December 6, 2013
Trade surplus plunges 59% in August
Soaring fuel and vehicle imports brought Argentina’s trade surplus down 59 percent in August in comparison to same month last year — the largest inter-annual drop so far this year considering it was one percentage point higher than the 58 percent registered in February.
The latest decrease means the trade surplus is down 32 percent in the first eight months of the year, compared to the same period in 2012, down to US$6.292 billion, the INDEC statistics bureau reported yesterday.
With gas reserves dwindling, fuel and lubricant imports grew a massive 103 percent up to US$1.548 billion, while the influx of passenger vehicles rose by 67 percent, compared to August 2012, increasing to US$760 million.
Imports rose a total of 14 percent to US$7.167 million, while exports stayed virtually flat, increasing less than one percent to US$7.735 million, taking the overall trade balance for the month to an unexpectedly low US$568 million.
Such a drastic increase in fuel imports was also accompanied by a drop in exports for the sector, with fuel and energy sales dropping from US$559 million to US$349 million, signifying a 38 percent decrease.
The market had estimated a surplus of US$983 million, according to the median forecast of seven analysts in a recent Reuters poll, but rising liquefied natural gas and other energy imports took a big bite out of the trade balance in August, the last full month of winter.
An overvalued peso and inflation estimated by private economists at about 25 percent have made imports more attractive to consumers.
In the first eight months of the year, the only month that saw an increase in the trade surplus was June, which saw a 26 percent increase from the same month last year. In July, the trade surplus shrank 39 percent, while the third largest drop was experienced in March, when it declined 49 percent.
With the majority of sectors restricted by imports, the remaining “broad categories” listed either remained at the same levels as August last year or registered moderate decreases.
Capital goods and pieces and accessories for capital goods remained at US$1 billion and US$1.4 billion respectively, while consumer goods imports and intermediate goods went down by 11 and eight percent to US$647 million and US$1.673 billion respectively.
In terms of exports, slight increases were seen in the primary products and agricultural manufactured goods categories, with each sector expanding five and six percent to US$2.023 and US$2.947 billion, respectively.
Industrial manufactured goods dropped by under one percent to US$2.415 million.
The best-selling export products last month in absolute values were “flour, soybean pellets, soybeans, land automobile vehicles, corn, soy oil, biodiesel, metals and precious stones, seafood, other fuels, parts and spare vehicle and tractor parts.”
Patience is key?
“This has a correlation with the increase in economic activity and the proactive policies of distribution and boosting demand,” Agustín D’Atellis, an economist at the pro-government think-tank La Gran Makro told the Herald.
The economist considered that exports “have stagnated due to the decrease in demand as a result of the economic crisis,” while regarding energy imports, D’Atellis pointed to the “Repsol effect.”
“Until we fully recover hydrocarbon sovereignty, we will see high levels of imports,” he argued.
D’Atellis argued that the hike in vehicle imports was down to a “favourable exchange rate, which benefits the domestic market.
“Exports to Brazil started the year with a strong recovery, but now they are slower because” the neighbouring country’s “growth has slowed down,” he elaborated.
José Anchorena, an economist at the PRO’s Fundación Pensar group, told the Herald that another month of decreased surplus figures was down to the Kirchnerite administration’s policy of “relaxing trade and exchange restrictions in order to boost economic activity.”
“Foreign trade is part of the balance of payments that is related to the purchase and sale of dollars, and this means fewer dollars are available,” Anchorena said, predicting a return to a stricter restriction on the foreign exchange market after the October elections.
Economic activity and employment depends on imports
Anchorena pointed to “the failure of YPF and energy policies” as the cause of ever-rising energy imports.
“Commodities prices are no longer growing, they are either flat or decreasing” and a “103 percent figure is truly an alarm sign.”
But the economist added that although significant, specific monthly figures are not nearly as important as the statistics for the first eight months of the year, which truly highlight stagnation.
“It’s mathematical, it’s very simple, energy must be consumed every day and every day there is a power outage or lack of gas,” Gerardo Rabinovich, of the Argentine Energy Institute, told the Herald.
With local demand increasing and production decreasing, the engineer considered that “nothing in the short or even long term will resolve this,” and rhetorically asked “what hydrocarbon sovereignty have they (the government) recovered?”
“This is the new Argentine reality: a constant decrease in the production of gas and petrol, and a recurrently growing energy deficit,” he argued, warning with Syria in mind that “if tomorrow the Middle East ignites and the barrel of oil goes up to US$150, the consequences will be disastrous.”
“This was not even a particularly cold winter, and we saw how demand was barely met,” he concluded.