Good News on the External Sector in Brazil

Trade balance posted a strong USD 4.6bn surplus in June. Exports performance explained such strong result. On the margin, it increased by 13% m/m s.a. in nominal terms, pushing the annual change up from -37% y/y in May to -22% y/y in June. Imports expanded 2% m/m s.a. with the annual change moving up slightly from -40% y/y in May to -38% y/y in June. Overall, trade balance reached USD 49bn surplus on seasonally adjusted and annualized terms, up from the USD 31bn SAAR in May. Accumulated over the last 12-months, trade balance rose from USD25.6bn to USD27.5bn surplus.

In the first semester of 2009, trade balance posted a surplus 25% greater than the one posted in the same period in 2008. This positive outcome is due to two factors. First, the decrease in international trade that decreased Brazilian exports. Second, the domestic contraction in the Brazilian economy that led to a decrease in imports. The flow of commerce decrease 25.3% in the first semester of 2009. The flow of commerce shows a better picture of the external sector in Brazil because it adds exports and imports. In the first six months of 2009, exports decreased 22% while imports decreased 29%.

A similar moviment was observed in the month of June. There was a decrease of 38% in imports and of 22% in exports. This led the trade balance to reach $4.6 billion, the best performance since December 2006. In comparison to June 2008, this result is almost 70% larger. In our opinion, considering that 2008 was the best performance of the Brazilian external sector ever, the current external sector performance tends to be outstanding. Clearly, when the financial crisis is over, Brazilian exports will boom again and the country will post extremely high growth rates.