Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance

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2 Overview Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance Foreign Exchange Transactions and Exchange Balance in August 217 In August, the National Treasury sold US$ 2.1 billion, while banks and other institutions sold US$ 362 million. This total was purchased by private sector clients for the sum of US$ 1.9 billion through the Free and Single Foreign Exchange Market (MULC) and by the BCRA for US$ 567 million. The volume traded in the MULC reached a new historical maximum, totaling US$ billion, up 62% against the same month of 216, mainly accounted for by the transactions arranged between the institutions and their clients and, to a lesser extent, by transactions among institutions, and between the latter and the BCRA. Current account transactions in the exchange balance evidenced a deficit of US$ 1.14 billion, resulting from net outflows for the Services and Primary Income accounts for US$ 1.4 billion and US$ 413 million, respectively, which were partially offset by net inflows recorded in the Goods account for US$ 295 million, resulting from collections on exports for US$ 5.29 billion (up 3% year-on-year [y.o.y.]) and from payment for imports for almost US$ 5 billion (up 5% y.o.y.). The foreign exchange and financial account of the public sector and the BCRA evidenced a surplus of US$ 3.97 billion, mainly due to the inflows from the National Treasury because of the increase in the amount of Bonar Bonds due 224 for US$ 4.2 billion and the issue of Treasury Bills (LETES) denominated in dollars for US$ 1.97 billion. These inflows were partially offset by the outflows of funds for the payment of LETES for US$ 2.3 billion and the repayment of net loans with International Organizations for US$ 15 million. The capital and financial account pertaining to the Non-Financial Private Sector (SPNF) recorded net outflows for US$ 1.8 billion, with an increase in the outflow by US$ 1.42 billion against the same month of 216. The main reason behind this situation was an increase in net purchases of external assets of residents, which was partially offset by the reversal of securities transactions in the secondary market. The capital and financial transactions of the Financial Sector resulted in net outflows for US$ 568 million, mainly accounted for by a rise in the liquid external assets of entities making up the Exchange Position (PGC) for US$ 466 million and the use of funds for the primary market underwriting of securities for US$ 419 million, which were partially offset by debt net inflows for US$ 311 million. As a result of these transactions, international reserves held by the BCRA went up US$ 1.86 billion over the month, totaling US$ billion by the end of August. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 1

3 I. Transactions in the Free and Single Foreign Exchange Market 1 In August 217, the National Treasury sold US$ 2.1 billion while banks and other institutions sold US$ 362 million. This total was purchased by private sector clients for the sum of US$ 1.9 billion through the Free and Single Foreign Exchange Market (MULC), and by the BCRA for US$ 567 million 2 (see Chart I.1). Chart I.1 Result of Transactions Broken Down by Sector August 217 Millions of dollars SALES PURCHASES National Treasury Other Pub. Sec. Priv. Sec. Institutions BCRA INSTITUTIONS CLIENTS: Explanatory Notes Pursuant to Communication A 6244, as from July 1 st, 217, new provisions entered into force to regulate the foreign exchange market, and among the changes made, such provisions established that the information of reasons (headings) for the transaction was no longer a sworn statement but it was only required for statistical purposes. This circumstance limits the historical comparison of series by heading. Another situation that must be explained is that when funds are cleared into the country from abroad, since there is an option to receive an equivalent amount in pesos (an exchange transaction ) or a direct deposit may be requested in a foreign currency local account ( swap transaction ). Even though, in both cases, the inflow is recorded for the heading corresponding to the transfer (+ sign), the difference lies in the fact that in the case of a swap, a second record is made for the same amount ( sign) for the deposit of funds in the account, as if the foreign currency were purchased (this second record is included in an account within the financial account, not subtracting such amount from the specific account where the funds were deposited). Likewise, a payment abroad with foreign currency deposited is recorded for the heading corresponding to payment (- sign) and another record (+ sign) for the debit from the account. Consequently, the total result in 1 The Central Bank s website ( contains the different statistical series of the Free and Single Foreign Exchange Market (to access the statistical series, click here), together with an annex broken down by sector and main headings (to access the statistical Annex of the exchange balance, click here). In addition, it is possible to go over the Main differences between the balance of payments and the foreign exchange balance (available in the Publications & Statistics section, subsection Foreign Sector / Foreign Exchange Market, to access the text click here). 2 Direct purchases from the National Treasury for US$ 2.1 billion and sales to institutions for US$ 1.53 billion. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 2

4 the exchange market of swap transactions is neutral. Taking into account the information appearing in the preceding explanatory notes, and their effects on the reading of information, the result of institutions with their clients by sector was broken down to differentiate net purchasers from net sellers (see Chart I.2). This analysis reveals that, in August, the main sectors with net purchases in the foreign exchange market were natural persons (included in Private Sector Other ), the Automotive, Machinery and Equipment and Chemical, Rubber and Plastic industries, and the sectors of Commerce, Transportation and Communications. With respect to net sellers, Oilseeds and Grains, Food, Beverages and Tobacco and Mining stood out, mainly due to transactions related to goods. Gráfico I.2 Institutions with Clients by sector in the MULC - August 217 Clients Result Millions of dollars Other Business From the Private Sector Motor Vehicles Industry -743 Machinery and Equipment -546 Chemical Manufacturing, Rubber and Plastic -58 Retail and Wholesale Business PURCHASES -452 SALES Transportation -329 Communication Services -245 Agriculture, Cattle Raise and Other Primary Prod. Act. Mining Foodstuff, Beverages and Tobacco Grains and Oilseeds The same as in July, in terms of the heading behind the reason for the transaction, the banknotes net purchases of the private sector for US$ 2.29 billion mainly resulted from the demand by clients to the institutions, which led to an increase of private deposits in the domestic financial system for around US$ 62 million. These net purchases evidenced an upward trend in the first two weeks before Primary Elections (PASO), held last August 13 th, 217 a typical behavior in pre-election periods but after the election, a slowdown was observed during the rest of the month under analysis. The formation of foreign assets (see Chart I.3) was accompanied by net transfers abroad to own accounts, which totaled US$ 875 million, up US$ 12 million against July s outflows, almost doubling the figures recorded in August 216. Other factors behind net purchases were net outflows for services for the sum of US$ 1.4 billion and the transactions related to primary and secondary income, which recorded a net outflow amounting to US$ 391 million. Conversely, the main source of the foreign exchange market resulted from net inflows from abroad due to investments by non-residents for US$ 1.15 billion. Out of this total, US$ 65 million were converted into Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 3

5 pesos and around US$ 5 million were directly deposited in foreign currency. The latter were related to a REPO between the National Government and five private institutions. There were also net inflows from abroad and from the settlement of financial loans and debt securities for around US$ 1 billion 3, from transactions with securities by institutions for US$ 43 million (including primary market underwriting and secondary market transactions), and derived from goods for US$ 295 million. In turn, transactions in which clients do not report the heading accounted for net inflows of US$ 55 million, out of which around two thirds corresponded to direct deposits from abroad not previously converted into pesos. The total of these transactions amounted to less than 2% of the total volume traded by clients in the foreign exchange market. Chart I.3 Free and Single Foreign Exchange Market - Clients - August 217 Millons of dollars Exchange transactions Swap transactions* Goods Services Primary and secondary income Non-financial private sector external assets Transactions with securities Investment of non-residents Swaps Financial loans and others Non reported concept Clients *Nota: the total result in the exchange market of swap transactions is neutral, the inflow is recorded for the heading corresponding to the transfer (+ sign), and a second record is made for the same amount ( sign) for the deposit of funds in the account, as if the foreign currency were purchased. In turn, the BCRA, in addition to the above-mentioned net purchases for US$ 567 million (direct purchases from the National Treasury for US$ 2.1 billion and sales to institutions for US$ 1.53 billion), made payments for foreign trade transactions arranged through the Domestic Currency Payment System (Sistema de Pagos en Monedas Locales, SML ) in force with Brazil and Uruguay and through ALADI (Latin American Integration Association) for US$ 72 million (see Chart I.4). 3 This figure excludes the record of foreign currency purchase to be delivered to the institution to pay the balance in foreign currency for the use of credit cards abroad, which is estimated to stand at US$ 371 million in August 217. These local debt settlement transactions in foreign currency with institutions belonging to the system do not imply a net demand in the whole system, made up by institutions and the Central Bank. The deficit for these uses was calculated in the heading Tourism and Travel at the time of transfers of payments abroad. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 4

6 Chart I.4. Change in BCRA s International Reserves August 217 Millions of dollars BCRA MULC + direct purchases to the TN SML and ALADI National Treasury of issues National Treasury paid to Int. Org. And securities Other net movements International Reserves variation *Note: Includes, among other operations, changes in the accounts of entities in foreign currency, the performance of reserves, adjustments by exchange rate and Valuation, purchase and sale of securities, transfer of National Treasury accounts that are part of the international reserves and operations of the BCRA. During August, the increase of international reserves was mainly due to the fact that the National Treasury received inflows of foreign currency for the issue of securities for US$ 6.16 billion, including the increase in the amount of Bonar Bonds due 224 (Bonds of Argentina in US Dollars due 224) for US$ 4.18 billion and the issue of National Treasury Bills (LETES) for US$ 1.97 billion. Besides, there were issues of LETES denominated in dollars and underwritten in pesos for an amount equivalent to US$ 372 million, which were not initially recorded on the exchange balance 4. In addition, the National Treasury paid LETES for US$ 2.3 billion and also made payments of the principal and interest to international organizations and holders of other securities denominated in foreign currency for around US$ 22 million; in this regard, the payment of interest to the Inter-American Development Bank (IDB) for almost US$ 1 million is to be noted. In view of all these transactions, BCRA s international reserves went up US$ 1.86 billion during August, and stood at around US$ billion by the end of the month (see Chart I.5). 4 These transactions are not included in the exchange balance upon the time of underwriting as there is no transaction in foreign currency involved at this initial stage. The payment made in foreign currency by the National Treasury is included at the time of maturity. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 5

7 7. Millions of dollars Chart I.5. BCRA s International Reserves Diary - Year 217 (h ) Ene Feb Mar Abr May Jun Jul Ago J-3 J-3 J-4 J-4 J-5 J-5 J-6 J-6 J-7 J-7 J-8 J-8 J-9 J-9 J-1 J-1 J-11 J-11 J-12 J-12 J-13 J-13 J-14 J-14 J-15 J-15 J-16 J-16 J-17 J-17 At the end of each month II. Volumes Traded in the Free and Single Foreign Exchange Market (MULC) 5 The volume traded in the MULC 6 reached a new historical maximum in August 217, totaling US$ billion (equivalent to a daily average of around US$ 2.1 billion), up US$ 4.3 billion against the previous record-high figure seen last July. The 62% rise against the figure recorded in August 216 (see Chart II.1) resulted mainly from the transactions arranged between institutions and their clients, and to a lesser extent, from transactions between entities, and between the latter and the BCRA. 5 The Central Bank s website contains the quarterly ranking broken down by institution for the volume traded in the MULC with clients (to access the Ranking click here). 6 It includes the volume traded by institutions authorized to carry out foreign exchange transactions with their clients, between authorized institutions and between the latter and the BCRA. It is worth noting that the volume traded between institutions and the BCRA implies the full value of the daily net balance in order to only count foreign exchange transactions against pesos, aiming at removing from the analysis any transactions where there are changes of instrument with no difference as to the exchange rate agreed upon, for example, in the case of swaps. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 6

8 Chart II.1. Volume Traded in the Forex Market (MULC) Millons of dollars Total volume traded in the MULC Volume traded between authorized institutions and their clients Volume traded between authorized institutions Volume traded between authorized institutions and BCRA Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 The transactions between institutions and their clients 7 accounted for 73% of the total volume traded in the MULC in August, up two percentage points (p.p.) against the same period in 216, to the detriment of the share of transactions between institutions, which stood at 24%, while the transactions between the latter and the BCRA 8 concentrated the remaining 3% of the total, against an almost negligible share one year ago. The volume traded between authorized institutions and their clients reached a new historical maximum of the MULC, for the third consecutive month, totaling US$ billion and posting a 66% rise in year-on-year terms. Despite the successive increases, these transactions continued to be concentrated in a small group of institutions: out of the 96 institutions that carried out foreign exchange transactions over the month, the first ten institutions (all of them banks) accounted for 8% of such transactions, and this share increases by 1 percentage points if the first fifteen institutions are taken into account. Upon analyzing the evolution of the volume traded with clients according to the share of the main headings, a rise of 24 p.p. in the headings included in the Capital and Financial Account was observed against the figure recorded in August 216 (see Chart II.2), to the detriment of transactions carried out under the remaining headings ( Goods, Services and Primary and Secondary Income, which exhibited drops of 18 p.p., 3 p.p. and 1 p.p., respectively). Capital and financial transactions ended the month accounting for 61% of the volume traded with clients, up 2 p.p. against the maximum level reached in July, and the main reasons behind the rise were the record-high volume of transactions for securities, residents transactions for external assets (banknotes and foreign currency), and indebtedness (domestic and from abroad). 7 The record for underwriting of Central Bank Bills and the swap transactions of clients with other countries that totaled US$ 2.33 billion in August are excluded from the volume traded by authorized institutions and their clients. 8 Swap transactions between institutions, including those carried out with the BCRA, are recorded as foreign exchange purchase-sale transactions with a change of instrument. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 7

9 Chart II.2. Volume Traded with Clients in the Forex Market and Share per heading Share 8% 7% 6% 5% 4% 3% 2% 1% Millions of dollars % Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Volume traded between authorized institutions and their clients Goods Services Primary and Secondary Income Capital and financial The distribution of transactions with clients broken down by type of institution was once again led by foreign private banks, which accounted for 65.2% (the four leading institutions with the highest volume are foreigncapital entities and concentrate 43% of transactions), more than doubling national private banks, which represented 25%, while public banks and foreign exchange firms and brokers accounted for 9.4% and.4%, respectively. Regarding the volume traded with clients from the standpoint of the currency used, the US dollar remained in first position against all other currencies used, accounting for 96.5% of total transactions while the remaining currencies used for transactions were distributed as follows: euros (3%), and other 43 currencies (.5%). Finally, the volume traded in August between banks and other financial and exchange institutions totaled US$ billion, as a result of which this market expanded by 35% in year-on-year terms. With respect to the distribution of this total per type of institution, private banks accounted for 94% (foreign and national banks, 48% and 46%, respectively); in turn, public banks and foreign exchange firms and brokers accounted for the remaining 6%. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 8

10 III) Exchange Balance 9 III) a. Exchange Current Account Current account transactions on the exchange balance evidenced a deficit amounting to US$ 1.14 billion in August 217, resulting from net outflows for the Services and Primary Income accounts for US$ 1.4 billion and US$ 413 million, respectively, partially offset by net inflows recorded in the Goods account for US$ 295 million and in the Secondary Income account for US$ 24 million. In August, the net outflow of the current account posted an increase of US$ 367 million against the same month of 216, basically due to higher outflows for services. III) a.1. Goods-Related Transfers Transactions related to goods transfers on the exchange balance exhibited a net inflow of US$ 295 million in August, resulting from the receipts from exports for US$ 5.29 billion (up 3% y.o.y.) and the payment of imports for almost US$ 5 billion (up 5% y.o.y.) (see Chart III.1). This trade surplus fell by 29% against the same month of 216, as a result of an increase in the payment of imports that exceeded the rise in the receipts from exports. Chart III.1. Goods-Related Transfers Millions of dollars +3% Payments for goods imports Collectios on goods exports Goods related transfers Jan-14 May-14 Sept-14 Jan-15 May-15 Sept-15 Jan-16 May-16 Sept-16 Jan-17 May-17 +5% III) a.1.1. Collections on Goods Exports The Oilseeds, Oils and Grains sector settled receipts from goods exports for US$ 2.64 billion in August 217, up 8% (US$19 million) against the same month in 216 (see Chart III.2). However, in year-to-date terms, the sector recorded inflows from collections on goods for a total of US$ billion, down 3% in y.o.y. terms (around US$ 7 million). 9 The exchange balance includes transactions carried out by institutions with clients through the MULC and those carried out directly with international reserves of the Central Bank recorded in its equity evolution. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 9

11 The year-on-year increase recorded in August was mainly due to collections after shipment, which stood at around US$ 1.5 billion and more than doubled the figure recorded in the same month of 216, followed by export prefinancing granted by local banks, which totaled US$ 398 million (up 3% y.o.y.). Conversely, advances and prefinancing from abroad fell 39% y.o.y. and totaled US$ 734 million. In August, total collection settlements through the foreign exchange market surpassed exports settlements of the month by around US$ 4 million, going up US$ 2 billion so far since January 217 1, a level exceeding by US$ 1.2 billion the surplus of settlements for exports during the first 8 months of 216. Chart III.2. Receipts from Exports of Oilseeds and Grains Million US$ % Total 214: % Total 215: Total 216: (y.o.y. +19%) +39% % Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Advance collections from clients and prefinancing of export Rest of export collections The year-on-year rise of the sector s settlements (8%) resulted mainly from more foreign sales, especially of soybean, wheat and corn. In fact, the Export Sworn Statements (Declaraciones Juradas de Ventas al Exterior (DJVE) 11 totaled US$ 2.17 billion in August, up 57% in y.o.y. terms 12. In contrast with the results seen this year, a remarkable level of foreign sales was observed during the first half of 216, mainly related to the measures adopted by the new Administration (see Chart III.3). 1 For the series of exports to be compared to that of settlements by the MULC, the basis for calculation considered is the total value of shipment carried out by a single group of companies classified within the sector as Oilseeds and Grains. Even though such companies carry out most sales of products of the complex, the evolution does not necessarily match, exactly, that evidenced by exports at product level. 11 DJVEs are sworn statements to which exporters of products of an agricultural origin falling under the scope of Law are subject. They are published daily by the Agribusiness Ministry (Minagro). In order to reflect foreign sales of products of an agricultural origin more accurately, DJVEs considered herein are adjusted taking also into account exports of biodiesel and soybean shells pellets, two products that do not require any DJVE. 12 This rise was accounted for by positive changes in terms of volumes (75%) and negative changes in terms of prices (7%). The main products behind this increase in foreign sales records of around US$ 8 million were basically soybean pellets for around US$ 4 million, followed by wheat and soybean oil for around US$ 15 million each and, lastly, by corn for US$ 1 million. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 1

12 Chart III.3. Sales, Collections and Exports in the Oilseeds and Grains Sector Million US$ Jan-16 a Aug-16-15% -3% -1% Jan-17 a Aug % 34% 25% 111% 12% -11% 3. 22% -6% 23% -34% 18% -6% 11% 8% -9% 1% -26% -11% -25% 61% -2% 39% -16% 6% -18% 19% -11% 1% -12% -21% 46% % 57% 62% 46% 4% 178% -23% -11% 41% 56% 45% 84% % -49% 9% 3% 22% 2. 86% 55% -11% 32% -5% % -18% % 1% 18% % -23%-25% % % Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sales (DJVE) Collections (MULC) Exports Source: National Institute of Statistics (INDEC) and the Minister of Agriculture. Sales (DJVE) include the exports of biodiesel and soybean shell pellets. The remarkable foreign sales of soybean were mainly related to the faster pace of domestic trading shown by the export sector and the industry if compared to the pace recorded in August Likewise, corn and wheat exhibited a pace of domestic purchases of the export sector breaking a historical record for the whole cycle 14. In turn, and unlike the figures recorded in the Oilseeds and Grains sector, receipts from exports of goods from the remaining sectors exhibited a 2% fall in y.o.y. terms, totaling US$ 2.66 billion in August (see Chart III.4). 13 Total soybean domestic purchases of the industry amounted to 2.5 million tons in August 217, against 1.9 million tons purchased in August 216, resulting in a 47% increase. In addition, it is worth stating that so far in this cycle, trading was rather behind in relation to the 215/16 cycle. It is important to highlight that the settlement of foreign currency is mainly related to the purchase of grains which will be later exported, either in the same condition or as processed products following industrial processes. 14 Total domestic trading of wheat, by the closing date of this report, amounted to 11.8 million tons, against the 6.1 million tons traded in the same period of 216 (evidencing a 96% hike). As regards corn, domestic purchases in late August 217 reached 19.7 million tons against the 16.1 million tons purchased in the same period of 216 (evidencing a 23% rise). Consequently, in this respect, the domestic trading of both grains broke a new historical record. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 11

13 8 Chart III.4 Receipts from Goods Exports from the Remaining Sectors (excluding the Oilseeds and Grains sector) Million US$ 7-1% August 216: US$ 2.77 millions 6 August 217: US$ millions y.o.y.: -2% 5 +1% 4-1% 3 +11% +8% % -29% -1% -37% +1% Automobile Industry Food, beverage and tobacco Chemical, rubber and plastics Industries Agriculture, Livestock, and Other Primary Activities Mining Oil Common metals and processing Textile and tanning industry Commerce Machinery and equipment On a sector-by-sector breakdown and against the same month in 216, a drop was observed mainly in the Commerce sector, which recorded collection on exports for US$ 82 million (down 37% y.o.y.), followed by Chemical, Rubber and Plastic industries and Textile and Leather Industry, which recorded inflows for US$ 345 and US$ 96 million, even though both exhibited drops against August 216 (1% and 29%, respectively). In the opposite direction, Automobile Industry and Mining, with inflows from receipts from exports for US$ 449 million and US$ 285 million, respectively, were the sectors that exhibited the most remarkable rise against the same month of 216. III) a.1.2. Payment for Goods Imports Payments for goods imports on the exchange balance totaled around US$ 5 billion in August, up 5% y.o.y; in addition, this amount stood, together with that of June 217, at one of the maximum levels on record since August 215. At sector level, the increase was led by the Common Metals and Processing and Commerce sectors, partially offset by the Chemical, Rubber and Plastic industries, among other sectors (see Chart III.5). Chart III. 5 Payments for Goods Imports per Sector 1.3 Million US$ % August 216: US$ millions 1. August 217: US$ millions 9 y.o.y.: +5% 8 7-7% 6 % +8% +25% % +13% -1% -7% -2% Automobile Industry Chemical, rubber and plastics Industries Energy * Machinery and equipment Commerce Common metals and processing Food, Other beverage and Manufacturing tobacco Textile and tanning industry Paper Industry, Publishing and Printing *Energy: includes oil, electricity and gas. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 12

14 - The payments of the Automobile Industry, first sector in terms of relevance in total payments for exports in August, amounted to US$ 1.7 billion. As a result, by including inflows from the collection on goods exports for US$ 449 million, the Automobile Industry evidenced a deficit in the Goods heading for a total of US$ 617 million in August (see Chart III.6); net payments have amounted to US$ 5.44 billion in year-to-date terms since early 217, exceeding the deficit recorded in the same period of 216 by 22%. All of this took place in a context of increased sales from automotive terminals to car dealers selling imported vehicles (43% y.o.y. hike), slightly offset by the rise in the exports of utility vehicles (up 18%) 15. Chart III.6 Automobile Sector. Goods-Related Transfers Million US$ Collections on goods exports Payments for goods imports Goods-related transfers Jan-14 May-14 Sept-14 Jan-15 May-15 Sept-15 Jan-16 May-16 Sept-16 Jan-17 May-17 In turn, the Energy sector, after the maximum seasonal figure observed in May, recorded payments for imports for US$ 559 million, standing at a similar level both in year-on-year terms and against the previous month. Taking into account the flows accumulated from January to August 217, a 13% y.o.y. drop is observed, mainly resulting from a decrease in payments for imports of the Electricity sector (see Chart III.7). 15 Source: Association of Automobile Manufacturers (Adefa) Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 13

15 Chart III.7 Payments for Goods Imports. "Energy" sector 2. Million US$ Gas (Extraction, Transportation, Distribution) Electricity (Generation, Transportation, Distribution) Oil Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Finally, by analyzing payments for goods imports on the exchange balance based on the method of payment used, deferred payments went up 3% y.o.y., amounting to US$ 3.72 billion during the month under analysis (see Chart III.8). In the same direction, advance payments totaled US$ 833 million, up 48% y.o.y. Conversely, payments at sight totaled US$ 442 million, down 18%. Chart III.8 Payments for Goods Imports 8. Millions US$ Deferred Payments for Goods Imports Advanced Payments for Goods Imports (FOB) Spot Payments for Goods Imports (FOB) % A-2 A-3 A-4 A-5 A-6 A-7 A-8 A-9 A-1 A-11 A-12 A-13 A-14 A-15 A-16 A-17 Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 14

16 III) a.2. Services, Primary Income and Secondary Income The year-on-year net outflow for services transactions increased by US$ 317 million and totaled net outflows for US$ 1.4 billion. This result was accounted for by net outflows for Travel, Passenger Transport and Other Expenses Paid with Credit Card, totaling US$ 879 million 16, and for Other Services and Freight and Insurance, reaching US$ 181 million and US$ 88 million, respectively, which were partially offset by net inflows from Business, Professional and Technical Services for US$ 14 million (see Chart III.9). 5 Chart III.9 Net inflows from services Million US$ Tourism, Travels and Tickets Business, Professional and Technical Services Freight and Insurance Other Services Net Inflows Services -1.5 E-13 M-13 S-13 E-14 M-14 S-14 E-15 M-15 S-15 E-16 M-16 S-16 E-17 M In this respect, the net deficit of the Travel, Passenger Transport, and Other Expenses Paid with Credit Card account evidenced a 28% y.o.y. hike, basically explained by a rise in outflows that exceeded the increase in inflows (see Chart III.1). Indeed, gross outflows totaled US$ 1.4 billion (up 28% y.o.y.), while gross inflows amounted to US$ 166 million (up 27% y.o.y.). By analyzing the performance of the flows under this heading, the year-to-date figures show a deficit of around US$ 7.38 billion while, for the same period of 216, the outflow amounted to US$ 5.6 billion, resulting in a 32% y.o.y. increase in the deficit. This change is in line with the results of the International Tourism Survey (ETI) of the National Institute of Statistics and Censuses (INDEC), where the year-on-year change for the January-July period was 29%. 16 It is worth pointing out that the transfers made to foreign countries in order to settle the balances with international credit card issuers include both the purchases made by residents travelling abroad and the remote purchases made from foreign suppliers, which are estimated to stand at US$ 15 million per month so far this year, accounting for 17% of the total outflows recorded by this account. In turn, the inflows include the remote purchases made by non-residents from Argentine suppliers. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 15

17 Chart III.1. Services, Tourism, Travels and Tickets Million US$ Tourism, Travels and Tickets - Incomes Tourism, Travels and Tickets - Outflows Tourism, Travels and Tickets - Net In turn, transactions related to primary income recorded a net outflow of US$ 413 million; this total is made up by net payments for interest totaling US$ 193 million, and for profits, dividends and other income for US$ 22 million. Regarding payments for interest, the Public Sector and BCRA accounted for 62% of net payments, reaching US$ 121 million; in this respect, net interest payments of local governments stand out. With respect to transfers of profits and dividends through the MULC, a gross outflow was recorded in August for US$ 213 million (see Chart III.11), evidencing a 33% drop against August 216. On a sector-by-sector basis, the payments made by Financial Institutions for US$ 46 million, Automobile Industry for US$ 36 million, Oil for US$ 31 million and Food, Beverages and Tobacco for US$ 3 million (see Chart III.12) are to be noted; as a whole, they accounted for two thirds of all transfers made. Chart III.11 Transfer of Profits and Dividends Millons of dollars Total x year Jan-1 Oct-1 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Chart III.12 August Total: US$ 213 millones Motor Vehicles Industry : 36 Financial Sector: 46 Oil: 31 Foodstuff, Beverages and Tobacco: 3 Entertainment: 11 Non-Metallic Mineral Products (Cement, Ceramics and Others): 9 Others: 5 Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 16

18 III) b. Foreign Exchange Capital and Financial Account The transactions of the foreign exchange capital and financial account on the exchange balance recorded a positive balance of US$ 2.14 billion in August. This surplus is associated with the surplus recorded by the Public Sector and the BCRA for US$ 3.97 billion and the Other Net Movements account for US$ 534 million; especially remarkable within the latter was the increase in domestic deposits in foreign currency. These movements were partially offset by the outflows of the Non-Financial Private Sector (SPNF) for US$ 1.8 billion and the Financial Sector for US$ 568 million. Foreign Exchange Capital and Financial Account In millons of dollars Date Aug-16 Sept-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Foreign Exchange Capital and Financial Account Non-Financial Private Sector Financial sector Public Sector and BCRA Other Net Movements III) b.1. The Non-Financial Private Sector s Foreign Exchange Capital and Financial Account In August, the capital and financial account of the Non-Financial Private Sector (SPNF) exhibited net outflows for US$ 1.8 billion, posting an increase of US$ 1.41 billion against the figure recorded in the same month in 216 (see Chart III.13). The main reason behind this result was the rise in net purchases of external assets by residents, which was partially offset by the reversal of securities transactions in the secondary market. Chart III.13 Non-Financial Private Sector s Capital and Financial Account Millons of dollars August 216 August Capital account Investments by non-residents Loans and debt securities Foreign assets Swap transfers from abroad Securities Total In August, the net demand for the purchase of foreign assets totaled US$ 3.16 billion, resulting from the net purchases of banknotes by clients for US$ 2.29 billion (see Chart III.14) and of foreign currency for no specific use for the sum of US$ 875 million. In gross terms, purchases of banknotes totaled US$ 3.55 billion and recorded an increase of around US$ 5 million against July 217, reaching its maximum figure since October 28. These purchases were made by Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 17

19 1,75,2 clients, the maximum number on record since the regularization of the Foreign Exchange Market in December 215, accounting for an increase of 1, clients against July 217. It is worth pointing out that these purchases followed an upward trend during the first two weeks before the Primary Election (known as PASO), followed by a downward trend once the elections were held. In fact, before the PASO, the net purchases of banknotes by clients amounted to US$ 132 million per day while, after the election, purchases averaged US$ 85 on a daily basis. Chart III.14 Transactions of Banknotes in Foreign Currency by the Non-Financial Private Sector through the MULC* 2. Millons of dollars Net purchases of Banknotes Sales of banknotes -4. Feb-2 Feb-3 Feb-4 Feb-5 Feb-6 Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 * Excludes operations with specific destination prior to If the information is broken down to take into account the amount of the monthly purchases by client, it is seen that 42% of banknotes purchases (around US$ 1.49 billion) were made for amounts up to US$ 1, per month by client, and this share goes down 5 p.p. against July (see Chart III.15). In addition, 96% of the number of clients who purchased banknotes in August made transactions in this amount segment, resulting in an average purchase by client for the sum of US$ 1,448 within this segment, whereas the remaining 4% made purchases for US$ 45,935 on average. It is worth stating that these purchases of banknotes drove the increase of deposits in savings accounts in foreign currency. In turn, the monthly sales of clients banknotes totaled US$ 1.26 billion in August, posting a level similar to that of July. It was observed that sales of banknotes exceeding US$ 2 million per month accounted for 48% of the total, around 5 p.p. above the figure recorded in the previous month, with drops in all middle segments (see Chart III.16). Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 18

20 Chart III.15. Purchase of Banknotes by SPNF- Stratified Share by stratum - strata defined by monthly cumulative per customer Chart III.16. Sale of Banknotes by SPNF- Stratified Share by stratum - strata defined by monthly cumulative per customer 1% 9% 8% 7% 6% 5% 4% 3% 2% 13% 16% 12% 11% 15% 15% 3% 5% 4% 8% 7% 16% 17% 17% 15% 16% 16% 17% 22% 2% 21% 19% 19% 19% 19% 19% 21% 7% 5% 7% 9% 3% 2% 7% 7% 17% 18% 18% 19% 2% 5% 48% 5% 53% 53% 53% 55% 49% 46% 45% 45% 41% 49% 47% 42% 47% 3% 7% 6% 4% 7% 1% 4% 6% 21% 6% 4% 5% 9% 3% 6% 16% 16% 2% 19% 15% 3% 5% 16% 18% 5% 4% 6% 19% 2% 6% 9% 7% 14% 3% 3% 3% 5% 5% 3% 6% 6% 2% 2% 22% 19% 2% 18% 2% 17% 4% 44% 47% 42% 4% 3% 6% 3% 8% 8% 13% 14% 17% 14% 17% 17% 11% 19% 16% 8% 8% 14% 19% 16% 43% 47% 41% 35% 18% 9% 1% 19% 15% 8% 8% 11% 9% 19% 2% 13% 1% 11% 1% 12% 17% 17% 17% 15% 35% 9% 8% 13% 11% 25% 3% 19% 11% 8% 17% 18% 31% 14% 7% 9% 15% 7% 12% 18% 27% 21% 31% 1% 13% 8% 13% 9% 11% 16% 15% 17% 13% 12% 15% 33% 4% 1% 8% 9% 7% 5% 1% 7% 9% 7% 8% 17% 15% 13% 14% 15% 1% 11% 11% 13% 11% 29% 34% 34% 33% 24% 26% 21% 1% 13% 24% 27% 2% 18% 16% 15% 18% 19% % Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 More than US$ 5 M Between US$ 2 M and US$ 5 M Between US$ 5 K and US$ 2 M Between US$ 5 K and US$ 5 K Between US$ 1 K and US$ 5 K Up to US$ 1 K Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 More than US$ 5 M Between US$ 2 M and US$ 5 M Between US$ 5 K and US$ 2 M Between US$ 5 K and US$ 5 K Between US$ 1 K and US$ 5 K Up to US$ 1 K Natural persons were the leading net purchasers of banknotes (US$ 2.27 billion) while legal persons purchased US$ 25 million in banknotes (see Chart III.17). This difference results from the fact that legal persons recorded gross sales of banknotes for US$ 826 million, accounting for 65% of total sales of banknotes. Chart III.17. Net Purchases of Banknotes Broken Down by Natural and Legal Persons Millons of dollars 25 Net purchases of banknotes by natural persons Net purchase of banknotes by legal persons Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Ago-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Unlike the behavior observed in the purchase of banknotes, gross transfers abroad without reporting a specific use for the funds and totaling US$ 1.61 billion were made by around 1,9 clients mainly belonging to the high-income segment, where clients with monthly purchases over US$ 2 million accounted for 84% of foreign currency total gross purchases (see Chart III.18). It is worth noting that part of these funds might have been used for the payment of external obligations from the foreign accounts to which they are transferred. On the contrary, transactions related to transfers from abroad were more fragmented if compared to transfers made to foreign countries. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 19

21 Chart III.18 Freely-available Foreign Currencies in the MULC August 217 Millons of dollars More than US$ 5 M 6% 1.22 Between US$ 2 M and US$ 5 M 74% Between US$ 5 K and US$ 2 M 739 Up to US$ 5 K % 9% 8% 8% 11% 22% Purcheses Sales Purcheses Sales On the other hand, there were net inflows of loans and debt securities from abroad for US$ 46 million and settlements of domestic loans for around US$ 17 million 17. On a sector-by-sector basis, debt net inflows of the Oil sector for US$ 37 million, Electricity (Generation, Transport, Distribution) for US$ 76 million and Automobile Industry for US$ 55 million should be noted. With reference to investments by non-residents, there were net inflows for US$ 1.14 billion, as a result of portfolio investments for US$ 1.1 billion and direct investments for US$ 133 million. Consequently, nonresidents investments rose by US$ 79 million in net terms against the same month in 216, due to the increase in portfolio investment (see Charts III.19 and III.2). In the case of non-residents portfolio investments, it should be noted that even though a priori it is not possible to identify the use to be given to such funds, it is possible to make a difference between funds initially kept in dollars and those which, after the clearing into the country, were converted immediately into pesos. Such distinction is instrumental to analyze the flows that may be invested in the financial market in local currency. In this sense, in August, non-residents portfolio investments initially in pesos evidenced net inflows for US$ 52 million, thus reversing the sign seen in July; as a result, August was the second month with the highest inflows under this heading in the history of the MULC. 17 Excluding the purchase of foreign currency by clients to be delivered to the institution to pay the balance in foreign currency due to the use of credit cards abroad, which was calculated to be at around US$ 371 million. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 2

22 Chart III.19. Non-Residents Investments Portfolio Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Foreign currency outflows Foreign currency inflows Foreign currency purchases Foreign currency sales Net inflows Net foreign currecy sales Non-residents portfolio investments directly deposited in a foreign currency account totaled US$ 49 million and were mainly devoted to investments in Treasury Securities. Chart III.2. Non-Residents Investments Direct 8 Millons of dollars Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Título del eje Inflows Outflows Net In turn, the main beneficiaries of funds from direct investments by non-residents in the SPNF (which amounted to US$ 15 million) were Oil with US$ 39 million, Gastronomy with US$ 18 million, Machinery and Equipment with US$ 15 million and Communications with US$ 12 million (see Chart III.21). Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 21

23 Chart III.21. Foreign Direct Investment. Share by Sector in Gross Inflows August Oil Gastronomy Machinery and equipments Comunication 9 18 Transport Entretaiment Other Lastly, there were net foreign currency inflows for the operation with financial entities securities 18 in the secondary market for US$ 82 million, evidencing a reversal of around US$ 94 million against the outflows recorded in August 216. III) b.2. Financial Sector s Foreign Exchange Capital and Financial Account In August 217, the capital and financial transactions of the Financial Sector evidenced net outflows for US$ 568 million, mainly accounted for by the rise of liquid external assets of the institutions making up the Exchange Position (PGC) for US$ 466 million and the use of funds for the primary market underwriting of securities for US$ 419 million, which were partially offset by debt net inflows for US$ 311 million. Financial institutions PGC stock totaled US$ 3.58 billion by the end of August (see Chart III.22) 19. Out of such total, 45% corresponded to holdings by the institutions of banknotes in foreign currency (see Chart III.23). This stock of banknotes is held by the institutions basically to address the transactions related to domestic deposits in foreign currency and to meet the needs of the foreign exchange market. 18 In the MULC, transactions are recorded under the name of the institution. The net effect of these transactions has, as counterpart, non-financial private sector s residents, or non-residents. For this reason, they are posted in the foreign exchange capital and financial account of the nonfinancial private sector. 19 It is worth mentioning that Communication A 6237 became effective on May 4, 217, stating that the institutions authorized to make foreign currency transactions may freely determine the level and use of their liquid external assets in foreign currency (PGC). However, institutions are still subject to the limits established for the Net Global Position in Foreign Currency (PGNME). Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 22

24 Chart III.22. Institutions Exchange Position Chart III.23. Banknotes Stock / Exchange Position Ratio 7. Millons of dollars % 6. Own currencies Banknotes 5. 71% 77% 72% % 39% 37% 37% 34% 33% 3% 25% 46% 47% 49% 46% 4% 41% 43% 44% 43%4% 44% 37%35% 35% 52% 6% 47% 41% 38% 47% 44% 45% 44% 45% 43% 64% 61% 56% 51% 54% 53%5% 45% 1. Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 At the end of each month Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 At the end of each month By the end of August, in relation with forward transactions in foreign currency made in the domestic markets 2, the ensemble of institutions recorded a net long position of US$ 87 million, evidencing an increase of US$ 643 million against the position recorded by the end of July, mainly due to both an increase in the forwards long position in Regulated Markets and a decrease in the forwards short position (see Charts III.24 and III.25). If the forward stock in foreign currency is broken down by type of institution, foreign entities ended August with purchases for US$ 955 million while national entities ended the month with sales for US$ 147 million; national private entities made net purchases for a total of US$ 551 million while public entities purchased US$ 92 million. Gráfico III.24 Institutions Forwards Position Millon of 4. dollars Forwards Position in Institutionalized markets 3. Positions in forwards Forwards net position 2. Gráfico III.25 Institutions Forwards Position by type of entity Millon of dollars Foreign entities Nacional entitis Jan-16 Mar-16 May-16 Jul-16 Sept-16 Nov-16 Jan-17 Mar-17 May jul -1.1 Jan-16 Mar-16 May-16 Jul-16 Sept-16 Nov-16 Jan-17 Mar-17 May jul It is also worth mentioning that the volume traded in the forward markets 21 amounted to US$18.78 billion in August, up 33% against the previous month and up 71% against the same month of 216 (see Chart III.26). Most transactions were carried out in the Rosario Futures Exchange (ROFEX) (84% of the total), up 3 p.p. against the average figure recorded so far in 217 and up 4 p.p. against the average observed throughout This information comes from the system implemented by Communication A 4196 and supplementary regulations. 21 This information comes from the Forward Transactions Reporting Scheme (Communication A 4196, as amended) and the ROFEX. It includes the total volume traded in ROFEX and the transactions arranged by entities in the Electronic Over-the-Counter Market (MAE) and with Forwards. Transactions in the Free and Single Foreign Exchange Market (MULC) and Exchange Balance BCRA 23