Argentina: Trade deficit with Brazil grows and is the highest in the last four years

According to a private report, the trade deficit with Brazil deepened in July and is the highest in the last four years.

The imbalance reached US$370 million for Argentina, the largest trade deficit since June 2018.

In turn, it meant a significant deterioration compared to the results of the first half of this year (US$225 million on average).

The trade flow between Brazil and Argentina reached US$2.42 billion in July and grew much slower than in the last two months (26.2% y.y. vs. 43.7% y.y. on average), reported the consulting firm ABECEB.

That was the result of imports that once again grew above exports (39.1% y.y. vs. 12.1% y.y.), which was evidenced in all the months except May.

Imports from Brazil reached US$1.4 billion in July and aligned with the average of the last four months (US$1.4 billion).

Among the products with the highest share, the performance of the automotive sector stands out: the purchase of “Passenger vehicles” grew 115.5% y.y., while the purchase of “Parts and accessories for motor vehicles” grew 58.2% y.y. (both items together accounted for 21.7% of total imports).

On the other hand, imports of “Petroleum or bituminous mineral fuels (except crude oil)” again showed a significant increase in its year-on-year comparison, explained by the greater need to import energy during the year by the greater need to import energy during the winter, as well as by the significant increase in prices compared to last year.

In numbers: purchases of this item went from US$2.8 million in July 2021 to US$58.5 million in July 2022.

Imports of “Paper and cardboard” and “Iron ore and its concentrates” increased by 30.3% y.y. and 6% y.y. -respectively- partially offsetting the significant increase of the three items mentioned above.

On the other hand, the rest of the imported products -67.1% of the total- grew by 25.4% y.y. on average.

THE TRADE DEFICIT WITH BRAZIL: HIGHER IMPORTS

Exports to Brazil reached US$1.03 Billion, representing the lowest value since March 2022 and a significant drop compared to the average of the last two months (US$1.3 billion; -20.2%).

In the breakdown, all the products with the highest share in the total grew above the average, except for “Motor vehicles for the transport of goods and special uses,” which contracted 26.9% y.a.

Among those that rose, the performance of “Wheat and rye, unmilled” stands out, which grew 67.5% y.y., followed by “Passenger vehicles” (+34.9% y.y.), “Piston engines and their parts” (+30.7% y.y.), and “Parts and accessories for motor vehicles” (+27.2% y.y.).

The five export products mentioned above accounted for just over 55% of sales to Brazil, while the remaining 45% grew at an annual rate of 8.5% y.y. on average.

Thus, the accumulated bilateral trade deficit up to July was US$1.72 billion, which meant a significant deterioration compared to the balance of the same period last year (-US$484 million).

This balance resulted from imports that increased twice as much as exports (34.2% y.y. vs. 16.8% y.y.) this year.

A deepening of the bilateral trade deficit is expected -which would close the year at around US$3 billion- as imports will continue to grow above exports.

According to ABECEB, the “projected deficit would be even higher were it not for the increasing restrictions on imports”.

Although the Argentine Central Bank (BCRA) improved in July, the access to the MULC for the payment of automotive imports, further obstacles are not ruled out due to the difficulty that the monetary authority is having in accumulating reserves.

With information from Agritotal