Macro Latam

The rebound in exports is supported by grain sales, but also manufacturing.

Exports continued to improve in March leading to the first lower trade deficit on a year-over-year basis since January 2017. The trade balance showed a deficit of USD 611 million, lower than the deficit of USD 910 million for the same month in 2017. The deficit was also lower than our forecast and market consensus (USD 1 billion and USD 1.1 billion, according to Bloomberg). As a consequence, the 12-month trade balance registered a deficit of USD 9.8 billion, down from USD 10.1 billion in February. At the margin, the seasonally adjusted deficit in 1Q18 fell to USD 8.2 billion (annualized) in 1Q18, significantly down from USD 13.4 billion in 4Q17. The decline is due to a stronger performance of exports and a deceleration in imports. On a sequential basis, total exports grew 59.2% qoq/saar (up from 8.7% in 4Q17) while imports grew at 12.8% qoq/saar (down from 33% in 4Q18).

The rebound in exports is supported mostly by grain sales, but also manufacturing. Export increased by a solid 17.2% yoy in March, accumulating a 12.9% increase in 1Q18 (1.4% in 4Q17). In particular, external sales of primary products rose 18.4% in 1Q18, chiefly by higher shipments of corn. Exports of manufacturing rose by 20.3% in 1Q18 led by higher sales of cars, helped by the economic recovery of Brazil. On the other hand, imports increased by 21.2% in 1Q18 (8.8% in March), a slowdown from the 25.6% growth rate posted the previous quarter. The slowdown is mostly attributed to a deceleration of purchases of consumption goods.

The energy trade balance remained unchanged. The energy trade deficit accumulated over the last 12 months was USD 3.3 billion, similar to that in February. Excluding the energy balance, the 12-month deficit decreased to USD 6.5 billion from USD 6.8 billion in February.

We maintain our forecast of a trade deficit of USD 10 billion for this year, with a current-account deficit of 5.2% of GDP. Although the weaker currency could be already helping the trade balance, by slowing down imports, we see the bulk of the sequential improvement in 1Q18 as transitory: mostly due to grain producers destocking, while the drought will curb agricultural exports ahead. So some widening of the deficit from 1Q18 level is likely.

Fuente: Itaú

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