Download FOREIGN TRADE AND THE BALANCE OF PAYMENTS New Series

FOREIGN TRADE AND THE BALANCE OF
PAYMENTS
New Series for the Balance of Payments 1
One of the main priorities of the Ministry of Economy and Public Works and Services is
the constant improvement of macroeconomic statistics. The degree of precision of these
statistics conditions the quality of analysis of the economic and social situation of the country
by the authorities, the private sector and the international community.
Analysts need to be sure that balance of payments statistics have been prepared
following internationally-recommended methodological guidelines and have been estimated on
the basis of appropriate sources of information. With this objective in mind, at the end of
1995 the Economic Programming Secretariat2 embarked on a work program for the revision
and updating of the accounts for the Balance of Payments3 in line with the process of
transformation of the economic environment.
This program, aimed at incorporating methodological criteria that adequately reflect
economic transactions between Argentina and the rest of the world, has been made following
the international standards recommended by the Fifth Edition of the International Monetary
Fund’s4 Balance of Payments Manual. In the first stage of this work, in 1995, improvements to
the estimating methodologies were published, which included: adoption of a criterion for
determining the residence of holders of government bonds, the identification of transactions
by the financial sector, the inclusion of a temporary methodology – based on a residual
method – for estimating external assets of the private non-financial sector and their income,
the presentation of imports on a FOB basis, and the classification by resident sector of the
capital and financial account.
Subsequently other changes were made, including estimates of foreign direct investments
in Argentina and their income, and the incorporation of the external debt of local governments
without the guarantee of the Central Government.
The changes introduced on this occasion represent a substantial part of the work
program for the improvement of balance of payment statistics. These changes include
improvements and new accounts for services and income statistics and in the identification of
capital transactions by the private non-financial sector. This enables the presenting of a more
precise measurement of the current account and a greater breakdown for the capital and
financial account5 . To sum up, the changes to be made in this new presentation are6 :
1.
In the services account, estimates have been included on: business, professional
and technical services, personal, cultural and recreational services, ground costs for passenger
transport and construction services. Changes have also been made to estimation
methodologies for the travel, royalties and insurance accounts.
2.
In the investment income account, the changes are of two kinds; those derived
from the new estimates for the financial account – which help improve the measurement of
income – and those derived from the application of the accrual criterion on the measurement
of income from the foreign debt of the public and private non-financial sectors. In the first
case, changes include on the side of income the earnings from the external assets of the private
non-financial sector (direct investment, trade financing, bank deposits and portfolio
investments) and income from the financing of bi-national projects. On the side of outflows,
the measurement of income from investments in shares by non-residents has been completed,
and inclusion has been made of income from direct external debt by the private non-financial
sector.
3.
4.
transfers.
Under other income, employee remuneration has been quantified.7
Tax withholdings on payments abroad have been included under current
5.
The new presentation of the capital and financial account implies, in the case of
assets, the replacing of the residual calculation method of estimation for the external assets of
the private non-financial sector8 by independent measurements of direct investments abroad,
commercial financing, bank deposits, portfolio investments and other assets not accruing
income9 , and the inclusion of loans for the financing of bi-national projects . In the case of
liabilities, inclusion has been made of estimates of direct company debt, so as to complete the
measurement of the external debt of the private non-financial sector, and estimates have also
been included of investments in shares in the portfolio of non-residents.
As a result of this presentation, balance of payments estimates include most of the
methodological improvements planned in the mentioned revision program10 . This program
intends to continue in future with the performing of special research to enable continued
improvement to the balance of payments accounts.
The Foreign Trade Sector in 1998
During 1998 the most outstanding events in the international economy were the
deterioration in commodity prices and the stagnation of the level of activity in Brazil 11 , and as
from August, the Russian debt crisis.
The prices of Argentine exports fell around 9% during the year. The most severely
affected categories were fuel, with a loss of 30%, and primary products, with a drop of 12%.
It should be noted that if in 1998 the prices of the previous year were to have prevailed, the
value of exports would have been some US$ 2.6 billion higher.
In 1998 the Brazilian economy remained almost stagnant, after growth of over 3% in
1997. This factor has had a negative effect on the demand for exports of Argentine goods12 .
In spite of the crisis unleashed following the default in Russia, the country continued to
be able to count on the inflow of capital from abroad. The effects of the crisis on capital
markets was reflected basically in the composition of the financing among sectors (with an
increase in net income for the public and financial sectors), the type of financing used and an
increase in the country risk premium. In this context, notable support was forthcoming from
International Agencies, in the form of approval for rapid disbursement loans for the National
Government to offset the temporary interruption of debt placement on international
markets13 .
During 1998 sovereign risk14 evolved unevenly. The average for the indicator in the
first nine months of 1997 (a period noted for fluid access to international financial markets)
was 312 basis points, while between the fourth quarter of 1997 and the second quarter of 1998
it went up 415 basis points because of the crisis in south-east Asia. In the third quarter of the
year it rose to 815 basis points, then declining to 740 in the last three months of 1998 (see
Graph 5.1).
I.
Balance of Payments
The balance of payments current account recorded a US$ 14,730 million deficit during
1998, US$ 2,694 million more than the deficit recorded in 1997 (Table 5.1). This increase took
place in spite of the significant slowdown in the level of activity and its effect on imports of
goods, and to a large extent has been due to the drop in export prices and an increase in
investment income.
The growth in the trade deficit accounted for 41% of the increase in the current account
deficit, with 54% being due to the increase in the investment income deficit. Nevertheless, as
a result of the continued deceleration in the rate of growth of imports, the quarterly rate of
growth for the current account deficit has declined steadily (see Graph 5.2).
Physical volumes of exports were 8% higher, but falling prices meant that the value of
exports was 0.9% lower than in the previous year. The behavior of exports was not uniform
over the year: in the first six months exports by value were almost 4% higher, whereas during
the second half of the year they fell by slightly over 7%15 (see Graph 5.3).
Imports of goods were up by 3% in terms of value, a result of 9% growth in physical
volume and a 5% fall in prices. The most significant development in the case of this variable
during the year was the slowing in the rate of import growth matching the lower rate of
economic growth during the period. Imports of goods recorded a year-on-year rise of 16% in
the first quarter of the year, rising 9% and 3% in the second and third quarters, respectively,
finally falling 12% in the fourth quarter16 (see Graph 5.4).
In 1998 investment income recorded a deficit of US$ 7,608 million, 23% more than in
1997. The growing trend in income accrual derives from the increase in external debt and
participation by capital from non-residents in the form of direct and portfolio investments.
During 1998 net inflows to the financial account were high (US$ 17,263 million). This
has mainly been due to the placing of bond issues, direct investments in Argentina, loans from
international agencies, banks and suppliers, the transfer to the Central Bank of liquidity reserve
requirements previously deposited abroad, and to the lack of any significant variation in the
foreign asset portfolios of the private non-financial sector.
Net capital inflows of the public non-financial sector and the Central Bank represented
51% of the balance of the financial account. Compared to 1997 the public and banking
sectors have increased their balances by US$ 1,491 million and US$ 4,011 million respectively,
while the income by the private sector was equal to almost half that estimated for 1997 (Graph
5.5).
Public sector income has corresponded basically to National Treasury revenue.
Whereas in the first three months of 1998 bond issues were the main source of financing for
the sector, in the fourth quarter of the year there was a predominance of funds inflows from
the first installments of loans granted to the Treasury by the IDB and the IBRD to make up
for the temporary closing of capital markets that took place as a result of the crisis in Russia.
In 1998 the private non-financial sector recorded a positive balance of US$ 5,285
million. The principal financing categories on the sector (direct investment, net placements of
bonds and shares, and direct debt with banks) recorded lower inflows than in 1997, partly as a
consequence of the increased maturities that took place in 1998.
During the year the financial sector recorded a strong positive balance of US$ 3,141
million derived from the inflow of funds to the Central Bank from the transfer of liquidity
requirements established abroad, and from flows from foreign loans, bond issues and direct
investments.
Inflows from direct investment were estimated at US$ 5,697 million, while direct
investment abroad totaled US$ 1,957 million. In spite of the reduction of income compared
to the record values of 1997, direct investment continued to represent an important source of
financing for the balance of payments.
As in previous years, the country’s external financing requirements were mainly met by
long-term borrowing and direct investments by non-residents (Table 5.2).
At December 31, 1998 international reserves of the financial system (including those of
the Central Bank and liquidity requirements established abroad) totaled US$ 31,737 million.
This represents an increase of US$ 1,968 million on the level at December 1997.
II.
Current Account
Merchandise Trade
During the fourth quarter of 1998 the value of exports of goods totaled US$ 5,833
million, a drop of 9% compared to the same period of 1997, while imports of goods (FOB) fell
12%, totaling US$ 6,780 million. As a consequence, in 1998 exports have totaled US$ 26,221
million and imports amounted to US$ 29,444 million, so that Argentina’s trade deficit has risen
to US$ 3,223 million, US$ 1,100 million more than in 1997.
As can be seen from Graph 5.6, this is the second quarter in succession that a negative
rate has been recorded for exports, and the first in which the rate of import growth was also
less than zero.
In 1998 exports of goods were 0.8% lower than those in 1997, affected by the fall in
international prices of the principal products exported (Table 5.3). In terms of value the
performance of exports sales was not uniform over the whole year, as during the first half they
were up almost 4%, while in the second half of the year they fell around 7% (Table 5.4).
Viewed by major category the only sector to record any significant growth has been
primary products (PP), which increased 16.2%. Exports of manufactures of industrial origin
(MIO) were up slightly during the period (2.5%), while manufactures of agricultural origin
(MAO) fell 4.4%. Sales abroad of fuel and energy (F&E) fell sharply (-28.6%). As a result the
share of PP and MIO in total exports increased 4% and 1% respectively, at the expense of
MAO and F&E, which lost 1 and 3 percentage points respectively (Graph 5.7).
Year-on-year comparison indicates that exports of primary products (PP) were up by
16% (US$ 926 million) although only four sectors have shown a positive variation: oilseeds
and fruits, cereals, vegetables and legumes and the other primary products category (Table
5.5).This increase has been due to a strong increase in volumes exported (31.4%), which was
partially offset by a drop in international prices (-12%).
Two thirds of total sales of PP correspond to cereals and oilseeds and fruits. Exports of
cereals rose by 1.6% compared to the same period of the previous year. This small increase is
explained by higher volumes exported, offset by a fall in international prices in the order of
23% for wheat and 10% for corn.
Sales of oilseeds and fruit recorded a sharp increase (212%) in the period analyzed,
contributing an additional US$ 719.4 million compared to the same period of the previous
year. The increase in soybean exports has been due entirely to higher sales, as the
international price has fallen 22%. The favorable performance of sunflower sales, with a
participation in total oilseeds of not more than 20%, has added to the good performance of
the sector in this period.
The major increase in exports in the “other primary products” category (223%) is
explained by higher sales of minerals (copper concentrate, lithium and sundry borates) after
recent foreign investment in the mining sector.
The largest drop in PP exports took place in the cotton fibers sector: the contraction of
US$ 107 million caused this sector’s share of the total to fall by 2%.
The unprocessed fish and sea-food sector recorded the second largest drop (US$ 86
million). Although sales to the European Union, the main destination of Argentine fish
exports, have increased by 34%, sales to the countries in the Rest of the world category fell
considerably (-51%).
Exports of the second major heading, manufactures of agricultural origin (MAO),
recorded a fall of 4.4% year-on-year. The blame for this decline can be assigned almost entirely
to the deflation in international prices (-7.8%), driven by a major drop in oilseed by-products
and partially offset by increases under fats and oils. Export volumes were 3.6% higher, given
the sharp increase by oilseed by-products (28%), which compensated for declines recorded by
the remaining groups. The fats and oils heading accounts for almost a third of all sales and
rose by 20.4% (US$ 454.6 million) during 1998, benefiting from a rise in international prices,
which was 21.4% for sunflower oil and 12.1% in the case of soybean oils.
Export sales of food industry waste and by-products fell by 16.4% (US$ 394.8 million).
The drop in the value of exports by the sector, second in size within the MOA category, has
been due to sharp falls in the international prices of soybean pellets (-41%) and sunflower
(-38%), which were not totally offset by increases in the quantities exported.
Exports of skins and leather fell 16.6% in the period under review. Increased sales to
NAFTA, the main buyer, could not offset the effects of lower prices in the sector (-4%) and
lower exports to other regions.
Meat exports recorded an unfavorable performance during the period, falling by 18%
compared to the previous year. These export figures reflect a fall in the volume exported, as
the international price of beef has risen 13% over the period.
Exports by another leading heading, manufactures of industrial origin, grew by only US$
207.9 million or 2.5% in 1998. An increase of 5% in quantities sold was offset by a drop of
3% in international prices.
Transport material, accounting for one third of all MIO sales, increased its exports by
US$ 282 million (10%) the Brazilian market being the most important source of this increase.
The increase in volume for 1998 has been 7.7%, although this was concentrated on the first
three quarters of the year, as in the last quarter sales fell as a result of the drop in demand from
Brazil.
Chemical products and related items recorded an export increase of 15.9%
year-on-year, contributing an additional US$ 187.5 million to the merchandise account. This
increase, 13.7% in volume terms, has mainly been due to a doubling of sales to NAFTA, in
contrast to the European Union, which cut its purchases by 18%.
Exports of machinery and equipment and electrical material totaled US$ 1,090 million
during 1998, a fall of US$ 139.8 million compared to the previous year (-11.4%) the sharpest
decline in the MIO category.
Another major category, fuels and energy, recorded a major drop in foreign sales
(-28.6%) equivalent to US$ 939.7 million. This fall is explained mainly be declines in the price
of oil (-30%) and the lower volumes exported (-10.6%).
An analysis of exports by regional destination during the period under review shows that
the principal destination is the Mercosur, which accounts for 36% of Argentina’s exports,
followed in importance by the European Union with 18% and NAFTA with 10%. The
remaining destinations as a whole take 36% of total exports (see Table 5.6).
However, during the period sales to the Mercosur fell 2.6%, compared to sales to the
EU which were up 15.5% and those to NAFTA which were 4.8% higher. Exports to the
remaining countries of the world fell 7%.
The increase in exports to the EU is explained mainly by larger sales of primary
products, which were up US$ 611 million, due to higher sales of oilseed and fruits and other
primary products (mainly minerals) which account for over 80% of the increase. The
principal category of products exported to the EU, manufactures of agricultural origin, fell 1%,
principally due to lower sales of meat, skins and hides and food industry residues and waste.
MIO exports were up 9%, driven by increases under base metals and transport material. The
32% drop in fuel exports is attributable to the fall in international oil prices.
Increased exports to NAFTA were driven by manufactures of industrial origin. The
increase of 32% is explained by higher sales of chemical products, rubber and rubber products,
transport material and electrical material and apparatus. However, chemical products include
the return in the first quarter of the year of heavy water to Canada for a value of US$ 60
million. Primary products increased 12% due mainly to an increase under Other primary
products, Oilseed and fruits and cereals, while MAO were down 8.3%, influenced by lower
sales of Processed legumes and vegetables.
In 1998 goods imports (FOB) were US$ 29,444 million, 3.2% higher than in 1997, while
CIF imports totaled US$ 31,399 million (Table 5.7). There has been a fall of 5.3% in the
prices of imported products and an increase in physical quantities of 9%. The drop in prices
has affected all categories, with Fuels in particular down 26%, and Intermediate Goods, with a
drop of 7.7%. Prices of capital goods and parts fell 3%, while consumer goods were 2%
lower. The 9% increase in volumes was due to the increase recorded in capital goods and parts
(12.7% and 2.7% respectively), Intermediate goods (8%), Fuels (19.1%) and consumer goods
(9.7%).
As a result of this behavior the total value of imports of Capital goods rose by 10%,
while Consumer goods rose by 7% and Passenger vehicles were up 5%. On the other hand
there have been falls in Fuels (-12%), Parts and accessories for capital goods (-1%) and
Intermediate goods (-1%) (Table 5.8).
As to the origin of imports (Table 5.9), the three main blocs supplying Argentina
increased their sales during 1998.
The Mercosur was the area that most increased its sales during the year, with a rise of
4.2% led by imports of Capital goods (19.5%) and Consumer goods (14.7%). These increases
were partially offset by falls in imports of Parts for capital goods (-7.9%) and Intermediate
goods (-0.8%).
Imports from the NAFTA bloc increased slightly during 1998. Lower inflows of
Intermediate goods (-6.9% or US$ 169 million) and Passenger vehicles (-20%) were offset by
higher purchases of Capital Goods (5.8%) and Parts and accessories (11.9%).
In 1998 imports from the European Union were up 3.7%, led by an increase of 7.2% in
Capital goods, 15.8% in consumer goods and 1.6% in the principal category of exports from
the EU to Argentina: Intermediate Goods. Parts and accessories for capital goods recorded a
decline (-6%). The other category to show a drop was Fuels (-19.2%).
The structure of imports in 1998 shows that the most important category, intermediate
goods, recorded a one percentage point drop in its share of the total to 32%. The second most
important group, capital goods, increased its participation by 1.5 percentage points, accounting
for 27% of total Argentine purchases abroad. The remaining categories did not record any
significant changes in their share of the total (Graph 5.8).
Real Services
In 1998 the balance of payments real services net deficit was US$ 4,281 million, 2.5%
higher than that recorded in 1997.
Transport and Travel accounted for 41% and 26% respectively of the total deficit for
Real Services during the year, followed by Business services, Royalties and Insurance, which in
total accounted for a further 27% of the total.
The Transport account, made up of the Freight charges, Passenger Ticket and Others
headings, were a negative US$ 1,757 million, an increase of 5.2% compared to 1997. The
Freight heading, the most significant component, recorded a deficit of US$ 1,320 million
during 1998, with an increase of US$ 77 million (6.2%) over 1997. The increase in the
negative balance of this account has been due to the rise in Argentine imports, leading to
higher freight charges, added to a declining international ocean freight share by local
transporters.
The Passenger ticket heading recorded a deficit of US$ 712 million, an increase of US$
70 million (10.9%) over the previous year. As in the case of Freight, the increased deficit under
this heading has been due to the loss of market share by local carriers in the international
passenger transport market, which in 1998 recorded positive growth rates.
The Travel account has been estimated to have recorded a deficit of US$ 1,044 million
in 1998, a reduction of US$ 81 million (-7%) compared to the previous year. This has
basically been explained by increased numbers of non-residents entering Argentina in
comparison to the number of Argentines travelling abroad during 1998.
Investment Income
The deficit in investment income was estimated at US$ 7,614 million during the 1998,
23% higher than in the same quarter of 1997; 68% of this increase has been due to a net
increase in interest, the remaining 32% being accounted for by net payments of profits and
dividends.
The rise in net accrual of interest is basically due to the increase in net foreign borrowing
by Argentina. The increase in profits and dividends has as its origins the higher dividend
payments on portfolio investments (holdings of shares that do not represent foreign direct
investment) and the increase in the yield on foreign direct investment during 1998 of US$
2,568 million. This figure represents an increase of 9% over 1997 (Table 5.10).
Profits in the private non-financial sector have been recording an upward trend since the
third quarter of 1997, but this trend was reversed in the last quarter of 1998. The fourth
quarter of this year shows a reduction of close to 40% compared to the same quarter of the
previous year. This fall has been strongly influenced by the performance of companies in the
oil industry (which have seen their results badly affected by the drop in international prices)
and in the auto industry (affected by a reduction in demand from Brazil).
Yield on direct investment by Argentina abroad rose slightly in 1998, after the increase in
1997 from the strong rise in transnational capital flows that took place that year (Table 5.11).
III.
Capital and Financial Account
The Argentine Central Bank
In 1998 the Central Bank recorded a net outflow of US$ 512 million, basically
because of the repayment of International Monetary Fund borrowings for US$ 654 million.
Banking Institutions (excluding the BCRA)
The net inflows of funds to the financial system in 1998 were estimated at US$ 3,141
million, as a result of the transactions in the second half of the year (US$ 3,334 million).
This behavior by the sector has been similar to that recorded in other periods of
uncertainty on international financial markets, when banks have brought in funds from abroad
either to meet deposit withdrawals or increase liquidity for precautionary reasons, or to take
advantage of investment opportunities that arise at such times(Graph 5.9).
Assets abroad declined US$ 509 million (through an inflow of currency). This inflow of
funds followed the switch from external compliance with liquidity requirements (by means of
deposits abroad at Deutsche Bank New York) to deposits in Argentina (in the form of repos
set up with the Central Bank using bonds and deposit certificates) and was also due to
borrowing abroad by a small number of firms. On the liabilities side, there has also been an
inflow of funds for US$ 2,632 million from greater foreign debt and contributions of direct
investment.
As regards the net inflow of funds received by banks in the form of direct foreign
investment, the estimated US$ 979 million has been due to contributions by head offices (see
Table 5.12). This constant growth in direct investment has been recorded since 1996, and is
related to the growth objectives of companies. It should be recalled that Central Bank capital
requirements are linked to the volume of assets, as well as being weighted by a series of factors
concerning the quality of transactions.
There have been openings and mergers of foreign banks, and their presence in the
provinces has increased following the purchase of local banks with a significant number of
branches. While the number of entities in the Argentine financial system as a whole continues
to decline, foreign entities and those with foreign capital are increasing their presence, even
without considering entities with an external portfolio investment component. At December
1994 such entities represented 19% of total entities, while at September 1998 the proportion
was 36%, and 42% in December.
The Non-Financial Public Sector
The non-financial public sector (excluding the Central Bank) recorded a positive balance
of US$ 9,349 million. The main sources of financing were bond placements, particularly in
the first three quarters of the year, and loans from International Agencies during the fourth
quarter.
Gross placements of National Government Bonds on international markets totaled US$
11,745 million, with a net positive balance of US$ 7,576 million, representing the most
important financing category for the sector. Of the total raised, US$ 1.2 billion corresponded
to the bringing forward of financing for 199917 . These transactions were carried out at an
average term of some 13 years of life, and the average yield agreed was some 415 basis points
above the yield on US Treasury bonds with a similar duration. However, two distinct periods
have been observed: before and after August and the crisis that developed in Russia. Issues
made prior to the crisis had an average life of 14.4 years and a spread of 356 basis points, while
issues after the crisis were for 9.3 years with a spread of 615 basis points.
The significance of the loans from International Agencies has to do with the
disbursement in the fourth quarter of a first installment of US$ 2 billion corresponding to the
loans granted to the National Treasury by the IDB and the IBRD for a total of US$ 4.5 billion.
These loans were negotiated as a preventive measure at the time of the closing of international
markets during the Russian debt crisis. However, Argentina was able to return to the market
in October.
Local governments recorded a positive balance of US$ 113 million, compared to the
US$ 1,593 million in the previous year, because of lower bond issues on international markets
and lower disbursements of bank loans.
Non-Financial Private Sector
The net external capital inflow of the non-financial private sector totaled US$ 5,284
million, compared to the record level of US$ 10,1114 million in 1997. This reduction in the net
use of foreign sources was basically seen in bonds, bank loans, direct investments and
investments in shares in portfolios of non-residents.
Although the level of bond placements by the sector on international markets was 3.6%
higher than in 1997, the net result was affected by the greater volume of maturities compared
to 1997. It should be noted that this increase in gross placements took place in spite of the
issues made as from the Russian crisis (Table 5.13).
Disbursements of loans from banks also recorded an increase of 12.6%, which partly
compensated for the effect of increased maturities in comparison to the previous year (US$
9,827 million and US$ 6,991 million respectively). Contrary to the situation observed in
financing through bond issues, there has been an increase in net financing by banks, suppliers
and official agencies since the Russian crisis.
If income in the form of direct investment in the sector is excluded from the analysis, it
can be seen that the increase in sovereign risk since the Russian crisis has had two effects on
the flow of these funds: on the one hand it reduced the level of net income, and on the other it
increased the importance of direct debt (see Graph 5.10).
In the case of investments in share portfolios of non-residents, the net flow was a
positive amount of only US$ 57 million, compared to income of US$ 1,385 million in 1997.
This evolution can be explained by the lack of new issues in the private non-financial sector.
With regard to the external assets in the sector, a growth of around 5% has been
estimated for the year, so that accumulated balance of payments flows totaled US$ 82,570
million at the end of 1998.
Foreign Direct Investment into Argentina
The flow of FDI during 1998 was US$ 5,697 million. Compared to the estimates for
the record level in 1997, a fall of 30% can be seen in the flow of capital transactions, mainly
explained by lower share transfers from banking entities and lower use of external borrowing
from branches and head offices. (Table 5.14).
The services sector has received 67% of the flows from estimated contributions and
changes of ownership during 1998, with manufacturing industry receiving 25% and primary
activities 8%. Within the Services sector the Commerce and Electricity, Gas and Water
sub-sectors accounted for 35% of total flows in the form of contributions and stock
purchases.
Foreign Direct Investment by Argentina abroad
The flow of capital in the form of direct investment abroad has been estimated at US$
1,888 million, 58% of which corresponded to companies in the oil sector. Since 1996 resident
companies have begun to participate in the privatization processes in other countries in Latin
America, in particular in the oil and steel sectors, a trend that accelerated in 1997 (when the
flow towards companies in the oil sector accounted for 65% of the estimated total of US$
3,007 million). Declining capital contributions in the oil sector explain the fall in direct
investments abroad in 1998 compared to 1997 (Table 5.15).
IV. External debt
Total gross external debt at the end of December 1998 was US$ 139,317 million, a
rise during the year of US$ 15,035 million (12%)(Table 5.16).
The stock of obligations of the public non-financial sector and the Central Bank rose by
US$7,620 million. The increase has been due to the net external financing offset by the debt
obtained from the National Government and the Central Bank for US$ 7.4 billion, plus an
increase in debt from the appreciation of currencies against the US dollar (US$ 2.1 billion), less
the differences between market values and residual nominal values of securities bought back
from non-residents in repo transactions using government bonds (US$ 1.040 million) and sales
by non-residents of government bonds for an amount of around US$ 800 million.
Obligations of the private non-financial sector, estimated at the end of 1998 at US$
34,958 million, increased during the year by US$ 5,977 million. The 61% increase has been
due to the placement of corporate bonds and securities, while 41% corresponded to increased
direct debt with banks and suppliers.
The external debt of the financial system (excluding the Central Bank) increased by US$
1,438 million during the year to a total of US$ 21,936.
The profile for the total external debt, including short-term transactions18 , shows that
24% will fall due in the first year. If short-term transactions which are mostly foreign trade
related (direct financing and bank lines of credit) are excluded, as well as deposits from
non-residents in the local banking system and purchase and sale transactions of securities by
the banking system (offset by the external assets of the sector), maturities in the first year
represent 9% of the total debt at December 31 last.
In the case of the public sector only 9% of the debt matures in the first year.
1 Further detail on the methodological changes and their effects on current accounts and the capital and financial account can be found in
“Presentation of the methodological updating for the balance of payments” DNCI, April 1999.
2 Currently the Economic and Regional Programming Secretariat.
3 This work was partly carried out with financing from the Inter-American Development Bank and technical assistance from the International
Monetary Fund.
4 The main purpose of the Manual is to: i) set rules on concepts, definitions, classifications and conventions, and ii) facilitate the collection,
organization and international comparability of balance of payments statistics and the international investment position.
5 Eliminating the residue identified as “other capital movements” and the incorporation of “errors and omissions” in estimates.
6 Estimating methodologies can be consulted in “Methodology for estimating the balance of payments” DNCI, April 1999.
7 Previously included under “Others - government”.
8 A net measurement that also included liabilities not estimated and errors and omissions in estimations.
9 A methodology developed with the technical assistance of the International Monetary Fund.
10 The accounts pending correspond basically to revision of the calculation of land freight and its costs, the replacement of exchange
statistics as a source of information for certain real services and transfers – such as bank commissions, purchase and sale services and other
services relating to trade, and transfers by immigrants, and the separation and valuation of some income and expense flows from the financial
account of the financial system (currently estimated in a net manner). In addition, the presentation of estimates for periods prior to 1992 on
the basis of uniform criteria is pending.
11 Including the latent threat of an exchange rate crisis, which finally was realized in early 1999.
12 To quantify the effect of the slowdown in the growth of Brazilian GDP on Argentine exports simulation exercises were performed using
estimates based on the import of Argentine goods function by Brazil, excluding transport material. According to these exercises, if output in
Brazil were to have risen at the same rate as in 1997, and the remaining variables were to have been as actually recorded in 1998, Argentine
exports to Brazil during 1998 would have been 9% higher than actual.
13 Following the Russian crisis, the markets remained closed until October.
14 Calculated on the basis of the yield of the Floating Rate Bond (FRB).
15 In the fourth quarter the value of exports fell by almost 13%.
16 It is interesting to note on Graph 5.4 that for the curve formed by the rate of change in GDP to coincide almost exactly with the curve
formed by the rate of change in imports, the scales must maintain a ratio of 3 and a fraction, a figure that provides a preliminary estimate – in
graphic form, without taking into account other external variables or a greater number of observations – of the value for elasticity in imports
compared to GDP.
15 In the fourth quarter the value of exports fell by almost 13%.
17 In 1997 there was no bringing forward of the following year’s borrowing requirements.
18 For terms of up to one year.