October 23, 2014
Trade surplus plunges 92% in February
Increases in energy purchases and lower sales of grains explain the decline
The country’s trade surplus plunged 92 percent in February, compared to the same month last year, totalling US$44 million. Coming on the back of an 88-percent drop in January, the first two months of the year have seen a year-on-year decline of 90 percent.
Even though economists largely agree that a recovery is expected over the next few months thanks to the bulk of the grain harvest, this marks the start of what could be a bad year for trade, in part due to the expected decline in vehicle and biodiesel exports amid growing energy imports.
Exports in February dropped six percent compared to the same month last year. Exports of primary products decreased 34 percent, including a whopping 54 percent drop in grain exports, and manufactured goods also decreased 2 percent. On the other hand, exports of manufactured agriculture products increased two percent and exports of fuels and energy rose 47 percent, explained by sales of crude oil for US$206 million.
The sharp drop in grain exports was a surprise for economists who were expecting more stable figures after the agreement the federal government sealed with farmers in order to boost exports.
“We were expecting a recovery of grain exports in February but that didn’t happen. Still, grains are only added to the figures once they are shipped so there could be a delay,” Lorenzo Sigaut Gravina, chief economist at Ecolatina agency, told the Herald. “We should see the growth in exports in the March trade figures but if that doesn’t happen we’ll have to look at the reasons more closely.”
Meanwhile, imports rose two percent in February compared to the same month last year. The growth can be explained due to a higher purchase of fuel to Russia and the United States, which increased 43 percent and totalled US$852 million dollars. A similar trend will be seen throughout the year, according to economists, due to the low gas and oil production in the country. Natural gas production plunged 4.4 percent and oil output declined 1.7 percent last year.
“Fuel and gas production has reached a plateau so the growing imports are to be expected. We will probably see a higher energy deficit this year since imports will probably rise more in winter with the cold temperatures,” Mauricio Claveri, coordinator of foreign trade at Abeceb, a local consultancy, told the Herald. “The country has a permanent need to generate energy so imports will rise.”
Imports of capital goods also rose four percent and totalled US$928 million, mainly due to the government’s purchases of trains from China. At the same time, vehicles imports dropped 25 percent to US$372 million.
“The government has implemented a restrictive policy on imports so they are not usually very dynamic. There’s a low demand since the same commercial policies carry on,” Claveri said.
Due to the record prices of soy and the high numbers of hectares cultivated, economists say the trend will change starting in April when the harvest season begins.
Mercosur, the main market
The Mercosur bloc continues to be the country’s main market, accounting for 35 percent of the exports sent to countries that are part of the bloc and 27 percent of Argentina’s imports brought from them. In February, a trade surplus of US$439 million was achieved with a five percent drop of exports and a seven percent drop in imports.
Imports from Mercosur dropped due to fewer purchases in all areas, while exports dropped due to fewer sales of primary products, including grains, fuels, energy and industrial manufactures.
A trade deficit was seen in February in trade with all the other blocs, including ASEAN (Korea, China, Japan and India) with US$758 million, the European Union with US$123 million and NAFTA (US$290 million).
Despite the deficit, exports to the ASEAN bloc, the second most important one for Argentina, rose eight percent in February due to higher sales of fuel and energy, primary products and manufactured goods. At the same time, imports from the bloc rose 11 percent due to higher purchases of capital goods and intermediate goods.
The main destinations of the country’s exports were Brazil, the United States, India and Germany, while most of the country’s purchases came from Brazil, China, United States, Germany and México.