Markets

For more exports, the deficit with Brazil narrowed 13.6% in the year 

So far this year, Argentine exports to Brazil increased 14.9% and imports only grew 1.8%. Thus, between January and July, the deficit was US $ 3,899 million, 13.7% less than in the same period of 2017. Commercial red is shrinking at the pace of lower growth in Argentina and improved prospects for industrial exports.

In July, in a month still marked by the effects of the truck stoppage that extended in June over the main cities of Brazil, Argentine exports to the neighboring country grew 33.2%, while imports fell by 23.9%, the fall of activity on this side of the border. According to the consultancy Abeceb – founded by the current Minister of Production, Dante Sica – with these data “a cycle of more than 3 years of widening of the bilateral deficit ends”.

Abeceb uses data from the Brazilian Ministry of Industry regarding July – the INDEC numbers will only arrive in three weeks -, which indicates that exports from Argentina totaled US $ 950 million and imports reached US $ 1,150 million. In this way the month closed with a commercial red of US $ 200 million, 75% less than the almost US $ 800 million same month of 2017.

Cars, wheat in grain, cargo vehicles, corn, aluminum and other cereals are the main products that Argentina sells to Brazil. 66% of Argentine sales to that country are industrial manufactures.

Abeceb warns that the July numbers for exports are exceptional. “We have been spending 2 months with supply chains quite complicated as a result of the strike of transporters in Brazil, so that in the margin good records can be attributed in part to the demand satisfaction delayed by the impossibility of moving goods.”

On the other hand, the collapse of Argentine imports has more local components, “The anemic behavior of imports from Brazil falls within a general context of retraction of the activity level and nominal depreciation of the peso”. In real terms, the Argentine peso weakened 14% against the real between April and July.

Looking ahead to the coming months, the bilateral deficit is expected to continue contracting because of “the weakness of Argentina’s domestic demand and the high comparison bases.” In the second half of 2017 the bilateral monthly red was high. It averaged US $ 700 million versus an average deficit of US $ 360 million in the last two months of this year. “It will also help the commercial red continue to decline the fact that some relevant products (chemicals and plastics, for example) will see a greater possibility of insertion in the Brazilian market via prices,” says Abeceb.

The consultant Ecolatina is forceful. “The fall in imports in the seventh month of the year was a consequence of the lower level of activity in Argentina.” In the last two months, the real bilateral exchange rate depreciated 8.1% year-on-year, making imported products more expensive from Brazil. “The fall in external purchases will be repeated in the coming months, since we do not expect a recovery of our economy in the remainder of the year,” he said.

“Exports were favored in July by the depreciation of the peso, which was more than enough to compensate for the slowdown in the level of activity facing Brazil, which has been involved for months in a context of political tension and social conflict.” The latest market data show an expected growth for the neighbor’s GDP of only 1.5% in 2018, half compared to the beginning of the year.

The forecast of Ecolatina is that this year “the bilateral red will shrink significantly compared to last year.” The estimate of the consultancy is that it would be below US $ 7,000 million, falling at least 15% year-on-year compared to the US $ 8,200 million registered in 2017. “By 2019, if the Brazilian economy continues its stabilization process, it would be possible that these figures improve even more, “they say.

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