Fully impacted by the drought that affected agriculture, the exchange with Brazil accumulated a new deficit in 2023: according to private estimates, the red in the balance of trade increased more than 110% compared to the previous year. In any case, looking to 2024, the outlook could be different.
In fact, in December Argentina had the first surplus After eleven months: exports fell 9.7% year-on-year, while imports contracted 14.3%, so the balance was US$52 million positive for the country.
The trend, analysts say, could be sustained at least in the first months of this year. “The latest data on trade with Brazil finally show the adjustment in activity that our economy is experiencing and, therefore, Imports from that country fell more than exports, showing a trade surplus for the first time in eleven months”, Matías Bolis Wilson, Chief Economist of the Argentine Chamber of Commerce and Services (CAC), analyzed Ámbito.
When projecting what may happen this year, the analyst said: “The conditions are not in place for us to see a recovery in local consumption in the first half of the year, but rather the opposite. That is why we would not be surprised if the positive bilateral trade result number is maintained in the first quarter. (or at least, if it were negative, not on the scale of 2023).”
“The current impact is related to the sharp drop in exports in 2023 (approximately -23%) and a drop in imports that did not follow that pace (-10%). That was financed with reserves, inflation and some credit from abroad,” said Bolis Wilson, who remarked: “Until Argentina balances external accounts, there is no room for consumption to boost activity (unless you get fresh financing). The effects of the influx of dollars from the coarse harvest (in March) would only be seen in the third quarter. However, with some dissavings from the middle class, It is possible that the fall in consumption will be cushioned a little and this would be reflected in a not so pronounced fall in demand for imports.”.
Exchange with Brazil: what to expect in 2024
When analyzing what may happen with the trade exchange with Brazil during 2024, the consulting firm Abeceb stated that “a challenging economic year is expected for Argentina at a macro level, since the fiscal, monetary and exchange adjustment measures anticipate a scenario with important repercussions.” in economic activity and income for a considerable part of the year.”
“However, The external sector would experience another kind of reality since it is expected that a high real exchange rate in historical terms will be maintained (incentivizing exports), that the reversal of the drought effect will be complete, that export incentives will be greater (as the extension of the suspension of withholdings on dairy productsor the elimination of the payment of the COUNTRY tax for inputs used in the production of exportable goods), and that the new SEDI system (replacing the SIRA) allows foreign trade to be streamlined and made more efficient,” they added from the firm.
Likewise, they estimated that the Brazilian economy is expected to grow at a lower rate than that recorded in 2023 (1.5% annually). “This wayshipments abroad from Argentina would recover, along with a disincentive to importgiven the 144% increase in the importing dollar, composed of a 121% devaluation of the official dollar, and a 10% increase in the PAIS tax,” they added from Abeceb.
And, in this scenario, they concluded: “In any case, without stabilizing the important macroeconomic imbalances, it will not be possible to completely normalize the external sector, giving rise to a partial continuation of the already existing controls and restraints. In the first six months of the year we expect imports to continue somewhat restrictedat least until international reserves are accumulated, reaching a very lightly monitored MULC at the end of the year.”
Trade balance with Brazil: what happened in 2023
According to the data from the latest bilateral trade report prepared by the CAC, the exchange between Argentina and Brazil was US$1,721 million in December, 12% lower than the value obtained in the same period of 2022 and a 10.9% lower than November.
“Argentine sales to Brazil fell 9.7% in December 2023 compared to December 2022 (ninth consecutive month of decline) by adding US$886 million, while imports from that destination were US$834 million and showed a year-on-year decrease of 14.3%. Thus, the trade balance for Argentina showed a surplus of US$52 million (after eleven months of negative value)”they explained from the CAC.
Despite the surplus in December, trade between both countries accumulated a negative balance for Argentina during the year 2023 for US$4,719 million.. Between January and December, exports fell 8.4% compared to the same period in 2022, while imports from Brazil increased 8.9%.
In any case, the dynamics of bilateral exchange had its “particularities”, as explained by Abeceb, since “imports grew during the first seven months of the year (25.2% between January and July), although they fell by 12 .3% between August and December.”
“On the contrary, exports grew only in the first quarter (15.2% annually), and fell the rest of the year, accumulating a decrease of 14.2% between April and December. There is no doubt that these data are due to the negative impact of the drought and the absence of sectors that could drive exports to the same extent, which also frequently presented difficulties due to obstacles to imports (for example, the automotive industry)”, they concluded from the consultant.
Source: Ambito
