The foreign trade channel for services continues to be in deficit for the country. This year it has had its fifth consecutive month of red, although below the levels of recent years.
The Services sector again posted a deficit in its foreign exchange transactions with the rest of the world last June, amounting to almost 370 million dollars, for the fifth consecutive month. The latest official data from the Central Bank (BCRA) show that last June the deficit totaled US$368 million and thus closed the first half of the year with a deficit of US$1,245 million. Despite the deficit balance, it is worth noting that it is 65% lower than the same period in 2023.
According to the BCRA’s Foreign Exchange Balance, the June Services account deficit was the result of the Net outflows for Travel, tickets and other card payments amounting to US$538 million, Freight and insurance for US$68 million and Other concepts for US$42 million. As usual all this negative flow was partially offset by net revenues from Professional and Technical Business Services of US$280 million.
For its part, Primary income operations represented a net outflow of US$533 million in June, explained by net interest payments of US$423 million and net outflows of profits, dividends and other income abroad of US$110 million. Regarding gross interest payments, the Government and the BCRA totaled payments of US$188 million, of which US$169 million corresponded to interest payments to international organizations (excluding the IMF) and US$19 million to other interest payments by the Government, while the private sector made gross withdrawals of US$264 million. Finally, Secondary income operations represented a net outflow of US$117 million.
When making comparisons, especially year-on-year, it is worth remembering that up to 20% of service exports can be brought into the country through the stock market within the framework of the aforementioned “Export Increase Program” (PIE), so this portion of the income does not appear in the statistics of the foreign exchange market and the Foreign Exchange Balance (with the exception of those collections that enter and are deposited in local accounts in foreign currency for later settlement in the stock market, which are recorded as exchange operations, with no net effect on the foreign exchange market), clarifies the BCRA.
Second semester: key to the future of reserves
As for the first semester, especially with a view to the second, which is key to the future of the BCRA’s reserves, the annual cumulative gross income and expenditure on services shows an improvement in the services account as a result of the fall in gross expenditure, especially in freight and insurance. In this regard, it is worth remembering that certain maneuvers and tricks with the registration of expenses related to transportation and logistics even caused a slap on the wrist from the then technical mission of the International Monetary Fund (IMF) to the previous government when they saw how spending on freight and insurance grew from mid-2021 and climbed to records in mid-2022, remaining until the middle of last year.
The figures for the first half of the year show that, on the gross income side, those linked to Professional and Technical Services fell by 12% year-on-year to US$2.636 billion, while those from Travel, Tickets and other Card Payments rose by 46% year-on-year to US$1.300 billion and those from Freight and Insurance fell by 39% year-on-year to US$126 million. Total gross service revenues remained unchanged at approximately US$4,062 million.
On the side of gross service expenditures, in the first half of 2024 those linked to Freight and Insurance fell by 74% year-on-year to US$437 million, while those of Professional and Technical Services fell by 32% year-on-year to US$1,430 million and another 11% year-on-year fell those associated with Travel, Tickets and other Card Payments to US$3,440 million. Thus, Total gross expenditure on services fell 30% year-on-year to US$5.306 billionThis explains another window through which the BCRA reserves are drained.
Source: Ambito
