Always unusual, Argentina is going through a new contradiction: just when the opening to products produced abroad becomes one of the hottest points of the debatethere is a collapse in expectations of import figures.
Economists participating in the Central Bank’s REM survey expect that the year will end with purchases of just US$79,121 million, which would imply that, in the rest of the year, every month should be around an average of US$6,800 million.
Although this forecast represents a figure that is 4% higher than last year’s import level, economists are continually revising their estimates downwards. And that is not good news, because it goes hand in hand with a cooling perception in economic activity.
At the end of last year, the same REM survey predicted that this year there would be imports of US$81.5 billion, which would represent a jump of almost 8%, more in line with a growing GDP. There are, among experts, some who go even further and even believe that imports will be lower than last year. For example, a recent report by Morgan Stanley investment bank predicts that the volume of purchases It will be just US$74.7 billion.
As with all statistical data, there can be a positive and a negative side. The positive is that there will be a greater income of foreign currency to the country due to the trade balance, and it is even possible that this surplus compensates for the outflow of dollars for tourism and services. In short, Concerns over current account deficit easewhich historically is usually the trigger for devaluations.
But the “half empty half” is that of a recessive sign. If the forecasts of falling imports were confirmed, it would be necessary to call into question the projections on economic activity – which the government estimates to be an increase of at least 4.5% of GDP for this year.
In fact, the last years in which there was a drop in exports were recessionary. In 2023, when imports totaled US$73,714 – a drop of 9.3% compared to the previous year – a negative variation in GDP of 1.6% was recorded. And the following year, already in the Milei administration, when the devaluation made the situation more serious, with just US$60,822, there was also a recessionfor 1.7% of GDP.
Imports with the smell of recession
In principle, there are indications that seem to prove right those who believe that imports will continue to decline. For example, tax collection from tariffs. It is true that it is a data that is impacted by the cut in tariff rates, so its variation does not accurately reflect the commercial movement. But the magnitude of the figures is still striking: last March, income from tariffs and statistical fees contributed 12% less to ARCA than last year, in real terms.
Why is this trend worrying? Because the main consumer of imports is the industrial networkl, who is in crisis and is using just 53% of its capacity factory installed.
Economists usually handle a historical “three to one” rule: For the Argentine economy to grow one percentage point, imports must increase three points.
That relationship is not always fulfilled, of course. The main exceptions occur when there are exchange distortions such as the stocks: in these cases, the typical thing is that importers advance purchases, even when they do not need them at that moment, because they suspect that there will be a devaluation in the medium term. This is what happened, without going any further, at the end of the government of Alberto Fernandezwhen there was a large accumulation of stock in companieswho after the devaluation drastically reduced their purchases
But also during the management of Javier Milei This phenomenon occurred, in a more limited way. Thus, imports in the months prior to the legislative election soared above US$7.1 billion per month, because there was uncertainty about whether the floating band exchange rate scheme would be maintained after the elections. In contrast, there was then an import collapse that reached its minimum last January, with imports for just US$5,057 million.
Why the government celebrates
If imports are on a downward trend, why then does the entry of products from abroad, particularly from China, continue to be a controversial issue? The answer is clear when you look at the statistics on how each import item varies.
For example, the purchase of capital goods falls at a rate of 17% year-on-year, which is compatible with a recessive scenario for the industrial branch. Insteadimports of final products for consumption and automobiles continue to enjoy good health and represent 23% of total imports, when a year ago that share was half.
President Milei’s vehement argument in defense of trade openness – in which he treated local industry leaders who asked for protection against Chinese competition as “thieves” – suggest that this weighting of consumer products in the country’s total imports will not only not decrease, but could grow throughout the year.
For the government, in addition to the ratification of its liberal discourse on the defense of consumers over industrialiststhe import opening represents another more earthly objective: imported products, such as textiles and household appliances, have been those that registered lower inflation. In this way, they compensate for the expected increases in public services, as a consequence of the “recomposition of relative prices.”
That is why the government does not seem to be concerned about the progress of the trade balance. Quite the contrary, the possibility that there will be this year a trade balance of around US$20,000 million -which is what would happen if Milei’s forecast of an export boom of US$100,000 million came true- then the dollar income would not only be enough to compensate for the departure of tourists but, in addition, there would be a remainder for that the Central Bank can accumulate reserves.
