Economic upturn boosts imports, trims trade surplus

Driven by an economic upturn, imports have surged beyond expectations at the start of the last quarter of the year. The increase in imports in October continues a trend that has become more evident since June, despite a weaker real against the dollar during the second half of the year compared to the first, according to experts. This economic dynamism leads to trade surplus estimates ranging from $70 billion to $74.6 billion for 2024, significantly below the $99 billion seen in 2023.

According to the Secretariat of Foreign Trade (SECEX/MDIC), Brazil’s trade balance ended October with a $4.3 billion surplus, significantly lower than the $9.2 billion in the same month last year. This result stemmed from $29.5 billion in exports and $25.1 billion in imports. The reduction in the surplus was primarily due to the increase in imports, which rose 22.5% in value. Exports fell by 0.7%, compared to October 2023. In the year up to October, the surplus was $63 billion, with exports totaling $284.5 billion and imports $221.4 billion.

The chart below uses data from Datamar’s flagship product, DataLiner, to provide an overview of container imports through Brazilian ports from January to September. The historical data begins in 2021.

Brazilian Container Imports | Jan-Sep 2021 vs. Jan-Sep 2024 | TEUs

Source: DataLiner (click here to request a demo)

Herlon Brandão, director of statistics and foreign trade studies at the MDIC, said both imports and the two-way trade—the sum of imports and exports—recorded in October 2024 were monthly records. He said the rise in imports stems from an increased volume of shipments, as the prices of these goods are declining.

Capital goods imports in October and throughout the year are the “major highlights” for the period, Mr. Brandão pointed out. In October, external purchases of capital goods increased by 55.6% compared to the same month in 2023.

“The import of capital goods is good news but it’s noteworthy that the base of comparison is low,” said Welber Barral, partner at BMJ and former secretary of foreign trade. He points out that in October, the volume of imported intermediate goods also increased substantially, with a 37% rise. This category accounts for 61.6% of Brazil’s total imports.

Except for July, the total import value has been growing monthly at double-digit rates since June, even with a weaker real against the dollar in recent months, said José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB). In June, according to him, the import value rose by 20.1%. In July, there was a slowdown to a 5.6% increase, but in August, the higher pace returned, with an 18.1% rise. In September and October, the growth was 14.2% and 17%, respectively. These variations are averaged by business day. “This evolution shows that the increase in October is not isolated, but part of a consistent trend over the past few months.”

The unexpected acceleration in imports is reducing monthly trade surpluses and annual balance projections. The AEB, which earlier this year anticipated a $92 billion surplus for 2024, now estimates a $71 billion surplus. Mr. Barral projects a $70 billion surplus. Gabriela Faria, an economist at Tendências Consultoria, forecasts $74.6 billion.

Still, according to Mr. Barral, the surplus will make an “excellent” contribution to the external sector. “Surpluses above $50 billion have a positive impact on the balance of payments,” he said. He points out that in 2023, the $99 billion surplus was a record and “extraordinary.”

Mr. Castro notes that the increase in imported value is primarily driven by volume and falling prices. According to SECEX data, in the year-to-date compared to the same months in 2023, the total imported volume rose by 18% while average prices fell by 7.5%. The import volume, according to him, accelerates independently of the depreciation of the Brazilian real against the dollar. Mr. Castro points out that this data indicates that the cost was partly mitigated through price reductions in dollars, likely resulting from negotiations between importers and suppliers.

Due to the performance of oil, iron ore, and soybeans, Brazil’s export revenue fell by 0.7% in October compared to the same month in 2023. Shipments of oil, soybeans, and iron ore declined in October due to falling prices for these three commodities, which combined accounted for 27.2% of total shipments for the month. The average prices of these commodities dropped by 24.3%, 18.3%, and 22.6%, respectively. This behavior contributed to a decrease in export revenue in October by 10.8%, 31.3%, and 18.7%, respectively.

Ms. Faria expects price declines to continue to affect exports in 2025. Tendências projects a trade surplus of $74.6 billion for 2024, with $337.6 billion in exports and $263 billion in imports. For 2025, the projection is a $71 billion surplus, resulting from $326.8 billion in exports and $255.8 billion in imports. The slight 3.2% decrease expected for exports in 2025, according to Ms. Faria, reflects the price factor, while an increase in mineral and oil production, along with a recovery in grain production, is still anticipated for quantities.

Source: Valor International

Original reporting available at: https://valorinternational.globo.com/economy/news/2024/11/07/economic-upturn-boosts-imports-trims-trade-surplus.ghtml

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