In the midst of fiscal adjustment and rampant inflation, much of the new government’s fortunes will be played out in the foreign sector in 2024. After the drought of the year that ends, the planets have aligned and all predictions agree on this Exports will show strong recovery in 2024, which will bring the country at least an additional income of 20,000 million dollars.
Added to this is a high dollar, at least at the beginning of Javier Milei’s presidency, which makes imports more expensive and which, together with the recession which will deepen the adjustment process will lead to a slowdown in foreign purchases.
Therefore, economists estimate that the country will go from an $8 billion trade deficit to an $8 billion trade deficit this year a favorable balance of between 15,000 and 24,000 million dollars for next year.
Will this high trade balance be enough to stabilize the economy and hold down the dollar? For economists it is a good start, but not enough to consider the game won.
2023 ends with a trade deficit of $8 billion. for the new yearEcolatina projects a surplus of $15,000 million, LCG aims for $22,000 million and Analytica for $24,000 million.
“Looking ahead to 2024, we expect a strengthening of the trade balance as a result of the recovery of agriculture, the reversal of the energy deficit and the sharp decline in activity and imports implicit in the fiscal adjustment and devaluation plan implemented by the government so far” , says Ecolatina.
The recovery in exports will come from the countryside. David Miazzo, chief economist of the FADA Foundation, specifies that in 2024 the exports of all agricultural and agro-industrial supply chains will be around 50 billion dollars. From this 35 billion dollars They correspond to grains and everything else to meats, regional economies and other products.
“It won’t be a record harvest, but it will probably be among the three best in history. In cereals it will be between 130 and 140 million tons. To become a record it would have to exceed 140 million, but no one uses that kind of estimate,” says Miazzo.
Although the campaign appears once again as the lifeline of the economy in a context in which projections indicate that industry and services will experience a year of recession, Miazzo underlines that “these Additional 10,000 or 12,000 million dollars that will be there in 2024 compared to 2023 will hardly be enough to channel the crisis, but they will be able to provide a greater supply of dollars and contribute to stability.”
Ricardo Delgado, director of Analytica, anticipates it in 2024 Exports will go from $65,000 this year to $88,000 million. “At the same time there is a strong contraction in imports, a consequence of the decline in activity, which will lead us to a trade balance of “24,000 million dollars”.
Abeceb estimates total exports by 85.3 billion dollars, 26% more than the previous year. Overseas sales will be “driven primarily by the reversal of the drought and a real exchange rate that will remain at historically high levels throughout the year.”
In addition to agriculture, it is highlighted that the energy sector, with total exports pro 10.8 billion dollars, will record a growth of 37% compared to 2023 mainly explained by a greater export of crude oil produced at Vaca Muerta. And the mining sector will export 4.3 billion dollars in 2024, expanding by 11% due to increased lithium production and price effects.
On the other hand, imports will decrease in 2024 (a decline of approximately 7% year-on-year) to reach a value of 69.5 billion dollarsexplained mainly by the decline in activity and the high real exchange rate (adding the PAIS tax increase to the devaluation).
Does it reach?
For Delgado this flood of dollars is not enough to get out of the crisis. “There is still a lack of funding to address the stabilization we need. “It’s a good start, but further financing will be needed to have robust cash flow in the Central Bank that allows the real exchange rate to appreciate and lower inflation.”
The economist underlines that “there is no lasting fight against inflation if there are no reserves that allow the peso/dollar relationship to strengthen. Negative net reserves need to be improved. To achieve this, they will not reach the trade surplus dollars, because the service sector deficit and all external payments will have to be subtracted from that account. “We also have to see what will happen with the IMF and with the dollars to be paid to private individuals.”
After the strong devaluation in December, the strategy of Minister Luis Caputo and the President of the Central Bank Santiago Bausili is to apply a 2% monthly correction on the exchange rate. With inflation close to 30% in December and figures close to 20% in January and February, the risk that the jump in prices will influence devaluation is significant.
“I think there will be some further correction in the exchange rate in January and February, because With these levels of inflation, at some point the carry trade will change direction. And we will have to see what incentives the producers will have to sell when the abundant harvest arrives in April/May.”
By 2024, The Central Bank’s market expectations survey predicts a 2.4% contraction in GDP.
“It is very difficult for all the dollars necessary for the economy to restart in the midst of this macroeconomic adjustment to be generated,” Delgado says. And he adds that the government’s commitment is there get additional currency.
“Exchange rate tension will continue to exist in 2024 because “We will have more dollars, yes, but not everything the economy needs”.
“This is not enough, which is why the government seeks, even if it does not say so openly, foreign investments or more dollars, for example through money laundering,” says Delgado.
Although some officials occasionally raise the possibility of the government getting funding, for now there is nothing concrete. “I don’t see the possibility that Argentina can return to the market in 2024. There is no desire to take on Argentine debt, until the risk approaches 1000 basis points it will be very difficult”, summarizes Delgado.
And he emphasizes that “the most critical thing is this period until the harvest dollars start arriving. We have to cross this first Rubicon. If it can cross it solidly, the government can get additional confidence that will allow it to have more financing. Without funding the adjustment is not sufficient.”
For Juan Ignacio Paolicchi, economist at Empiria, the additional dollars of 2024″will help is to accelerate the rate at which stocks could be rallied. “The more reserves the Central Bank has, the faster stocks can be raised because the more firepower it has so that the exchange rate is not a disaster.”
“That 24 billion dollars will help in this sense, I see it as a very positive aspect. “If the Central Bank can accumulate reserves, that will help make the adjustment a little more gradual and inflation can come down a little faster.”highlights Paolicchi.
Source: Clarin
