Argentina Posts Biggest Annual Current Account Gap Since 2000

Argentina posted the biggest current account deficit last year since 2000, the year before it defaulted on a record $95 billion in debt.

The South American nation had $4.33 billion deficit last year, the national statistics agency said today. That’s the biggest since a $9 billion gap in 2000. For the fourth quarter, Argentina had a current account deficit of $1.7 billion, beating the $1.4 billion median estimate of six analysts surveyed by Bloomberg.

Argentina in January devalued the peso 19 percent to boost exports and is seeking to mend relations with international investors in a bid to issue debt for the first time since the default with reserves at a seven-year low. Government spending jumped 46 percent in January even after Argentina in 2013 posted the biggest primary budget deficit in at least 21 years.

“It’s not going to be easy to reverse this situation,” said Mariano Lamothe, an economist at in Buenos Aires. “The government is already addressing the issue of the external account but now it needs to deal with the fiscal deficit.”

The deficit was led by repayment of debt and multinationals repatriating dividends, Lamothe said. Since 2010, President Cristina Fernandez de Kirchner’s government, which has avoided borrowing internationally at rates that would be among the highest in emerging markets, has drained reserves to $27.3 billion to pay foreign-currency obligations.

Argentina’s trade surplus fell 92 percent to $44 million in February from the same period a year earlier as grain exports fell 54 percent and fuel imports rose 43 percent. Argentina’s trade surplus of $33 million in January was the smallest since 2001.

Consumer prices rose 3.4 percent in February, the highest monthly gain in the region after the government introduced a new inflation index Feb. 13 to assuage criticism by the International Monetary Fund that it misreports economic data.

Locked out of international debt markets since the default in 2001, the government is seeking to repair relations with the IMF, World Bank and the Paris Club of creditors to access new financing.

Fernandez has promoted measures to curb the decline in foreign currency holdings used to pay international creditors, including raising a tax on credit-card purchases abroad for Argentines and promoting a bill to raise taxes on luxury imports.

The capital account deficit was $1.9 billion in the fourth quarter of 2013 and $3.9 billion in 2013, the statistics agency said

Before it's here, it's on the Bloomberg Terminal.