IMF Loan Boosts BCRA Reserves by USD 14 Billion in April, With Over 2 Million People Investing USD 2 Billion
High Demand for Dollars in Argentina Amidst Economic Uncertainty and Inflation
April 2024 witnessed an unprecedented demand for U.S. dollars in Argentina, with a record $2,048 million bought by individuals, according to the latest report by the Central Bank. This marks a significant increase compared to March, where only $6 million was purchased. The average transaction size was $204.8 per person, while 309,000 sold dollars, with an average of $36 per person.
This considerable demand has resulted in a net deficit of $2,010 million in the "net formation of external assets" of residents in Argentina. The deficit consisted of net purchases of bills for $1,839 million and net outflows of currency for $171 million.
International reserves of the Central Bank increased by $13,942 million, closing the month at $38,928 million. This significant rise is primarily due to the disbursement by the IMF to the National Treasury for the equivalent of $12,396 million.
Of interest, the government has questioned the cause of a fire in the Lomas del Mirador grain silo and its relation to a new tender.
In the "real sector" of the economy, net purchases of foreign currency were recorded at USD 1,196 million, excluding the Oilseeds and Cereals sector. However, excluding this sector, surplus items were observed in the Mining, Energy, and Food and Beverages sectors. The Automotive and Machinery and Equipment sectors recorded the most significant deficits.
This high demand for dollars by individuals marks the highest amount since October 2019, surpassing the $4,300 million registered during the government of Mauricio Macri. Meanwhile, the million people who bought dollars in April was the highest number since July 2019.
The BCRA report highlights that the demand for bank branches and home banking increased by $765 million, primarily due to travel expenses and purchases from external providers, with a significant association to travel abroad. However, the Central Bank estimates that 60% of these expenses are covered using "own dollars" by individuals.
In April, Argentina had a trade surplus of $204 million, although this figure is 89% lower than that of the same month in 2024 due to increased imports. This rise in imports was 16 times higher than the growth in exports.
It should be noted that April marked the eleventh consecutive month in which Argentina recorded a deficit in its current account, primarily due to net outflows in the "Services" and "Primary Income" accounts. On the other hand, Argentina experienced a record tourist deficit in the first quarter of 2024, with notable examples such as increased purchases in Chile and Argentine vacations in Brazil.
In summary, several factors have contributed to the high demand for dollars in Argentina, including inflation, economic uncertainty, currency controls, fear of devaluation, capital flight, and political and fiscal instability. These factors continue to shape the country's economic landscape and the demand for foreign currencies like the U.S. dollar.
- The increased demand for U.S. dollars by individuals in Argentina, as seen in April 2024, indicates a growing interest in investing, wealth-management, and personal-finance, possibly driven by economic uncertainty, inflation, and the desire to secure assets in a stable industry like finance.
- As the demand for dollars continues to rise, it may have a significant impact on business and the overall industry, particularly in sectors like travel and imports, as more people seek opportunities abroad or purchase goods from external providers.
- Given the high demand for dollars and the ongoing economic challenges, effective wealth-management strategies are crucial for individuals and businesses in Argentina, requiring careful consideration of personal-finance and the broader economic landscape to make informed decisions in the finance industry.
