MercoPress. South Atlantic News Agency

Energy shortages punish Argentine July industrial production

Argentina's July industrial production grew 2.7% over the same month a year ago and actually declined 2.1% compared to June 2007 because of the energy crisis which forced many factories to reduce production, according to the latest release from the country's Statistics and Census Office, Indec.

This is the weakest expansion since manufacturing begun recovering in Argentina in 2002. Indec, following on specific instructions from president Nestor Kirchner delayed one day the release of the information which was presented on Friday twofold: one covering all industries and another excluding steel which is the main consumer of gas and/or electricity. The new index shows industry expanding 5.4% over a year ago and 0.4% compared to June. Argentina's steel production in July contracted 26% according to private sources forced by "routine annual stoppages as a consequence of energy supply restrictions". Indec reports production was down 22.5%. But numbers show that other sectors also contracted. Two of the eight car manufacturers took a break and overall production was up 16.9% in July, well below the average 32 percentage since the beginning of the year. Manufacturers' capacity utilization was 69.2% very close to the 67.5% of last January when most companies cut back for maintenance, new equipments and personnel vacations. Food production was also down 0.2% in July bringing the overall expansion of the first seven months to 3.4%. The dairy industry was particularly hit, 12.6%, which means annual production has been down 9%. Textiles expanded 1.9% over a year ago; paper and pulp, down 0.4%; petroleum refining expanded 10.2%; chemicals down 3.3% and construction supply industries, the most dynamic in the current Argentine boom, increased 8.5%. In the first seven months of 2007, industrial production increased 5.8%, two points less than the same period a year ago. If steel is excluded the percentage jumps to 7.5% almost equaling 2006. The Argentine energy crisis also impacted on the trade surplus which dropped from 961 million US dollars in July 2006 to below 470 million this July, almost 50%. Trade surplus was already eroding during the first six months but at a 17% rate. The July change can be explained because of larger imports of gas, electricity, fuels, fertilizers and consumer goods. On the other hand energy exports contracted and other manufactured goods overseas sales slowed down because of the shortage of gas and electricity. Imports ballooned in July 45% to 4.124 billion US dollars with energy related purchases representing 54% of the increase. Exports expanded 21% to 6.6 billion US dollars, mainly oils, seeds and grains, which are also facing a bullish market and an average 5% increase in prices.