Declining import prices drive Brazil’s trade balance to record surplus

Marked by declining prices, Brazil’s June trade balance recorded a surplus of US$ 10.59 billion, a record amount for the month. The positive balance was a result of imports decreasing at a faster pace than exports.

According to data released by the Foreign Trade Secretariat (Secex/Mdic) yesterday, the surplus in June came from exports worth US$ 30.1 billion and imports worth US$ 19.5 billion. Imports dropped by 18.2%, while exports fell by 8.1% compared to the same month in 2022, considering the average per working day.

In the first semester, imports reached US$ 120.6 billion, representing a 7.1% decrease compared to last year. On the other hand, exports increased by 1.3%, reaching a total of US$ 166.2 billion, also a record amount for the first semester.

Secex data shows that exports grew by 8.7% in volume for the year-to-date result compared to the same months in 2022, driven by soy, crude oil, iron ore, sugar, fuel, and poultry meat. However, some of these products, such as soy, crude oil, iron ore, and fuel, experienced price decreases from January to June. In terms of total exports, prices fell by 6.8% in the first half.

José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), comments on the significant price drop observed in June. He states that the price drop was more substantial than expected, particularly for imports. He mentions that the AEB’s initial projection of a surplus of US$ 71 billion will need to be revised and is expected to be close to the government’s forecast. Secex also revised its projection for the trade surplus in 2023 from US$ 84.1 billion to USD 84.7 billion.

Castro predicts that the decline in imports will be more pronounced than anticipated due to a sharper price decrease. He believes that the value of exports will end the year with a 2% to 3% decrease, while the value of imports is expected to fall around 12% compared to 2022.

Rafael Cagnin, an economist at the Institute of Studies for Industrial Development (Iedi), points out that after recovering export levels in 2021 and a significant part of 2022, exports from the manufacturing industry showed more fluctuating performance in the second quarter of 2023. According to Secex data, sector exports decreased by 10% in June compared to the same month in 2022.

According to Cagnin, this context results from the weakening of the performance products from the manufacturing industry that are more contaminated by commodity cycles. “They functioned as a cushion in the context of base recomposition but were losing their cushioning effect,” he says, reflecting the drop in prices in a global environment of economic slowdown and monetary tightening in several markets. For him, the priority agenda to make manufacturing industry exports more competitive involves forwarding the Mercosur-European Union agreement and approving the tax reform on consumption.

Source: Valor Econômico

Read more: https://valor.globo.com/brasil/noticia/2023/07/04/balanca-tem-saldo-recorde-para-junho-apos-queda-de-precos.ghtml

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