Cablegate: Argentina 2007 Trade in Goods: Trade Up, Surplus Down

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E.O. 12958: N/A
TAGS: ETRD EAGR ECON AR
SUBJECT: Argentina 2007 Trade in Goods: Trade Up, Surplus Down

Refs: (A) Buenos Aires 50

(B) Buenos Aires 19
(C) 2007 Buenos Aires 1127

1. (U) Argentina exports grew at a 20% rate in calendar 2007 and
imports jumped by 31%, according to a report released by GoA
statistics agency INDEC on January 25. 2007 exports totaled US$55.9
billion and imports were US$ 44.8 billion, with Argentina's net
trade surplus of $11.2 billion down 9.4% from the 2006 surplus of
$12.3 billion. The INDEC report attributed 60% of the increased
value of exports to higher goods prices, and 40% to increased
quantity.

2. (U) On the export side, the increase was led by primary products,
especially oilseeds (soy) and grains. Total value of exports in
those areas (including processed soy) rose from $13.4 billion in
2006 to just over $20.0 billion in 2007, roughly 70% of the total
value increase of Argentina exports. Another $1.1 billion - 40% of
the increase other than soy and grains, and 12% of total 2007 export
growth - was attributed to increased automotive exports to Brazil,
thanks to a bilaterally negotiated relaxation of restrictions (Ref
C) on Argentine goods in that area. Hydrocarbon and energy exports,
despite an 11% increase in price, fell 12% in total value to $6.8
billion because of a 20% reduction in quantity.

3. (U) The largest value increase in imports was in the category of
intermediate goods, which rose from $11.9 to $15.5 billion. This
was complemented by a 34% rise (to $5.1 billion) in consumption
goods, a 33% increase (to $2.7 billion) in motor vehicles, and a 64%
increase (up to $2.8 billion) in imports of refined hydrocarbon
fuels. Imports of productivity-enhancing capital goods also
increased, up 28% to $10.8 billion.

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Comment
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4. (SBU) Expanded imports of capital and intermediate goods (60% of
total imports) speak to Argentina's potential to sustain its
five-year record of strong growth, with 2008 GDP growth currently
projected in the 7% range. Increased imports and reduced exports of
hydrocarbons reflect the ongoing dearth of foreign direct investment
in Argentina's primary energy infrastructure and could augur future
energy shortages (Ref B). Finally, the increase in primary global
agricultural commodity prices has contributed significantly to
Argentina's trade surplus: the 2007 price increases for exports of
Argentine primary products and agricultural-based manufactured goods
accounted for $5.8 billion in increased exports, or 52% of
Argentina's trade surplus. The trade surplus, though shrinking, is
not at risk of disappearing soon, but any large fall in global
agricultural commodity prices would have a significant negative
impact on trade balances. Any such decline would also significantly
reduce the GoA's revenue intake, since taxes on primary commodity
exports (Ref A) contribute a significant share of the government's
primary fiscal surplus.

WAYNE

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