ago-9 oct-9 dic-9 feb-1 abr-1 jun-1 ago-1 oct-1 dic-1 feb-11 abr-11 jun-11 ago-11 oct-11 dic-11 feb-12 abr-12 jun-12 ago-12 oct-12 dic-12 feb-13 abr-13 jun-13 ago-13 oct-13 dic-13 feb-14 abr-14 jun-14 II - 26 III - 26 IV - 26 I - 27 II - 27 III - 27 IV - 27 I - 28 II - 28 III - 28 IV - 28 I-29 II-29 III-29 IV-29 I-21 II-21 III-21 IV-21 I-211 II-211 III-211 IV-211 I-212 II-212 III-212 IV-212 I-213 II-213 III-213 IV-213 I-214 REAL SECTOR In 213 Paraguayan GDP increased by 13.6%, the highest growth rate in the country s history, the highest in Latin America in 213 and the third largest in the world. Nevertheless, since late 213 economic expansion has toned down. In the first quarter of 214 Gross Domestic Product expanded at a rate of 4.1% in regards to Q1 213. Services increased at a rate of 3.6% and were the main thrust behind GDP growth in the period. The agricultural sector grew at a rate of 4.1%, a fairly moderate increase in percentage terms, but the figures are measured against first quarter of 213, when the sector experienced a 6% growth rate. The livestock and industrial sectors expanded at a rate of 7.% and 7.9% respectively; while construction had an important growth of 14.7%, boosted by investments from the private sector. 2 15 1 5-5 -1 Consumer spending exhibited mixed results, on one hand, public sector spending decreased by 2.6%, while private sector increased 2.1%. The results indicate a decrease spending, explained by a decrease in average real income and increased consumption of unregistered imports (smuggling). Investment expenditure displayed a lower growth rate when compared against 213 Q1, mainly due to the 51% decrease in public sector investment, overshadowing growth registered in private investments. AGRICULTURE PARAGUAYAN ECONOMY Contributions to GDP Growth Agriculture Livestock Industry Construction Commerce and Service GDP The 213/214 soybean season ended with great results, surpassing expectations and previous records. Total harvested area was almost 3.3 million hectares, while the average yield was around 2,487 kg/ha; meanwhile the 212/13 season was around 3.2 million hectares with an average yield of 2,598 kg/ha. 7% of all soybean production is located in the eastern and southern regions of the country: in Alto Paraná, Canindeyú and Itapúa, in which the highest yields per hectare were obtained. Other departments with important soybean production are Caaguazú, Caazapá, San Pedro and Amambay. A total production of almost 8.1 million tons was obtained, 1.3% greater than the previous harvest, which had been an all-time high. With these results, Paraguay positions itself as the sixth largest producer and fourth largest exporter of soybeans worldwide. Corn season ended with a reduction in surface area sown and yields. The decrease was attributed to low international prices, which reduced incentives to grow corn, forcing producers to center instead on the production of soybean. With regards to wheat production, despite a slightly smaller harvest surface, greater yields are expected in comparison to the previous season, leading to an expected production above one million tons. Soybean Corn Wheat Crop LIVESTOCK 211/12 212/13 213/14* Var% Has 2.957.48 3.157.6 3.254.98 3,1% Tons 4.43.39 8.22.19 8.93.821-1,3% Ton/Ha. 1,367 2,598 2,487-4,3% Has 876.369 983.899 876. -11,% Tons 3.461.658 3.935.596 3.416.4-13,2% Ton/Ha. 3,95 4, 3,9-2,5% Has 499.566 551.365 55. -,2% Tons 1.236.426 71.439 1.21. 72,5% Ton/Ha. 2,475 1,272 2,2 72,9% Source: Investor based data from CAPECO - INBIO Total slaughter during the first semester of 214 reached optimum levels, with a monthly average of 171 thousand cattle, 11% greater than the first six months of 213. If slaughter levels of the last 12 months are compared to the twelve month aggregate registered one year ago, a growth rate of 17% is observed. 21. 19. 17. 15. 13. 11. 9. 7. 5. 3. Total slaughter Total heads slaughtered Average Source: Investor based data from SENACSA During the first semester of 214, bovine meat exports accumulated to 135.7 thousand tons, which is 14.9% greater than Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6
5 1. 1.5 2. 2.5 3. 3.5 4. 4.5 5. 5.5 ene-6 may-6 sep-6 ene-7 may-7 sep-7 ene-8 may-8 sep-8 ene-9 may-9 sep-9 ene-1 may-1 sep-1 ene-11 may-11 ene-12 may-12 ene-13 may-13 ene-14 may-14 the volume exported during the same period last year. In monetary terms, exports increased by 22.4% to a grand total of US$ 582.9 million driven by high levels of frozen meat sales which rose 19% in annual terms. With regards to destination of Paraguayan bovine beef sales, Russia is still the largest customer, while others included Hong Kong, Kazakhstan, and Angola. Regarding chilled beef, the main destinations are Chile and Brazil, which represent 97% of total exports. The average price for chilled beef was around 5,699 US$/Ton, which is 15% greater than the value reported in June of 213. Other destinations included Russia, Lebanon and Hong Kong. OTHER SECTORS The construction sector exhibited a 14.7% growth, propelled by the private sector. Cement sales increased 7.5% in comparison to 213. As an indicator of the transport sector s performance one can analyze freight volumes related to agriculture and livestock, which have increased 6% during the first semester of 214 with regards to 213 figures. As in 213, high levels of smuggling continue to affect small businesses, mainly related to food, clothes and other non-durable consumption goods, which is reflected in lower import levels and deteriorating performance of businesses selling consumer goods. 14. 12. 1. 8. 6. 4. 2. Concept (million US$) EXPORTS External Trade (12 months aggregated - Million US$) Exports Imports Trade Balance (right axis) 21 211 212 213 214-5 -1. -1.5-2. -2.5-3. -3.5-4. -4.5 % Change 214/13 Exports 3.364 3.838 3.66 5.46 5.51 9,2% Imports 4.17 5.42 5.23 5.582 5.285-5,3% Trade Balance -85-1.582-1.416-536 225 141,9% In the first semester of 214, total exports reached US$ 5,51 million, 9.2% more than in 213. Exports of the soybean chain increased 11% in terms of value and 13% in volume. With the installation of new grain processing plants, aided by the great year for the soybean production complex, exports of soybean meal and oil increased 55% and 38% in volume, respectively, shipping around U$S 9 million. 214 3.17 Exports by products 583 1.84 826 5.51 EXTERNAL SECTOR 213 2.729 476 1.12 74 5.46 BALANCE OF TRADE 212 1.57 366 1.119 615 3.66 Paraguayan External Trade has shown a good performance in the first six months of 214, with an important improvement with regards to previous years. After 9 straight years of deficits, the balance of trade registered a surplus during the first semester of 214. Exports surpassed imports by U$S 225 million, an improvement of 142% in comparison to the negative U$S 536 million registered between January and June of 213. Paraguay has improved its position with Argentina, Brazil, Uruguay and the group of Asian countries. On the other hand, decreases have been registered regarding the rest of Latin America, the European Union and Russia. 211 21 1.674 1.521 431 462 988 1.129 million US$ Beef chain exports surpassed US$ 58 million. In comparison to the first semester of 213, bovine beef sales have increased 22% and 15% measured in value and volume, respectively, driven mainly by the reopening of the Chilean market. 425 572 3.364 3.838 Soybean chain Beef chain Electrical Energy Others Chilled beef exports have exhibited great progress in 214. During the month of June, the average shipment was valued at around 5,7 U$S/Ton., the highest level since the last Foot-and- Mouth Disease outbreak in September 211. Shipments of this type of meat have grown by 127% in value compared to the same period in 213. An important recovery can be observed in sales to Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6
1.65 311 1.11 1.684 385 1.234 365 1.31 353 395 million US$ 1.346 1.53 1.658 1.766 1.818 2.11 1.827 1.82 1.242 million US$ 2.187 31-dic.-12 15-ene.-13 3-ene.-13 14-feb.-13 1-mar.-13 16-mar.-13 31-mar.-13 15-abr.-13 3-abr.-13 15-may.-13 3-may.-13 14-jun.-13 29-jun.-13 14-jul.-13 29-jul.-13 13-ago.-13 28-ago.-13 12-sep.-13 27-sep.-13 12-oct.-13 27-oct.-13 11-nov.-13 26-nov.-13 11-dic.-13 26-dic.-13 1-ene.-14 25-ene.-14 9-feb.-14 24-feb.-14 11-mar.-14 26-mar.-14 1-abr.-14 25-abr.-14 1-may.-14 25-may.-14 9-jun.-14 24-jun.-14 9-jul.-14 the Chilean market, with growth rates of 429% and 492% in value and volume terms. On the other hand, frozen beef exports have diminished by 1.2% in volume, with an average price of 4,121 U$S/Ton, 1.4% higher than the first semester of 213. The decrease is due to diminished sales to the Russian market. Until today a decrease of U$S 18.7 million has been registered when compared to the same period of 213, a 7.1% decrease. IMPORTS 213 Africa 4% Russia 62% Total Exports US$ 476 million 118.18 Tons Asia 17% BEEF EXPORTS Brazil 9% Chile 3% Rest of Europe 4% Russia 5% 214 During the first semester of 214, imports have registered a reduction of 5.3% compared to the same period in 213. This decrease has shown up in non-durable consumer goods as well as capital goods, with declines of 4.5 and 13.7% respectively. Meanwhile, durable goods and intermediate goods increased 12% and.5% respectively. Several items suffered losses, especially capital goods, petroleum derivatives and certain food items. The decrease in asphalt imports (-5%) must be highlighted, due to the lower execution of infrastructure works by the public sector. Africa 5% Chile 16% Total Exports US$ 582 million 135.66 Tons Asia 17% Rest of Europe 1% Brazil 1% EXCHANGE RATE As the U.S. Federal Reserve began cutting back on its Quantitative Easing program, 214 was expected to be a year marked by a strong dollar in regards to other currencies. At first the Paraguayan Guaraní followed the expected path, registering a 3% depreciation, around Gs/U$S 4.65. During January the tendency continued, reaching a level of Gs/U$S 4,72 towards the end of the first month, a rate not seen since February of 212. It is not unusual for the dollar to appreciate at the start of the year, given a higher demand over the holidays exerts pressure on the exchange rate, as well as a slow inflow of foreign currency given that most of the soybean production is still not harvested and processed. Despite all of this, the Paraguayan currency began to appreciate in February, registering a rise of 4.5% and a return towards Gs/U$S 4,49. In mid-february, the rate between the Guaraní and the American Dollar returned to the levels seen during the last two quarters of 213, and would remain at such levels during March, April, May and the first weeks of June, fluctuating between 4,53 and 4,46 Gs./U$S. After the first weeks of June, the Guarani began to strengthen given an increase in supply of dollars due to the large inflows from exports and lower demand for imports, as well as daily interventions of around U$S 2 million by the Central Bank. In 3 days the Guarani appreciated by 5.4% (Gs. 23) against the Dollar, reaching 4,25 Gs./U$S. During the next few days the exchange rate stabilized around 4.35 Gs./U$S. Gs./US$ 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4. 3.9 Nominal Exchange Rate 4.72 4.25 4.35 2.5 2. 1.5 1. 5 4.17 5.42 Imports 5.23 5.582 5.285 6. 5. 4. 3. 2. 1. In regards to the Real Exchange Rate (RER), comparing data from May 214 and December 213, the Guaraní has strengthened against the Argentinian peso (11.3%), the Euro (6%) and the American Dollar (4.5%). On the other hand, the Brazilian Real and the Japanese Yen have appreciated slightly, around 2.8% and.7%, in relation to the Guarani. 21 211 Non Durable Consumption Goods Intermediate Goods Total Imprts (right axis) 212 213 214 Durable Consumption Goods Capital Goods MONETARY AND FINANCIAL SECTORS MONETARY SECTOR During the first four months of 214 there has been an increase in inflationary pressures. In January most items in the index Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6
jun-7 sep-7 dic-7 mar-8 jun-8 sep-8 dic-8 mar-9 jun-9 sep-9 dic-9 mar-1 jun-1 sep-1 dic-1 mar-11 jun-11 dic-11 mar-12 jun-12 dic-12 mar-13 jun-13 dic-13 mar-14 jun-14 % basket suffered increases, resulting in a rise of 1.4%, driven by transport and food items. On one hand, urban transport ticket prices experienced a 2% increase, from Gs. 2, to Gs. 2,4. On the other, the vaccination period and positive export trends increased prices of bovine beef and grain. In January, annual inflation was around 3.9%. In February the CPI (consumer price index) increased by.7%, driving annual inflation to 5.4%. Almost 75% of the month s price hike came from three specific sectors. School supplies and educational services rose due to the start of the school year and, even though their importance in the basket is small, it had the greatest impact on the price increase. Once again, certain food items exerted upward pressures, especially beef substitute products, such as pork meat and sausages. Other items that exhibited rising prices were alcoholic beverages and sugar. Finally, prices for food services and hotels displayed moderate increases. Inflation during March ended at.5%, driving the accumulated inflation in 214 up to 2.6% and annual inflation to 6.1%. Once again, certain food products displayed increases, especially those consumed during the Easter holiday. As in February, there were increases in beverages, sugar, hotels and food services. At the same time, there were decreases in beef prices due to greater supply. During the month of April, CPI increased by.4%, resulting in an annual inflation of 6.4% and 3% throughout 214. The most important increases were registered in food items consumed during Easter, natural gas and services related to real estate. May registered an inflation of.3%, the main increases occurring in bovine meat due to lower supply and greater international demand, natural gas and services related to real estate. On the other hand, there was a decrease in prices of those goods that had increased during the Easter holiday. With these results, accumulated inflation reached 3.3% and annual inflation reached 7%, right on the limit of the target inflation set by the Central Bank. In June, prices of consumer goods slightly decreased by.1%, resulting in an annual inflation of 6.4% and 3.2% throughout 214. Decreases were registered in prices of bovine meat due to greater supply caused by climatic conditions in certain areas of the country and the arrival of winter. Also, prices of pork meat, corn flour and rice registered decreases during June. On the contrary, certain food products suffered increases (chicken, sugar, and dairy products), house rentals and medical services. 3 25 2 15 1 5-5 -1 Regarding monetary policy, the growth rate of monetary aggregates has been slowing down since mid-213. In annual terms, M1 (bills and coins in circulation plus deposits) grew at a pace of 4.2% in May. The Central Bank has set an inflation targeting strategy aimed at maintaining prices at 5% ± 2%. In order to achieve this, it withdraws Guaranís from the market when it deems necessary, by issuing Monetary Regulation Instruments (MRI) or by selling dollars in the market. The balance of MRI by July 22 was Gs. 5.1 trillion and the average monthly rate stood at 6.33%. In three consecutive meetings, between December and February, the Central Bank decided to raise monetary policy rates due to the expected inflationary pressures during the first few months of 214. As mentioned previously, prices during Q1 exhibited rising pressures, reaching an accumulated inflation of 3% through the first seven months of the year. During the monthly meetings from March through July the 6.75% rate was not modified. FINANCIAL SECTOR Inflation Annual Inflation Annual Core Inflation Annual Food Inflation By the end of May, deposits in the financial system reached Gs. 61.8 trillion (around US$ 13.8 billion), 21% greater than the previous year in nominal terms and 13% in real terms. Also, net loans in the financial system (banks and financial entities) reached Gs. 51.1 trillion (around US$ 11.4 billion), 19% greater in nominal terms and 11% in real terms compared to May 213. Regarding the banking sector statistics, the liquidity ratios have decreased in comparison to May 213, registering a descent in relation between Cash and Marketable Securities, and Deposits, from 5.2% to 48.4% and Cash and Marketable Securities, and Liabilities from 4.5% to 39.3%. Furthermore, profitability ratios exhibited mixed results. Return on Assets (ROA) decreased slightly, from 2.55% a 2.54%, while Return on Equity (ROE) finished at 26.6%, an increase of.8%. Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6
ene-8 may-8 sep-8 ene-9 may-9 sep-9 ene-1 may-1 sep-1 ene-11 may-11 ene-12 may-12 ene-13 may-13 ene-14 may-14 ene-8 may-8 sep-8 ene-9 may-9 sep-9 ene-1 may-1 sep-1 ene-11 may-11 ene-12 may-12 ene-13 may-13 ene-14 may-14 4% 35% 3% 25% 2% 15% 1% 5% % Annual loans growth rate Source: Investor based data from BCP 11,5% On the topic of interest rates, in May 214 the weighted average lending interest rate in local currency was 21.14%, slightly lower than the 21.55% registered a year before, but greater than the 2.15% registered in December 213. Meanwhile, the average deposit rate in Guaranís was 6.28%, lower than the 6.53% and 6.88% registered in May and December 213. With regards to interest rates in foreign currency, the weighted average lending rate was 8.14%, lower than 8.28% from May and 8.54% from December 213, while deposit rates increased.24% annually, from 3.6% to 3.29%. 25 2 15 1 5 Interest rates Regarding the beef sector, global meat market will have an increasing international demand, especially from developing countries. In our country, expected production increases, alongside higher export volumes at higher prices due to reopening of better paying markets could result in export levels around US$ 1.2 million. Consumer spending will display a similar behavior to the one registered in 213 given that no important changes are expected to affect its determining factors. Exports should maintain a steady rhythm due to the good agricultural production and rising meat exports. Regional exchange rate differentials will continue, as well as the uncertainty regarding Argentina s future and Brazil s expansionary measures. The Guaraní/U$S exchange rate will remain at current levels for the rest of the year. A rate of 4.42 Gs./US$ is expected for year end. Even though annual inflation is near the target s upper limit, current monthly CPI rates are lower than those at the beginning of the year. Rising pressures aren t expected during the second semester of 214 and inflation should end near the target set by the Central Bank. According to Investor s estimates, inflation in 214 will end up at around 5.1% ± 1%. Avg. Lending Rate Avg. Deposit Rate Proyections from INVESTOR Year 214 GDP Growth 3,9% ± 1% Exchange Rate (Gs./US$) - Year End 4.42 ± 1 Annual Inflation 5,1% ± 1% After a decrease in Non-Performing Loan (NPL) rates throughout the second semester of 213, the first few months of 214 have exhibited a rising trend. By the end of May, the financial sector average reached 2.58%, the same level registered in May of 213 and higher than the 2.14% achieved in December. Banks registered a rate of 2.41%, similar to the one measured a year before, while financial institutions reached a level of 5.8%, lower than the 5.29% registered in May 213. OUTLOOK The outlook for wheat production is very promising, good weather is expected and prices are estimated at around US$ 245 per ton. Paraguay should continue improving its wheat production in order to position itself as an important provider for Brazil. Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6
Av. General Santos 179 esq. Concordia Santos Parque de Oficinas Ofic.G4 Tel.: +595 (21) 212 6