Argentina is heading for third consecutive year of trade surplus above 3% of GDP

RIO DE JANEIRO, BRAZIL – The November commercial balance maintained the dynamics of previous months and showed a surplus balance of US$ 1.601 billion in October (+US$ 931 million over October 2020).

This was the result of exports that reached US$6.848 billion (+46.5% y.y.) and exceeded imports, which reached US$5.247 billion (+31% y.y.). In turn, trade exchange increased by 39.4% compared to October 2020 and reached US$12.095 billion.

According to the consulting firm ABECEB, Argentina would achieve a trade surplus equivalent to 3.4% of GDP with these figures.

With these last data, in the first ten months of the year, exports accumulated US$65.141 billion (+39.1% y.a.), while imports reached US$51.201 billion (+49.1% y.a.). Thus, the accumulated trade balance up to October exceeds the annual balance of 2020 (US$12.530 billion) and reaches US$13.940 billion.

But despite the good numbers, the incoming dollars were not enough to cover the strong demand for dollars that was verified since September before the elections, and that seems to be maintained.

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“Although the Free and Single Exchange Market (MULC) data for October are not yet available, the dynamics that were evidenced in previous months and the net foreign currency sales of the BCRA in the tenth month of the year reflect that the increase in the surplus trade balance did not have as a counterpart a similar dynamic in the MULC,” they said in the report.

“In fact, not only were there not enough dollars, but the supply of foreign currency was not even enough to cover the demand, which is why the monetary authority ended up with a net seller balance of US$207 million in that market”.

ABECEB points out as leading causes the latest regulations carried out by the Central Bank (BCRA) and the National Securities Commission (CNV) to limit the outflow of the drain of reserves. “The lack of clear economic and political signals encourages agents to increase the demand for dollars and reduce their supply, which ends up overshadowing any kind of positive news that may arise from foreign trade.”

THE DYNAMICS OF EXPORTS

“In October, exports increased 46.5% with respect to the same month of 2020 (+US$2.174 billion), thanks to an unprecedented increase in prices of 28% and to a lesser extent in quantities of 13.6%. Although all items showed year-on-year increases, exports of primary products were among the most dynamic (+73.7% y.a.), influenced by a shallow base of comparison, after the rearrangement of stocks promoted by China towards the end of last year (soybeans and corn grain),” according to the report.

On the other hand, shipments of manufactured goods of agricultural origin fell in quantities but were boosted by prices. As for meat exports, “they continue to suffer from a restrictive restraint and fell again.”

“In turn, exports of manufactures of industrial origin increased by 56.8% in one year, driven, in part, by a low base of comparison, since by the end of 2020 industry and consumption had not fully normalized for our main partners.

As a result, exports of chemicals have doubled compared to 2020, and those of plastics have increased by 60% and those of metals by 124% in one year. Shipments of transport material also maintained a good performance (+41%), although slowing down compared to previous months”, added the consultant.”

This year seems to be positive for Argentina, ABECEB points out that “thanks to the greater magnitude of the increase in export prices with respect to the increase in import prices, the country recorded a gain in terms of trade of US$454 million in October. In turn, by replicating such analysis in the accumulated ten months 2021, the gain would be US$5.707 billion so far this year.”

With a 10-month accumulated trade balance of US$13.9 billion and with exports that will continue to grow above imports in the remainder of the year, 2021 would close with an estimated trade surplus of US$16 billion, equivalent to 3.4% of GDP. It would be the third consecutive year with a trade balance above three product points (in 2019, it was 3.5%, and in 2020 it was 3.2%).

OUTLOOK FOR 2022

From ABECEB, they estimate that at international level, problems in supply chains could complicate the dynamics of foreign trade flows at least until the middle of the end of the year. On the other hand, they point out the increase in freight costs, especially from China.

“Difficulties in Brazil’s automotive production due to the lack of normalization in the flow of chips will also continue to influence auto parts exports to the neighboring country.”

“Towards 2022, we expect agricultural exports to remain at levels practically equivalent to those of 2021, adding US$ 30.26 billion to 2022 exports that could reach US$ 77 billion. Entering the period of low seasonality of agro-industrial shipments, the key for 2022 lies in how climate factors evolve, in a price scenario that we do not expect to change too much and that, in the accumulated of the year, will be negative,” ABECEB concluded.