aspects

Since the beginning of 2013, in the context of the global economic situation, there has been a slowdown in the evolution of exports from the main countries in the region, both in terms of volumes sold and their prices. Imports of goods from these countries showed some growth as a result of higher consumption. As a result, the balances of the trade balance of goods showed a significant drop in the accumulated of the year with respect to the surpluses observed in the same period of 2012.

Although with a larger trade surplus than the other countries in the region, Argentina was not exempt from this situation. In the first nine months of 2013, the trade balance of goods in FOB terms resulted in a surplus of about US$ 9,600 million, which represents a reduction of US$ 2,700 million compared to the result of the same period in 2012.

In this context, to which must be added the impact of the end of the most seasonally important period of export settlements and the usual behavior of the private sector in the pre-election periods, the purchase and sale of foreign currency of the entities authorized to operate in foreign exchange with their customers, during the third quarter of 2013, they showed a deficit of US$ 2,667 million.

Within the framework of the managed floating exchange rate policy, the Central Bank made net sales in the foreign exchange market for US$ 1,831 million and made net payments for foreign trade operations channeled through the Local Currency Payment System in force with Brazil (SML) and by ALADI for US$ 317 million in the third quarter. Also noteworthy in the quarter were the payments of capital services and interest on debt in foreign currency by the public sector and the BCRA for around US$ 1,050 million.

Net income from subscriptions of the Certificate of Deposit for Investment (CEDIN) and the Argentine Savings Bond for Economic Development (BAADE), totaled about US$ 300 million in the aforementioned period.

The BCRA’s international reserves decreased by US$ 2,264 million in the quarter, reaching a stock of US$ 34,741 million at the end of September 2013, a level that represents approximately 50% of the public external debt. In this regard, it should be noted that this ratio was around 25% during the period of the Convertibility regime. The stock of international reserves at the end of September was equivalent to almost twice the accumulated maturities of principal and interest on public sector debt maturing in the last quarter of 2013 and in 2014 and 2015.

The balance of operations of the current account of the foreign exchange balance of the third quarter of the year registered a deficit of US$ 3,665 million. The fall with respect to the result recorded in the same quarter of the previous year was basically due to the reversal in net transfers for goods for about US$ 2,400 million and the higher net outflows channeled for services and rents for US$ 658 million and US$ 274 million, respectively.

Revenues from collections of exports of goods totaled US$ 19,999 million in the third quarter of the year, a level 1% lower than the collections of exports in the third quarter of 2012. The oilseeds, oils and cereals sector recorded export revenues of US$ 7,596 million, a level that was 10% lower than that recorded in the same quarter of the previous year. For their part, the rest of the sectors registered settlements for the collection of exports of goods for US$ 12,403 million, showing an increase of 5% in year-on-year terms.

The reduction in the debt stock of the oilseed, oil, and cereal export export sales was associated, on the one hand, with changes in the forms of financing and, on the other hand, with the decrease in foreign sales. With respect to the first point, as of the second quarter of 2012 it was observed that the sector replaced financing in foreign currency with local financing in pesos, which implied a reduction of 34% year-on-year between the second quarter of 2013 and the same period of 2012 of the lines in foreign currency and, at the same time, a 46% year-on-year increase in loans in pesos.

Payments for imports of goods through the foreign exchange market in the quarter reached US$ 20,313 million, registering a year-on-year increase of 12% and constituting the historical record of payments since the beginning of the MULC in 2002. Payments exceeded FOB imports in the period by about US$ 840 million, which were around US$ 19,500 million (registering a year-on-year increase of 9%).

Operations recorded in the concept of services totaled net expenditures of US$ 2,252 million in the third quarter of 2013. This result was explained by net expenditures for tourism and travel and tickets for about US$ 2,000 million, freight and insurance for about US$ 450 million, and royalties and other services for about US$ 500 million. These expenditures were partially offset by net income from business, professional and technical services of around US$ 650 million. Likewise, the drawings for profits and dividends exceeded by about US$ 350 million what was operated by the concept in the same quarter of 2012.

The capital and financial account of the foreign exchange balance for the third quarter of 2013 resulted in a surplus of US$ 1,080 million, registering an improvement of about US$ 2,500 million compared to the deficit of the third quarter of 2012.

Direct investments by non-residents were around US$ 730 million, with a year-on-year increase of US$ 150 million, mainly explained by income from contributions from the oil sector for the implementation of the exploitation of unconventional resources.