Definition
The Commodity Price Index (CPI) compiled by the Central Bank measures the evolution of international prices of the main commodities linked to Argentine exports. With a base of Dec-01 = 100, it summarizes in a single indicator the behavior of agricultural products, metals, and energy commodities that are relevant for foreign currency inflows.
It is used to assess external conditions, the purchasing power of exports, and the impact of international prices on the trade balance, revenue associated with the agribusiness sector, and the availability of international reserves.
Analysis
Following the collapse of the early 2000s, the index rose sharply starting in 2002, reflecting the so-called commodity supercycle. Between 2003 and 2008, the index multiplied several times relative to its base level, driven by strong global demand for soybeans, grains, and metals, significantly improving Argentina’s terms of trade.
The 2008 global financial crisis triggered a sharp correction in prices, followed by a partial recovery between 2009 and 2011, when the index returned to very high levels. From 2012 onward, a weakening cycle emerged, associated with slower demand from China and price corrections in agricultural and energy commodities, reducing the external tailwinds for Argentina.
From 2018 onward, the index combined episodes of volatility with a broadly sideways trend, until the pandemic in 2020 generated a new initial decline, later offset by the global rebound in commodity prices. Between 2021 and 2022, the index returned to elevated levels amid supply shocks, global supply chain realignments, and accelerating international prices.
In recent years, the index has shown some moderation: it has retreated from recent peaks but remains well above early-2000s levels. This implies that external conditions are still relatively favorable by historical standards, albeit less exceptional, and that negative commodity price shocks could once again put pressure on the balance of payments and reserve accumulation.