Falling Imports: For the second month in a row, the trade balance with Brazil is in surplus



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For the second consecutive month, and again producing – a sharp contraction in imports, Argentina achieved a favorable trade balance with Brazil in January, according to data released this afternoon by the Ministry of Development of the neighboring country. The surplus was 114 million USD. In January 2018, this resulted in a loss of $ 478 million.

Purchases from Mercosur's largest partner dropped by 43% and have a five-month downtrend. On the contrary, exports increased by 9.5%, the eighth consecutive increase. As Abeceb consulting firm explains, the improvement in the trade balance is largely explained by the contraction of imports. "The answer is obvious: with a marked growth differential (we estimate that the Argentine economy dropped 6.6% in the last quarter of the year and that its main partner grew by 1.8% , with fixed investments rising by around 4%) and a real exchange rate of 17.8% in January, it makes sense that imports find a brake and that the balance is balanced "said Abeceb.

On the export side, One of the sectors that responded quickly to the improvement in the exchange rate in 2018 was automobile manufacturing., which benefited from the beginning of the Brazilian recovery since the middle of the year. Sales in this sector rose 35%, while wheat sales increased 27%. Between them, they account for about 40% of shipments in Brazil and offer good prospects for 2019.

With regard to the expectations for the year just begun, the consultant expects that, due to the "low growth rate" of the economy this year, the bilateral trade balance reverses the deficit of 4,000 million USD reached in 2018 and rubs the balance. "Imports will limit their drop to $ 12 billion year-round, a 20% drop from last year, and exports would increase by about 10% in our base case" said Abeceb.

However, the need for both countries to move towards a more balanced trade is still latent, since when they are both growing, Argentina's deficit with Brazil is structural. Although the high exchange rate reduces purchases abroad, the contraction in imports is mainly due to the sharp drop in consumption.

As the consulting firm Ecolatina explains, the collapse of imports occurs "in a context of economic recession and sharp loss of purchasing power, in dollars and pesos". The most affected items were pbadenger vehicles and tractors, tractors and auto parts. Although, in the case of exports, the explanation is due to the "gradual recovery of the Brazilian economy", to which has been added a higher real exchange rate, which despite the fact that the The nominal exchange rate recorded in January is still competitive. "The main advances are in freight vehicles, wheat, gasoline and dairy products.

In this way, Ecolatina forecasts a balanced bilateral balance for 2019, with exports increasing by 10% and imports gradually moderating their declines to close the year with a decline of around 16%. "However, if Mercosur's flexibilisation materializes, Argentina would lose its tariff advantage and, as a result, our exports to Brazil would be reduced, which would affect the results of the trade balance between the two countries. ", he added.

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