A week after the government announced the opening of food imports as a tool to lower inflation, the question now is whether there will be money to demand these imported goods: Indec reported this afternoon that in February According to the trade balance report, imports decreased by 18.6%.. And everything indicates that imports will continue to decline due to the recession affecting economic activity.
The decline in imports allowed Argentina to record a trade surplus of 1,438 million dollars in February, an increase of 581% compared to the positive result of 211 million dollars in the same period of 2023. The surplus recorded in the second month of this year almost doubled compared to that achieved last January, which reached $797 million.
The trade balance result has two readings.
On the one hand, lower demand for imports is a bad sign for businesses and consumers at a local level because it is synonymous with an increasingly felt recession.
On the other hand, it is a “good” sign that the objectives of the program agreed between Argentina and the IMF have a better chance of being achieved. Because a trade balance will be generated and the dollars will remain in reserves.
“This is in line with what was expected. In the two-month period a trade surplus of 2,222 million dollars has already accumulated, while last year there was a deficit of 232 million dollars”, commented the chief economist of the abeceb, Elisabet Bacigalupo. on commercial data. “The turnaround is fundamental because it allows the Central Bank to accumulate reserves, it is the main real source of dollar generation”.
Last year, Argentina recorded a trade deficit of $6,925 million compared to a negative balance in 2022 of $6,923 million. According to abeceb.com, a trade surplus of at least $14 billion is expected this year. For the ACM consultation it would be higher: between 16,000 and 18,300 million dollars.
The February numbers can practically be explained by an increase in exported quantities (13.5%) and a decrease in imported quantities (13.2%). Prices instead fell by around 6% in both categories.
“As long as Argentina is in recession we will have a super trade surplus in addition to the reverse effect of the drought,” adds Bacigalupo.
Argentina had recorded a decline in imports of around 18% in July last year (6% in quantity), but essentially in a context of import restrictions. Today, imports are not limited beyond payment in four installments. The effect of the current decline in imports is a reflection of the recession. On the other hand, the government announced last week that it will open food imports to address inflationary pressures.
Argentina saw larger declines in imports than now during the 2019 pandemic and recession.
Brazil was Argentina’s main seller (25% of total imports) and also the main buyer (19% of exports), thanks to export growth above the general level (16.2% y/y).
Source: Clarin
