Foreign Trade: Reasons for Optimism

SÃO PAULO – Although the Ministry of Economy reported a trade deficit of $176 million in January this year, what matters is that foreign trade has been on a record-breaking trajectory in early 2022. Just in January, according to data from the Foreign Trade Secretariat (Secex) of the Ministry of Economy, exports grew by 25.3% and reached $19.6 billion, the best result for the month in the historical series that began in 1997.

Even with the off-season and the issues arising from the coronavirus pandemic (COVID-19), agricultural and livestock products were the highlights of exports, with a 97.5% growth in January, especially due to the performance of soybeans. The manufacturing industry also stood out with a 36.1% growth in January, reaching $12.2 billion in sales.

Imports, on the other hand, reached $19.8 billion, marking a 24.6% increase, the highest since January 2014 when they reached $20.2 billion. This was mainly due to a significant increase in purchases of products for the extractive industry, especially crude oil, natural gas, and coal, linked to energy production in Brazil. The prices of imported extractive industry goods have been rising since the second half of 2021, reaching 99.1% in January this year.

As a result, the foreign trade flow (the sum of exports and imports) also hit a record, rising by 25% and reaching $39.52 billion. There was a deficit of $176 million because the volume of imports exceeded that of exports. However, despite being negative, the result represents an improvement compared to January 2021 when the trade deficit was $219.9 million. This was also the best trade balance for this month since 2018 when there was a surplus of $1.6 billion.

In other words, alongside a highly active export sector with records every month, imports are growing, a trend that has been observed since the last half of the previous year. Despite a 15.7% drop in the agricultural sector in January, there was a 325.8% increase in extractive industry acquisitions and a 14.9% growth in foreign purchases by the manufacturing industry. Exports are also on the rise, with a 51.8% growth in those destined for the United States, 46% in volume sent to the European Union, and 18.3% to Argentina.

However, exports to China, Hong Kong, and Macau decreased by 3.8%, reflecting the drop in iron ore shipments. But this has little impact on trade between Brazil and China, which, from 2020 to 2021, increased by 34%, compensating for the 5.4% loss in the previous year. In fact, trade with China had a greater increase than that recorded with the United States, the European Union, and South America, according to data from the Foreign Trade Indicator (Icomex) of the Getúlio Vargas Foundation, which reported a 360% growth in exports to the Asian country since 2008. In contrast, during the same period, there was an 18.6% decrease in exports to the United States.

Given these numbers, there is every reason to be optimistic about the future of Brazilian foreign trade. It’s worth noting that in 2021, the trade balance recorded a surplus of $61 billion, which was 21.1% higher than the 2020 balance when there was an average daily surplus of $50.4 billion. Based on this, the Central Bank projected a positive result of $52 billion for 2022, while the financial market was even more optimistic, predicting a surplus of $57.2 billion. If these projections are confirmed, it will already be a significant victory.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Manager of Environmental, Social, and Corporate Governance (ESG) at the Fiorde Group, consisting of Fiorde International Logistics, FTA Transport, Warehouses, and Barter International Trade. Email: lianalourenco@fiorde.com.br. Website: fiorde.com.br.

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