TRADE-BRAZIL: Trade Surplus Fails to Dispel Gloom

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 8 1999 (IPS) - Although Brazil recorded its first major trade surplus of the year in May – 312 million dollars – the news failed to lift the general gloom surrounding trade projections.

Despite the surplus, the balance for the first five months of the year continued to be in the red – a 479 million dollar deficit – making the government’s year-end target of a 3.4 to 5.3 billion dollar surplus look increasingly remote.

Exports stood at 4.38 billion dollars last month, 18.4 percent above the total for April but 4.8 percent less than the May 1998 figure. The surplus was a result of a decrease in imports, which were 13.9 percent down from May 1998 – a consequence of the crash of the Brazilian real in January.

Exports failed to rally despite favourable exchange rates and increased sales of soy over the past few months, according to Trend Consultants, which sees the government’s trade projections for this year as overly optimistic.

Nevertheless, May did mark the start of a rise in exports, reversing a trend that began to be seen last June, according to Mario Marconini, secretary of Foreign Trade in the Ministry of Development, Industry and Commerce.

The deficit accumulated so far this year was less than one- fourth of the total reported for the first five months of 1998, which stood at 2.046 billion dollars, Marconini pointed out.

But imports also staged an about-face last month, growing 10.8 percent over April – a response to the first signs of economic recovery in Brazil since the financial turbulence of the latter half of 1998.

The latest government trade projections pointed to one or two percent fall in the gross domestic product (GDP) this year – half the drop initially forecast after January’s devaluation of the real.

But Marconini said that a rise in GDP would drive up imports, reducing Brazil’s chances of achieving the hoped-for trade surplus. On the other hand, the chances for a recovery of exports in Brazil have been hurt by the continued stagnation of international trade.

Waning demand in wealthier markets and Asia has especially hurt the prices of commodities, of which Brazil is a leading exporter.

The downward trend in international trade saw the value of Brazilian exports plunge 12.5 percent from January to April, compared to the same period in 1998, according to the Foundation of Studies in Foreign Trade, an organisation financed by export companies.

The average price of imports, however, rose 5.6 percent with capital goods topping the list with an increase of 13.7 percent.

The uneven evolution of prices for commodities and manufactured goods has resulted in a vicious circle for Brazil. Its industrial exports are sold mainly within Latin America, which is suffering a recession largely caused by the devaluation of the Brazilian real.

Brazil not only saw the volume of its highest-priced exports diminish, but also has suffered a collapse in the prices of its chief exports, such as soy, coffee, sugar and iron ore, purchased by rich countries.

Within a few years, the opening of agricultural markets in Europe and the United States would allow Brazil to double its farm exports to 36 billion dollars, predicted agribusiness leader Luiz Hafers.

But that target, shared by Brazil and its partners in Southern Common Market (Mercosur) – Argentina, Uruguay and Paraguay – appeared increasingly remote, due to the continued resistance by the European Union (especially France) to reducing subsidies for farmers and doing away with protectionist measures.