Itaú BBA - ARGENTINA – Another strong trade surplus in July

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ARGENTINA – Another strong trade surplus in July

agosto 21, 2019

The incoming administration will receive lower twin deficits, but the roll-over of debt will be challenging,

Argentina’s trade balance showed another wide surplus in July. The trade surplus reached USD 1.0 billion, compared with a deficit of USD 0.8 billion one year before. The surplus was slightly above both our and Bloomberg market expectation of USD 0.9 billion. The 12-month trade balance rose to USD 8.4 billion, from USD 6.6 billion in June. At the margin, the three-month accumulated and annualized surplus reached USD 12.4 billion, up from USD 11.9 billion in 2Q19.

Imports continued to fall sharply. Total imports declined by 24.1% yoy in the quarter ended in July (-27.9% in 2Q19). Imports of capital goods and parts fell by 21.9% in the quarter, indicating poor investment. Consumer goods imports (including cars) fell by 37.3% yoy in the same period, reflecting the decline in household earnings, while imports of intermediate goods dropped by 11.4%. At the margin, purchases from abroad fell by 13% qoq/saar.

Agricultural exports posted a hefty recovery but manufacturing sales continued to decline. Total exports increased by 8.9% yoy in the quarter ended in July (up from a 6.8% yoy gain in 2Q19), but remained almost flat adjusted for seasonality (-0.1% qoq/saar). Agricultural exports (including manufactured agricultural products) grew 19.3% yoy in the quarter, due to an increase in soy and corn shipments. Sales of industrial products dropped by 10.4% in the period, severely hit by a decrease in exports of biodiesel and cars. 

The energy balance deficit continued to shrink, led by lower oil imports.  The accumulated 12-month deficit fell to USD 1.0 billion, down from USD 1.4 billion in June and USD 2.4 billion in 2018.

The trade balance numbers are another indication that the incoming administration will receive an economy with much lower twin deficits, but rolling-over the sizable foreign currency obligations of the federal government will be very challenging, risking a sovereign default.

Juan Carlos Barboza
Diego Ciongo


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