Argentine exports to Brazil reach third highest value in the last nine years

Argentina’s exports to Brazil in August 2022 reached the third highest value in the last nine years and the best eighth month since 2012, reducing the deficit to US$255 million from US$370 million in July, an increase of 31% year-on-year, according to Ecolatina.

“In August, the increase in imports from Brazil again overshadowed the good performance of exports to that country, resulting in the eighth consecutive month of deficit in the bilateral trade balance,” the Argentine consultancy said.

On this basis, the trade flow returned to the level of 2013 (US$2.885 billion), so that in August the bilateral trade balance showed the second highest monthly deficit in the last 15 months and represented a significant deterioration compared to the previous year (in the same month of 2021 it had been US$116 million), warned Abeceb.

Argentine sales to Brazil totaled more than US$1.3 billion in August, 28% higher than the average for the first seven months, mainly due to the motor vehicle sector (which grew 41% year-on-year and accounted for 37% of total sales, with sales of almost US$490 million).

However, Argentina continues to have a low weight in imports of its main trading partner, and although they improved slightly compared to July (from 4.2% to 4.7%), they are still below 5%, compared to an average of 6% in 2019 and 12% in the early 2000s.

Imports from Brazil increased sharply again in August (40% y/y, practically the same as in July), and their y/y increase was almost 10 percentage points higher than that of exports (only in May was it the opposite).

Purchases from Brazil totaled US$1.57 billion, the second highest since April 2018 and 24% above the monthly average through July, driven by vehicles and their parts and accessories, which together totaled more than US$370 million and accounted for nearly a quarter of imports.

Through August, exports are below US$8.5 billion (+19% yoy), while imports exceed US$10.45 billion (+35% yoy); and the trade balance shows a deficit of US$1.96 billion so far in 2022, the highest in the last four years and more than three times higher than the same period in 2021.

Ecolatina believes that “it is necessary to monitor not only domestic factors such as the maintenance of import restrictions, but also events in Brazil. In particular, the dynamics of the presidential election campaign and the corresponding results.”

In the last 17 years, Argentina has been able to achieve a positive trade surplus with Brazil only in 2019, as Argentine exports stagnated and lost ground to Brazilian imports, while imports from the neighboring country were high.

“In 2022, the history of recent years is expected to repeat itself, with a bilateral red that will again be around US$3 billion, slightly below the 2018 level,” Ecolatina predicted.

Meanwhile, Abeceb estimated that the bilateral trade deficit will continue to widen due to imports that will grow faster than exports, reaching about US$2.7 billion in 2022, still below the historical structural deficit of US$3.5 billion that existed between 2004 and 2018.

Moreover, “given the scarcity of BCRA reserves – and the government’s reluctance to make a discrete exchange rate jump – major import restrictions in the coming months cannot be ruled out, which would reduce the annual bilateral deficit,” they added.