Argentina Surprises and Reduces Pressure on Official Dollar in October

Contrary to expectations of increased pressure on the US dollar due to accumulated import payments in October, the scenario unfolded more favorably. The initial forecast was that Argentina would settle 125% of its accrued import payments for the month, but the actual figure was significantly lower at 84%.

Data from Cohen Argentina revealed that the reduced pressure on official dollar reserves was primarily due to increased dollar availability from the currency regularization program (blanqueo), which enabled companies to access new loans. This dynamic partially explains Argentina’s dollar trade surplus. Earlier in the year, concerns were raised about the Central Bank’s ability to purchase foreign currency in the second half of the year.

Milagros Gismondi, an economist at Cohen Argentina, explained: “In October, we anticipated a surge in import payments, reaching 125% due to accumulated imports and pending installments. However, the index dropped to 84%, indicating a resumption of credit to importers.”

Since February, the government has implemented a staggered payment schedule for importers, initially divided into four monthly installments. This schedule was subsequently reduced to two 50% installments and then to a single 30-day installment. In October, when deadlines from both old and new schedules overlapped, the month was expected to be particularly challenging. However, instead of relying on the official market, companies opted to borrow dollars from banks, which were holding approximately $14 billion from the Blanqueo program.

Recession, Energy Balance, and Surplus

In addition to the currency regularization program, other factors contributed to the accumulated surplus of around $22 billion in 2024. The economic recession led to reduced imports, while the energy balance improved by $5 billion due to lower energy import needs from Bolivia.

According to Gismondi, the agricultural sector generated around $10 billion of this surplus. However, she warned that increased tourism spending is draining a significant portion of the dollars generated by Vaca Muerta, the shale oil and gas field.

“The exchange rate appreciation intensifies the pressure on the services balance, especially with tourism,” Gismondi explained. In a typical year, Argentina may register a deficit of up to $10 billion in tourism.

In October, of the $900 million surplus recorded, $600 million came from energy, while tourism spending amounted to $500 million. “Although new sectors are contributing to the surplus, new costs are also emerging. All of this is a result of the exchange rate appreciation,” concluded the economist, who predicts further currency strengthening in 2025.

Photo by Diego Torres Silvestre available on Flickr

Source: https://www.ambito.com/economia/importaciones-efecto-blanqueo-y-calma-cambiaria-octubre-salieron-menos-dolares-n6086772

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