Brazil trade with Saudi Arabia reach milestone of USD 5.3 bn in imports

Mar, 10, 2023 Posted by Gabriel Malheiros

Week 202313

Imports from Saudi Arabia to Brazil reached an all-time high: USD 5.3 billion in 2022.

Previously, the highest amount had occurred in 2014: US$ 3.3 billion. The Ministry of Development, Industry, Commerce, and Services (MDIC) provides data up to 1997.

Analysts consulted by BBC News Brazil list the effects of the covid-19 pandemic and the Ukraine War as explanations for record high prices of oil and other products and the reapproximation of Brazil and Saudi Arabia during the Jair Bolsonaro administration from 2019 to 2022.

After a sudden fall in the first year of the pandemic (2020), imports from Saudi Arabia grew again around 2021 to USD 2.9 billion. From 2021 to 2022, the imported value rose by 84%. These are nominal values, that is, with no inflation information included.

No less than 60% of the value of imports in 2022 corresponded to crude oil and bituminous minerals, 16% to organic and chemical fertilizers, and 14% to petroleum fuel oils and bituminous minerals. The rest of the percentages is composed of intermediary by-products.

From 2021 to 2022, the imported value of crude oils and bituminous minerals purchased from the Saudis rose 132%, from US$1.38 billion to US$3.2 billion.

In fact, although not to the same extent, in 2022, the international crude oil market experienced a rise in the price of benchmark Brent barrels.

The value of a barrel reached US$ 122 in June 2022, the highest value recorded since 2018, according to data compiled by the BBC. From June onwards, oil prices fell.

“Brazil has historically been reliant on Saudi Arabian oil. Because Saudi Arabia is a major producer and has a different type of oil than we do, we usually import light oil to mix with the heavy crude produced by Brazil, resulting in gasoline for the domestic market,” José Augusto de Castro, executive president of the Brazilian Foreign Trade Association (AEB), explains.

Castro explains that the trade balance between Brazil and Saudi Arabia is simple: the former exports commodities and imports oil-related products.

See below the top five commodities most exported from Brazil to Saudi Arabia last year, according to DataLiner.

Top 5 Brazilian exports to Saudi Arabia | Jan 2022 – Dec 2022 | TEUs

Source: DataLiner (click here to request a demo)

Specific circumstances in Brazil in recent years have increased the demand for fuels, such as the greater need for diesel oil to keep thermoelectric plants running during drought periods.

The resumption of economic activity, with a GDP increase of 5% in 2021 and 2.9% in 2022, is reflected in higher fuel demand.

“You don’t have much flexibility when the trade balance is like this, with few products: if the main product drops or increases, it automatically impacts the balance,” Castro says.

“However, the tendency is for the trade deficit to decrease as oil prices fall,” he added.

Another possible reflection of the war in Ukraine was the 86% increase in the value of Saudi fertilizers imported by Brazil from 2021 to 2022.

Russia, waging war against Ukraine, has been Brazil’s main supplier of this item in recent years.

Brazilian exports to the Saudis reached US$ 2.1 billion in 2021 and US$ 2.9 billion in 2022 — a value slightly below the export record registered in 2011 (US$ 3.5 billion).

Last year, poultry and offal stood out in terms of export value (29%); so did sugars and molasses (14%).

In a text published by the Arab Brazilian Chamber of Commerce news agency, the secretary general at the institution, Tamer Mansour, stated that the war affected Brazilian exports.

“The conflict also had the effect of limiting the global supply of grains, particularly corn, and wheat. As a result, Arabs sought out these and other products from suppliers who had them in stock, resulting in prices higher than inflation [5.79%, according to the IBGE], with profits favored by the drop in the real,” explained Mansour.

Source: Época Negócios

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