Brazil: sharp decline in imports poised to bolster record trade surplus in 2023

With exports remaining essentially stable, a nearly 20% drop in imports in August helped secure a trade surplus of $9.8 billion, a record for the month, according to data released last Friday (August 31) by the Secretariat of Foreign Trade (Secex/Mdic). The trade balance dynamics of August are expected to continue, and judging by the year-to-date balance of the last eight months – $63.3 billion, also a record for the period – experts suggest that the surplus could reach nearly $90 billion in 2023, even if the decline in imports is milder in the coming months.

José Augusto de Castro, President of the Brazilian Foreign Trade Association (AEB), recalls that his last projection, released in July, pointed to a trade surplus of $86 billion for this year. However, given the results so far, he says it is reasonable to expect monthly trade surpluses averaging above $5 billion by the end of the year, which would result in a “probable” surplus of around $90 billion in Brazil’s trade balance for 2023.

He emphasizes, however, that the positive balance is expected to come from a greater drop in the value of imports, mainly due to price adjustments after global inflation caused by the disruptions caused by the COVID-19 pandemic and also by the surge in oil prices due to the Russia-Ukraine war last year.

Secex data shows that imports amounted to $162.1 billion from January to August, a figure 10.4% below the same months in 2022. The drop resulted from an 8.1% decline in prices, although the volume of foreign purchases remained virtually stable, with a 0.3% decline.

On the export side, Castro points out that there was also an adjustment in prices of equal magnitude, with an 8.1% drop in the same eight months. However, a good agricultural harvest and recovery in iron ore shipments helped secure a 10.4% increase in volume, resulting in almost stable export revenue, which rose by 0.3% over the same period.

Welber Barral, partner at BMJ and former secretary of foreign trade, believes that this year’s trade surplus could reach $95 billion, with a very marked trade balance dynamic driven by a drop in imports, also influenced by prices.

He notes that intermediate goods, responsible for more than 60% of foreign purchases, suffered a 14.8% decline from January to August. The quantity dropped 2.7%, and prices fell 11%. Reflecting the adjustment in the international oil price, the value of fuel imports fell by 24%, with a 28.9% drop in prices and only a 1% decline in volume. In these two economic categories alone, imports fell by $24.1 billion, all in the accumulated eight-month period.

Source: Valor Econômico
To read the original news report, visit: https://valor.globo.com/brasil/noticia/2023/09/01/queda-nas-importacoes-deve-ajudar-a-garantir-superavit-comercial-recorde-em-2023.ghtml

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