JPMorgan Predicts Plunge in Argentina Reserves to $37.5 Billion

Argentina’s international reserves will drop to $37.5 billion as capital controls erode the country’s trade balance, according to JPMorgan Chase & Co.

JPMorgan’s estimate of a $5.5 billion decline in central bank funds this year assumes that capital controls will prevent a pickup in private-sector outflows. Reserves dropped to $39.8 billion yesterday, below $40 billion for the first time since May 2007.

“Capital controls threaten to exert an adverse toll on expectations of economic performance,” JPMorgan analysts including New York-based Vladimir Werning wrote in an e-mailed research report.

Argentina’s merchandise trade balance will be $9.6 billion this year, according to JPMorgan, down from a previous estimate of $11.6 billion.

JPMorgan cut its 2013 “agro bonus” forecast, the estimated increase in agriculture-related exports, to $4.8 billion from $6.7 billion. It projected soy crop output of 45 million tons, down from a prior estimate of 51.5 million tons. The bank raised its corn output estimate for this year to 25 million tons from 24 million tons.

YPF SA, the oil company that the Argentine government seized in April 2012, was projected to import $600 million worth of fuel this year.

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