Argentina Posts $552 Million 1st-Quarter Current Account Deficit
06/22/2012| 03:32pm US/Eastern
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By Taos Turner
BUENOS AIRES--Argentina posted a current-account deficit of $552 million in the first quarter of 2012, completely defying economists' expectations for a surplus totaling $590 million.
Analysts had thought import barriers and other steps the government has taken to protect the country's hard currency reserves would lead to a surplus, according to the median estimate of more than 50 banks, economic research firms and universities surveyed by the Central Bank of Argentina.
But the deficit reported by the national statistics agency, Indec, showed just how mistaken those expectations were.
The first-quarter deficit compares with a current account deficit of $356 million in the fourth quarter of 2011 and a $929 million deficit in the first quarter of 2011, according to Indec data.
BNP Paribas had forecast a first-quarter current-account surplus of $1.3 billion.
"The improvement is expected to come from an increase in the merchandise trade surplus and a decline in dividend payments. Both trends are the result of increased controls affecting foreign exchange transactions," BNP Paribas economists said in a note.
After winning re-election with 54% of the vote in October, President Cristina Kirchner implemented foreign exchange controls and new trade barriers to protect the central bank's international reserves.
Ms. Kirchner relies on those reserves to pay her government's foreign creditors. Critics say the government also needs U.S. dollars to pay for fuel imports that totals more than $9 billion last year.
The government has been pressuring foreign companies not to send dividends home, but rather reinvest their earnings in Argentina.
At the same time, sweeping restrictions on imports have bolstered the trade surplus, which rose 32% on the year to $6.31 billion during the first five months of this year.
Argentines and foreigners pulled $21.5 billion out of the country in 2011, according to central bank data.
Much of that capital flight was related to fears that annual inflation--which most private sector forecasters say is between 20% and 25%--would eventually force the government to weaken the peso at a swifter pace to help exporters suffering from the inflation-adjusted appreciation of the peso.
While capital outflows have eased dramatically thanks to the foreign exchange controls, the central bank has struggled to build its reserves as Argentines pull dollar-denominated deposits out of the banking system.
More than $5 billion in foreign-currency deposits have left the banking system since the end of October.
Reserves stood at $46.29 billion on Thursday, compared to $46.38 billion at the end of last year.
Write to Taos Turner at taos.turner@dowjones.com
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