04/17/2024 – 10:23
After two consecutive months of record surpluses, the Brazilian Institute of Economics (Ibre) of Fundação Getulio Vargas (FGV) observed a slowdown in foreign trade volumes in March, both in exports and imports. A possible intensification of conflicts in the Middle East, however, could boost Brazilian sales abroad due to increased prices and have negative effects on domestic inflation, the entity assesses.
The trade balance balance in March 2024 was US$7.5 billion, lower than that in March 2023. However, in comparison with the first quarter, the surplus of US$19.1 billion in 2024 was the largest in the series historical. In the case of exports, which grew 19.7% (January) and 20.6% (February) in the monthly interannual comparison between 2023 and 2024, a decline of 9.6% was recorded in March. In terms of imported volume, the behavior was similar: 11.2% (January), 12.4% (February) and deceleration to 1.6% in March.
“Prices followed the downward trajectory observed since the beginning of the year, and fell 5.6% for exports and 8.5% for imports”, reported the Foreign Trade Indicator (Icomex), released by FGV’s Ibre this Wednesday, 17.
For Brazil's foreign trade – unless there is a spread of conflicts involving the great powers – the supply of commodities, especially oil, could benefit from a possible increase in prices. High interest rates in the United States tend to devalue the Brazilian currency along with domestic factors such as fiscal issues, among others.
In this case, inflationary pressures are not welcome, but for the trade balance the effect would be positive, assesses Icomex. “In April, before the intensification of the conflict in the Middle East between Iran and Israel, the World Trade Organization (WTO) estimated an increase in the volume of world trade of 2.6% in 2024, after a decline of 1.2%, in 2023, influenced by Europe's poor performance, but drew attention to the uncertainties that lingered in world trade”, he highlights.
FGV Ibre observes that there is an unfavorable scenario for negotiations aimed at ending the war in Ukraine and the conflict between Israel and Hamas, which influences commodity prices and affects global transport logistics, especially in the Suez Canal.
The high probability of maintaining high interest rates in the United States, which could lead to lower growth in the country's economy, and doubts regarding the 5% Chinese growth announced by the government, could have an impact on global demand for imports.
In 2023, while the volume of world trade declined, the volume exported by Brazil grew 8.6% and imports fell 2.2%. Drought in Argentina, harvest problems in the United States, recovery in China explained the country's good export performance. For 2024, the Ibre model estimated in March (Macro Bulletin), an increase in export volume of 2% and imports of 1.2%, close to WTO projections.
“There is no consensus regarding Chinese performance for 2024. However, signs of improvement in the Chinese economy have led several experts and institutes to begin to accept the Chinese government's projection of 5% for 2024 as viable”, informs the institution.
According to the document, Brazilian exports to China are concentrated in three products. In the first quarter of 2024, these products explained 77% of exports to China – soybeans (31%); iron ore (23%); and oil (23%). Even with lower growth, around 4%, exports should slow down in relation to the 2023 result, but the variations will be positive and the surplus is guaranteed. “All these considerations assume that the conflict will not spread throughout the world”, he warns.
The main destination markets for Brazilian exports in the first quarter of 2024 were: China (29.4%); United States (12.6%); and Argentina (3.6%). The European Union's participation was 12.1%. The United States is highlighted by the increase in exported volume, whether in the monthly (+21.6%) or quarterly (+21.0%) comparison. Crude oil exports explained 19% of sales to this market, with a variation in value between the first two quarters of 2023 and 2024 of 142%. China recorded a positive variation in the quarter, but a drop in the monthly comparison with lower sales in soybean volume.
In imports, the highlight is the increase in volume to China and the drop to the United States. In the latter case, the drop in fuel oil imports (9.9% of imports) and the decline of -46% in the quarterly comparison draws attention.
It is observed that the distance between the participation of China and the United States in Brazilian imports has increased over the years. In the first quarter of 2024, China's share was 23.9%, the United States 15.2% and the European Union 19%. Ten years ago, in the first quarter of 2014, these shares were: China (17.4%); United States (15.5%); and European Union (19.3%).
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