The December trade balance registered a surplus again and, thus, the balance for the year closed in line with the projections made by Sergio Massa in his budget project.
Thanks to the US$1,102 million left by the last month of the year, the a total surplus for 2022 of US$6,923 million. The figure is modest when compared to the US$14,751 registered a year ago, but in the Government it did not stop meaning relief, given that the explosive increase in purchases in the energy sector led to historical import records being broken during the winter, with a peak of US$8,664 million in June – an increase of 46% compared to 2021.
So Minister Massa has the satisfaction of to have reversed the dangerous deficit that had lasted for three months, at the worst moment of dependence on gas imports, thereby avoiding the gloomy scenario predicted by economists, who imagined a summer in which the balance, far from contributing to the Central Bank’s reserves, would be an additional factor of currency stress.
However, the achievement of the surplus came at a high cost. To begin with, it was achieved not so much by a rise in exports but by a sharp cut in imports.
The YoY drop of purchases was located at the end of the year in 19%under the criteria of new permit systemwhich subjects the release of imports to the Central Reserve situation and which acts under the logic of “rewards and punishments” of the new price agreement, with greater access to dollars for those who best fulfill the task of containing inflation.
The cost of industrial cooling: punishment for “Made in Argentina”
The problem is that that import repression is already revealing its recessive effects: there were sectors of industrial activity -such as the automotive– where shifts had to be suspended and the pace of activity reduced due to lack of inputs and economists’ forecasts suggest that the situation will worsen.
The automotive industry, one of the main affected by the cut in imports
For now, the industrial survey carried out by the FAITHFUL foundation registered for last month a year-on-year drop of 0.5% and 2% compared to October. The growth rate continues its downward trend, so that in 11 months of 2022 a variation of barely 3.4% is already registered, with signs of slowing down.
The indicators elaborated by economists already give clues in this regard. For example, the one who makes the Austral University IAE to advance investment prospects by one semester shows a year-on-year drop of 10%. While the leading index of the Di Tella University it only stopped its decline at the end of the year after seven months of consecutive decline.
But what worries the companies the most – which have been warning all last year about the consequences of the import repression – is that Massa has given no signs that the tone of 2023 is going to be different. Rather to the contrary, the demanding payment schedule with which International Monetary Fundadded to the weather difficulties in the fieldmakes the panorama of currency scarcity continue to be pressing.
On the other hand, the Government has decided to link the problem of imports with that of inflation, so that priority access to foreign currency is given to the sectors that show a greater degree of compliance with the moderation of internal prices, something that is not necessarily agrees with a criterion of greater need for purchases of inputs from abroad.
The expectation of the analysts who participate in the REM survey of the Central Bank is that this year there will be a 3.5% drop in imports, a figure that calls into question the official projection of GDP growth. It happens that, according to the consensus among Argentine economists, there is a “3 to 1” rule between imports and GDP: imports need to rise three percentage points for the economy to grow one point.
Following this rule, for the 3.5% growth projected by Massa to materialize, imports would have to grow by around 10%, up to the level of US$90,000 million. Quite a contrast with market expectations: the REM foresees purchases for only US$78,000 million, and a modest variation of GDP of 0.5%.
A recent report from the Argentine Industrial Union indicates that for 60% of manufacturing companies, imports represent more than 25% of operating costs.
Minister Sergio Massa made an optimistic forecast about the 2023 trade surplus, which contrasts with the skeptical view of the market
Worse remedy than disease?
With these numbers on the table, the question that the market is asking is to what extent will Massa be willing to sacrifice industrial activity for the sake of maintaining Central Bank reserves and exchange rate stability.
And the worst part of the situation is that there is not even certainty that forcing a surplus in the trade balance can eliminate the risk of turbulence with the dollar. As evidenced in recent weeks, the parallel market remains under pressure, with a blue dollar targeting parity at $380 and which, according to some economists, has room to continue to $400.
Part of this tension is created indirectly by the import restriction itself, given that the sectors that are seen prevented from accessing the official exchange market they are going to look for the dollars via MEP or “counted with liquid”thereby increasing demand and putting pressure on the exchange rate.
In fact, in the financial market it is estimated that the 10% rise in the MEP price so far in January is mainly explained by the pressure of importing companies that resort to the financial channel to obtain the currencies that allow them to Maintain your activity level.
Soybeans, gas and the forecast clash
There is another fundamental issue that is currently the subject of debate in the market: the balance surplus improved over the end of the year thanks, to a large extent, to to the extraordinary contribution of the “soybean dollar”. But it is a resource that, even if it is repeated in the future, has diminishing returns: in its first edition, it generated income of US$7.5 billion, while on the second occasion the contribution was US$3 billion and -given the limited stock of 5 million tons that remains in silo bags- a third edition it would hardly leave more than $2 billion.
But the worst, naturally, is the effect that the drought will have on exports. A recent report from the Buenos Aires Grain Exchange foresees that, if the climatic situation continues in its severe conditions of lack of moisture in the soil, there will be a cut of such magnitude in the volume of the main crops, that the contribution of the field It will be cut by $14 billion.
This is why the optimistic official version of an increase in exports generates controversy. In fact, the chancellor santiago cafiero He presented an ambitious plan in Congress in which internal sales of US$105,000 million are expected next year.
Analysts believe that the Government not only overestimates this year’s export capacity but also probably underestimates the difficulties that may occur again in the energy field.
The completion of the Kirchner gas pipeline is Massa’s bet to achieve a drastic cut in energy imports
In the year that has just ended, Energy imports totaled a record figure of US$12,868 million, which represented 16% of the country’s total purchases. The variation compared to 2021 is an impressive 120%.
Massa has given an optimistic forecast for 2023based on the completion of the Kirchner gas pipeline: believes that not only will the volume of gas purchases drop drastically next winter, but that Argentina will be able to enhance its role as an oil exporterso that the fuel item could have a favorable net balance.
The truth is that in 2022 exports of the energy sector had a growth of 59%, but even so the total figure of US$8,398 million is far from the level of gas purchases.
And among the experts in the area, one hears Doubts regarding how the times of the gas pipeline work will be givengiven that the first major gas purchases are already being made in May to meet the high winter demand.
The dream of doing without dollars
In short, the positive numbers that the 2022 trade balance produced do not leave much room for celebration, far from it to pay the official projection of a comfortable surplus of US$12,000 million this year.
The most worrying thing is that, even if this balance could be achieved through a strongly interventionist policy in the allocation of foreign currency for imports, the cost could be very high in terms of economic activity.
These days, the Government’s commitment is focused on the advancement of bilateral agreements with the two main partners commercial –china and brazil-, with the aim that the exchange can be sustained without having to resort to dollars.
This ambition, cherished without success for many years, now appears closer to becoming a reality, through the swap with the Chinese central bank and the adoption of a common commercial currency with Brazil.
Of course, it is an option that is not free, but to which Massa puts chips to achieve the hitherto impossible formula of sustaining a high level of commercial exchange and, at the same time, exercising strict control over currencies to comply with the IMF to give reassuring signals to the financial market. Judging by the forecasts made by economists and businessmen, the minister has not yet been convincing enough.
