Trade balance grows, Brazil gains position in OECD ranking

Brazil’s 2023 year-to-date trade balance has soared to $69.6 billion by the fourth week of September, surpassing the total of $61.53 billion recorded for the entire year of 2022. This significant increase signals a new record for the current year, propelling the nation upward in the global rankings of trade surpluses. In the most recent data from the Organization for Economic Cooperation and Development (OECD), encompassing 46 countries, Brazil secured the sixth position in the ranking from January to June. In 2022, Brazil held the eighth spot in the ranking, while in the pre-pandemic year of 2019, it was 11th.

Tatiana Prazeres, leading the Foreign Trade Secretariat (Secex/Mdic), highlights that 2023 is unfolding as a remarkably positive year for the Brazilian trade balance. The agency is anticipated to reevaluate the $85 billion surplus currently projected for the year within its regular quarterly review. Meanwhile, the Brazilian Foreign Trade Association (AEB) forecasts a surplus ranging between $92 billion and $ 93 billion. Additionally, Welber Barral, a partner at BMJ and former Foreign Trade Secretary, presently projects the balance could ascend to $95 billion.

“While it’s unfeasible to near China’s unchallenged standing, considering this year’s outcomes, Brazil’s further ascent in the trade surplus ranking is quite plausible,” asserted José Augusto de Castro, president of AEB. According to the OECD ranking, China markedly leads with a trade surplus of $498.36 billion from January to June, followed by Germany and Russia with $99.73 billion and $59.7 billion, respectively. This ranking, in addition to OECD members, also counts strategic partners like South Africa, India, Indonesia, Brazil, and China.

Mr. Castro emphasizes that this year’s surplus advance is attributable to nearly stable exports and a decline in imports. Secex data reveal that Brazil’s export value increased 0.6% from the same period last year by the fourth week of September this year, while imports experienced an 11.1% downturn.

Ms. Prazeres highlights that the notable decline in imports is predominantly attributed to price decreases. Data accumulated by Secex from January to August reveals a 10.4% reduction in import expenditures compared to the same period in the previous year. This decrease comprises an 8.1% drop in prices and a virtually stable volume, with only a minor 0.3% decline compared to the same months last year. “This underscores that a lower price is being paid for nearly the same volume of imports, given the high prices in 2022,” she explained. She points out notable decreases in prices for significant imports this year, such as fuel oils and fertilizers, plummeting by 21.3% and 43%, respectively, over the same eight-month span.

Herlon Brandão, the director of Planning and Commercial Intelligence at Secex, notes that the import fall is a global phenomenon, not restricted to Brazil. Data from the OECD ranking show a 6.6% reduction in imports from China from January to June this year compared to the same timeframe in 2022, accompanied by a 2.3% fall in Chinese exports. German imports dwindled by 5.2%, even as their shipments rose 2.2%.

In Brazil, noted Ms. Prazeres, exports exhibited a contrasting vigor compared to imports in terms of volume and prices. “Even with the decline in prices propelled by commodities, the surge in quantity amply compensated for this price impact.” As per Secex data, Brazilian exports remained essentially stable from January to August, marking a slight 0.3% increase compared to the same months in 2022. Prices experienced an 8.1% descent, but volumes ascended by 10.4%. From January to August, Brazilian exports were predominantly fueled by soybeans, contributing to a 19% share of the total physical value, succeeded by oil at 11% and iron ore and its concentrates at 8.4%. According to Secex data, all three products endured a decline in average export prices but witnessed volume growth.

“The surplus has been secured by commodities and is likely to persist in the short and medium term,” asserted Mr. Castro, even though the forecast indicates a shift in global trade dynamism. For now, Brazil has yet to capitalize on the gap created by China’s diminishing lead in the U.S. market, a position now overtaken by Mexico this year. Between January and July this year, Chinese shipments to the U.S. plunged by 24.8%, while Mexican shipments experienced a 5% uptick. Conversely, Brazil’s sales to the U.S. contracted by 1.3%.

Data from the OECD further highlight that, despite Brazil’s position among the largest trade surpluses, it only ranks as the 18th largest exporter. In this categorization, China continues to dominate, with $1.8 trillion in physical volume from January to June, followed by the United States with $1 trillion and Germany with $848.5 billion.

Mr. Barral highlights that cyclical factors have played a role in this year’s surplus, such as a record harvest from the agricultural sector and still relatively high commodity prices despite adjustments. Looking ahead to next year, he anticipates no new records, citing the looming challenges in the Chinese economy and the resurgence of Brazilian competitors, among other factors. “A new record is unlikely, yet a sturdy balance will be maintained,” he said.

Mr. Castro also chimed in, noting that while a surplus increase is anticipated in 2023, the country’s overall trade flow is projected to dip. In 2022, Brazil’s trade flow, a sum of exports and imports and an indicator of trade vitality, hit a record $606.75 billion. This year, the AEB forecasts a total nearing $560 billion. As reported by Secex, up to the fourth week of September, the trade flow amounted to $423.93 billion, marking a 4.6% decline from the same period in 2022.

(Reporting by Marta Watanabe, Álvaro Fagundes).

Source: Valor Econômico

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