The Good Trade Balance and Current Account Balance Results
Due to another rising cycle of international commodity prices, Brazil’s trade balance has improved significantly since 2020. According to Secex data, in the 12 months through June there was a surplus of US$ 72 billion, with exports of US$ 336 billion and imports worth US$ 263 billion. These exports cannot be classified as diversified, with almost 40% referring to three products since 2020: soybeans, crude oil and iron ore.
Soybeans, the leader by value since 2022, again led the way in first six months this year, helped by the record-breaking harvest in response to favorable climate conditions. This commodity also made the largest contribution to GDP growth in the first quarter. In turn, exports of petroleum grew strongly in 2021 and 2022 because of the increased production and effects of the pandemic and embargo on Russian oil exports, so that the European Union is now the main importer of Brazil’s output. Finally, iron ore, although continuing to be in third place, has lost relevance because of the reduction of prices, due mainly to the crisis in China’s real estate sector.
Our projection is that although international commodity prices are now trending downward, the current account deficit will fall in 2024. But there are important risks, mainly related to the high concentration of Brazilian exports to China and the European Union. Both Chinese and European growth is now decelerating, in the second case due to the restrictive monetary policy required to control inflation. Finally, doubt exists regarding Brazil’s farm output due to the negative climate effects of El Niño on the 2023-2024 harvest.
Now read on...
Register to sample a report