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Argentina Shipping Report Q2 2011
Business Monitor International, Feb 2011, Pages: 99
The Argentina Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Argentina's shipping industry.
The Argentine economy grew vigorously in the first half of 2010, but we see the pace slowing down significantly in 2011, with the possibility of a 'hard landing' in 2012. The outlook for the country's ports and shipping sector is therefore somewhat bearish. A key part of the scenario is political: the government of President Cristina Kirchner faces presidential elections in October 2011, and in the run-up to that date the administration is pump-priming the economy through a series of measures we consider unsustainable (such as 'raiding' the Central Bank foreign currency reserves to boost public spending).
Worryingly, we also believe that some of the imbalances in the economy are currently being underreported (for example we believe consumer price inflation is not fully reflected in the official data). Our core macroeconomic conviction about the Argentine economy remains firmly in place: until the current policy mix comes to an end, Argentina will fail to achieve sustainable growth, and as a result find itself lagging behind more politically and economically stable regional peers beyond 2012. With major macroeconomic adjustments it is a matter of when rather than if, in our view, that hard landing arrives.
The report forecasts 2011 GDP growth of 4.1% in Argentina (following on from a very strong 8% during the previous year). Out outlook for 2012 is for growth to weaken further to 2%. In the five years to 2015 we expect growth to average 2.5% per annum, implying that Argentina will be one of the laggards among the major economies of South America.
At the Port of Buenos Aires (POBA) total tonnage throughput rose by an estimated 9.3% in 2010; however, in 2011 growth is forecast to slow down to 3.2% taking total tonnage handled to 11.113mn tonnes. Labour disputes are a cause for concern and a downside risk to our projections. At the Port of Bahia Blanca (POBB) we are also expecting a sharp slowdown in tonnage growth in 2011. After expanding by 12.1% in 2010, we believe growth will fall to 2.2% this year, with tonnage reaching 11.568mn tonnes.
A similar pattern is expected in container throughput at POBA to that of total tonnage handling. Box throughput, which increased by 8.9% y-o-y in 2010, is projected to grow by a rather less impressive 3.2% to 1.02mn TEUs. At Bahia Blanca container growth trends have been far more volatile, which reflects the fact that the port's box terminal only came online a few years ago. Since coming online in December 2007, throughput volumes have grown rapidly despite the global economic downturn and were estimated to have increased by 56.2% in 2010. With the terminal nearing full capacity, growth is expected to be much slower and is forecast to fall to single digits in 2011, growing by 8% y-o-y.
Argentina's total trade (imports plus exports) rebounded strongly in 2010, growing by an estimated 13.5% y-o-y despite trade disputes including China's import ban on Argentine soya oil. A stumbling Argentine
and global economic recovery is expected to put the brakes on the country's trade volumes in 2011, however. This year we see exports expanding by just 5% in real terms, compared with 12.0% last year as overseas demand for Argentine goods falls. The analyst expects imports to be constrained by the low growth of domestic demand and foreign exchange shortages and so we predict imports to grow by 7% against 2010's 15.0% increase. Total trade in 2011 is predicted to expand by 6%. In nominal terms, exports will gain by 7.9% in 2011 to reach US$85.49bn, while imports will rise 9.6% to US$66.65bn. Argentina will therefore register a sizeable trade surplus - a state of affairs that we see being repeated for the rest of the forecast period, as the authorities seek to maximise foreign currency earnings.
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