Brazil exported US$ 280.9 billion in goods in the first ten months of the year, 19% above the same period in 2021. This is the highest value since the beginning of the historical series of the Foreign Trade Secretariat (Secex), in 1997 But this good scenario for exports could fade next year.

“There are many concerns in the air”, says the president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro. Among them are the slowdown of the global economy and domestic problems of Brazil’s trading partners.

Four of the main buyers of Brazilian products abroad have a challenging economic situation and should grow less. Together, Argentina, China, the United States and the European Union were the destination of almost 59% of Brazilian exports between January and October.

The biggest one is with the loss of traction of the global economy, motivated by rising inflation and the consequent rise in interest rates to try to contain it. In April, the International Monetary Fund (IMF) projected that the global economy would grow 3.6% next year, an estimate that in July fell to 2.9% and, in October, to 2.7%.

The phenomenon affects some of the country’s main trading partners. “There is a change in the international scenario, which will have an impact on prices”, says Castro.

US economy could go into recession

Sales to the United States, Brazil’s second main trading partner, grew 23.2% in the first ten months of the year, reaching US$ 31.1 billion. It is the highest level of the historical series started in 1997.

The Brazil-United States Chamber of Commerce (Amcham) expects unprecedented figures for exports and imports this year. “This projection is based on the increase in demand and the rise in international prices of important items on the bilateral agenda”, says the executive vice-president of Amcham, Abrão Neto.

The scenario may be different next year. IMF expectations for US economic growth next year plummeted between April and October, dropping from 2.3% to 1%. The projection for the advance of the North American GDP this year also lowered in the last months, and the most recent one is of only 1.6%.

The largest global economy has a recurring problem with inflation, driven by energy and food prices, which has led the Fed – the central bank there – to raise interest rates. Currently, they are in the range of 4% to 4.25% a year, and new highs are expected for the coming months, which should lead to a slowdown in the economy, with a possible reflection on purchases of Brazilian products.

“After a second contraction in its GDP in the second quarter, the outlook for the US economy is uncertain to say the least. Inflationary pressures are showing signs of easing, but the pace of decline in inflation may be slower than expected. Although consumer confidence has recently stopped its downward trend and, in fact, recovered slightly in August, business surveys show a sharp decline in sentiment, particularly in the manufacturing sector. BNP Paribas.

Worrying scenario in the European Union

Another important buyer of Brazilian products facing problems is the European Union. The main ones are high inflation, which forces an increase in interest rates, and the possibility of an energy “blackout” – until the beginning of the war in Ukraine, 40% of the energy consumed came from Russia.

The obstacles coincide with the best moment in ten years for business with the economic bloc. In the first ten months of 2022, Brazil exported US$ 42.8 billion in goods to the European Union, almost 39% more than in the same period last year.

Six products account for just under half of export revenue: crude oil, soy, soy bran, unroasted coffee, iron ore and cellulose.

The prospects are not very favorable, especially in the Euro Zone, which comprises 19 countries, including some large Brazilian clients such as the Netherlands, Germany and Spain. For this region, IMF forecasts for economic growth in 2023 have plummeted in recent months, from 2.3% in April to 1.2% in July and 0.5% in October.

Allied to this, mentions the president of the AEB, there is the fact that most commodities tend to become cheaper with the slowdown of the world economy.

Argentina and China have domestic problems

Two other important buyers of “made in Brazil” products, China and Argentina, are dealing with domestic problems. The Asians, despite not having made a monetary tightening, are not able to grow at a strong pace and may, for the first time since 1980, grow less than Brazil. The IMF projection is that the Chinese will grow 3.2% this year and 4.4% in 2023.

A series of factors affect the Chinese economy, the second largest in the world and the main destination for Brazilian products, says the director of investments at Portofino Multifamily Office, Eduardo Castro:

• The real estate sector, one of the engines of the Chinese economy, is in trouble, as is the case with mega-developer Evergrande;
• Interventions in the information technology segment repelled potential investors; and
• The maintenance of the “Covid zero” policy, which leads to the implementation of lockdowns in the affected regions.

China mainly buys agricultural products, such as meat and soybeans, and mining products, such as oil and iron ore. The value of purchases of Brazilian products fell 1.3% in the first ten months of the year, to US$ 76.5 billion. As a result, China’s share of total Brazilian exports fell to 27.2%, the lowest share since 2017.

Argentines, in turn, face a severe exchange rate crisis and tend to restrict foreign exchange outflows. Two of the instruments are the establishment of different types of exchange rates, depending on the activity, and the collection of taxes for activities related to tourism abroad.

The expectation of analysts at Itaú is that Argentina’s economy will contract in the second half of the year, due to fiscal and monetary adjustments and adjustments such as stricter control of imports. “In this crisis scenario, they will only buy what is strictly necessary”, projects the president of AEB.

One of the sectors that are already feeling the blow is the automobile industry, whose exports to Argentina have recently dropped because of the restrictions imposed by the neighboring country. Also influencing, according to the National Association of Automotive Vehicle Manufacturers (Anfavea), the exhaustion of the exemption quota in Colombia and logistical problems.

Source: Gazeta do Povo