Consulado y Centro de Promocion Argentino en Shanghai

ARGENTINA TRADE OVERVIEW Nº16

(July 2004)

THE EXPANSION OF FOREIGN TRADE CONTINUED IN MAY

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The latest foreign trade information published by INDEC showed that in May exports reached a new record, and maintained the strong dynamism showed in April (see Argentina Trade Overview Nº 15). Furthermore, primary products kept losing share within the total sales due to a significant growth of the manufactures of agricultural origin, while industrial manufactures showed a good performance, mainly in the Latin American sales and the South East Asia sales. The rapid expansion of imports continued, but at a slower pace than during the first months of the year, while the result of the trade balance continued to show a surplus.

EXPORTS:

Exports reached USD 3.35 billion (the higher monthly record), with an annual increase of 20% fully explained by the increase in prices.

ITEMS: sales were again fostered by the manufactures of agricultural origin (annual +39%, mainly explained by meat, dairy products, fish and seafood, pellets and flours, edible oils, furs and leathers). A new strong dynamism in the industrial manufactures stood out, which grew (annual +21%) because of automobiles, plastics, chemical products, machines and equipment, and paper, cardboard and publications. Also, fuels grew (annual +18%), while primary products increased 3% annually (cereals and copper minerals increased, but honey, fruit, vegetables and legumes, oleaginous seeds, and non-elaborated fish and seafood decreased).

The stagnation in the quantities exported was due to the fall in the amounts of primary products (annual -17%), which compensated the increase in the other items, within which the increase in the amounts of industrial manufactures stood out (annual +12%).

DESTINATIONS: a strong dynamism in the sales to the Andean Community, South East Asia, Korea, Chile, China, and the NAFTA, with growth rates higher than annual 20%. Only exports to Japan, India and the Middle East fell. On the other hand, exports to Brazil recovered in May (annual +21%), after the poor performance in April (annual +2%); mainly explained by industrial sales (annual +30%, with a good performance of chemicals, plastic materials, machines and equipment, automobiles), and fuels (annual +25%).

IMPORTS:

On the second quarter, imports continue showing growth rates lower than in the initial months of the year. In May, foreign purchases increased annual 64%, reaching USD 1.78 billion, and stimulated by the recovery of the economic activity. Despite this dynamism, imports are still placed 32% below the maximum reached in May 1998, at the beginning of the 1998-2002 recession.

ITEMS: imports grew in all of the economic uses; with the following items standing out: capital goods (+120% annually, mainly cell telephones, trucks, tractors and electric generators), intermediate goods (mainly iron and steel), and pieces and accessories for capital goods (mainly from the automobile complex). Also was important the increase in fuel imports (+120% annually), basically of fuel oil and gas oil to cater for the effects of the energy crisis, and of automobiles (+323% annually) mainly from Brazil.

ORIGIN: imports from all the suppliers increased, the most dynamic being the Asian countries (Japan, South East Asia, Korea and China), and the Latin American countries (Andean Community and MERCOSUR), with variations higher than 60% annually.

TRADE BALANCE:

The commercial surplus reached in May the amount of USD 1.57 billion, about USD 130 million below the amount reached in May 2003. A positive balance was recorded regarding all the main regions, except for the commercial deficits of USD 150 million with MERCOSUR (Brazil) and USD 35 million with Japan.

FIRST FIVE MONTHS OF 2004

EXPORTS:

Sales abroad exceeded the 2003 record at USD 1.86 billion, reached by USD 13.6 billion (+16% annually, with prices: +13%, and quantities: +3%).

EXPLANATORY FACTORS OF THE INCREASE IN EXPORTS

First five months of 2004

(USD Part. in

million) total var.

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TOTAL VARIATION IN EXPORTS 1.858 100%

Total price effect 1.496 80%

Total quantity effect 362 20%

POSITIVE FACTORS

Agricultural manufactures prices 982 53%

Primary product prices 487 26%

Agricultural manufactures quantities 251 14%

Indust. manuf. quantities extra-Brazil 163 9%

Fuels quantities 134 7%

Industrial manuf. quantities Brazil 129 7%

Industrial manufactures prices 94 5%

NEGATIVE FACTORS

Fuels prices -66 -4%

Primary products prices -316 -17%

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Source: CEI based on INDEC data.

Agricultural manufactures (+34% annually, mainly for prices) and industrial manufactures (+13% annually, basically for amounts) leaded the expansion of exports. On the other hand, primary products grew at a lower rate than last year (+6% annually, with a price increase and a decrease in amounts), and fuels increased 3% annually.

MOST DYNAMIC PRODUCTS

(January-May of 2004)

% annual var.

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Copper mineral 89%

Dairy products 85%

Meat and ist by-products 72%

Pellets and flours 48%

Plastic materials 32%

Petroleum gas 30%

Paper, cardboard and public. 28%

Textiles and clothting 27%

Edible oil and fats 22%

Fish and seafood 21%

Automobiles 20%

Chemicals 20%

Furs and leather 14%

Machines and equipments 12%

Oilseeds 9%

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Source: CEI based on INDEC data.

The greatest dynamism is still shown by sales to China (+48% annually), to the Andean Community (+38% annually), to Japan (+27% annually), and to the European Union (+16% annually). After a poor performance at the beginning of the year, exports to South East Asia, Chile and NAFTA are recovering, while those to Korea and India are falling.

With a good performance in May, sales to Brazil increased 6% annually in the initial five months of the year, with a good performance of the industrial manufactures (+18% annually).

In terms of regions, the main client is the European Union (19%), followed by MERCOSUR (18%), NAFTA, Chile and China.

IMPORTS:

During the period January-May, imports reached a total USD 8.04 Billion (+71% annually, with prices: +6% and quantities: +61%) because of the strong expansion of the economy. Despite this performance, purchases of foreign products are still placed 38% below the 1998 maximum.

All the economic uses grew with relation to the prior year. The greatest expansion rates were shown by automobile and capital goods sales, with annual variations higher than 100%, consumption goods (+69% annually), pieces and accessories for capital goods (+68% annually) and fuels (+50% annually). The main elements of imports were: intermediate goods (40% of the total imports), capital goods (24%), and pieces and accessories for capital goods (16%).

As in last year, the most dynamic origins were: China (+105% annually) and South East Asia (+101% annually). A strong growth of imports from the Andean Community countries (+188% annually) was also recorded. On the other hand, purchases of the main suppliers, which are MERCOSUR (36% of the total imports), NAFTA (21%) and the European Union (21%), showed growth rates at 70% annually.

TRADE BALANCE:

It reached a USD 5.61 billion surplus, USD 1.5 billion below the amount recorded in the same 2003 period, with positive balances in the greater part of the main commercial partners, the highest ones being those with Chile, the European Union, China and the Andean Community (USD 1.35 billion, USD 1.0 billion, USD 900 million and USD 530 million, respectively), except for the deficits recorded with Japan (USD 60 million) and with Brazil (USD 600 million).