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Trade deficit with Brazil soars 102.8%

A file photo showing containers at the Buenos Aires port.

Imports from neighbouring country rises by 8.1 points compared with 2012

Brazil’s trade surplus fell to its lowest level in over a decade in 2013 — hurt by lower commodities prices, an increase in fuel imports and declining competitiveness among manufacturers — but the neighbouring country saw a boost in exports to Argentina, with the trade balance weighing US$3.153 billion in Brazil’s favour.

Brazil posted a trade surplus of US$2.561 billion in 2013, the Trade Ministry in Brasilia said yesterday — the country’s worst result since 2000, and a sharp drop from the US$19.396 billion surplus posted in the previous year.

Yet despite that sharp drop, Brazilian exports to Argentina rose by 8.1 percent from 2012 to US$19.616 billion, while Argentine exports to the country led by President Dilma Rousseff edged up a mere 0.1 percent to US$16.463 billion.

Despite these discouraging figures, Argentina remains Brazil’s third most-important supplier, behind China and the United States, representing 6.9 percent of total acquired goods. The same order of countries applies to the largest buyers of Brazilian exports.

The 102.8 percent spike in the annual trade deficit with Brazil is less dramatic when seen in context, considering 2012 saw a 73 percent plunge in the deficit from 2011, when the numbers in red fell to US$1.560 billion from US$5.804 billion, a trend that was explained by the increasing import blocks imposed by Argentina. Overall, the volume of bilateral trade contracted by 13 percent in 2012 as a result of the restrictions.

A recovery on the Brazilian side last year was largely due to soaring auto-sector exports to Argentina and a contraction in wheat imports, according to the Acebeb consultancy.

The total trade between the countries for 2013 weighed in at US$36.079 billion, representing a 4.7 percent hike from 2012.

Exports to Brazil in December alone decreased 25 percent in comparison with the same 31 days in 2012, according to Acebeb, as the country adopted an increasingly protectionist approach and looked toward the Middle East to satisfy its growing energy demand. Imports from the latter region surged 38.1 percent in December, and dropped 3.6 percent from the European Union.

The surge in Argentine imports from Brazil is attributable to hikes in the influx of aluminum oxides and hydroxides, fuel oils, automobiles, tractors, freight vehicles, tires, iron ore and plastic polymers.

Brazilian concern

The worsening trade balance is a serious challenge for Brazil, which is struggling with a subdued global economy and productivity shortcomings at home. The diminishing surplus has also weakened the local currency, the real, as fewer US dollars enter the economy. That could lead to additional inflation pressure as imports become more costly.

For December, Latin America’s largest economy posted a trade surplus of US$2.654 billion.

A 15.3 percent increase in manufactured goods over the previous year helped support the trade balance in December, with the largest portion of that attributed to the US$1.2 billion export of an oil rig.

That oil rig, however, was sold by state-run oil firm Petrobras, to one of its foreign subsidiaries and will likely remain in Brazil.

Petrobras obtains certain tax and other benefits by registering its ships and offshore oil rigs in the Netherlands, and any transfer of ownership out of Brazil is accounted for as an export.

Imports reached a record US$239.6 billion in 2013, a 6.5 percent increase over the previous year, the trade ministry said. In contrast, exports fell 1 percent to US$242.2 billion.

Rousseff’s government has offered billions of dollars in subsidized lending to help exporters, mostly those who produce finished goods. Still, Brazilian manufacturers have struggled to remain competitive with their global peers due to a heavy tax burden, high labour costs and poor infrastructure.

Raw materials such as soy, corn and iron-ore accounted for about half of total exports from Brazil last year, though the country is earning less for some of those products as prices on global markets decline.

Imports, on the other hand, remain robust even after the real weakened a little more than 13 percent against the US dollar last year.

A big part of that is fuel, with the country’s limited refining capacity requiring costly shipments from abroad. The total value of fuel and lubricant imports rose 13.8 percent in 2013 from the previous year, while intermediate goods rose 5.8 percent and capital goods rose 5.4 percent.

Brazilians’ appetite for foreign products has also remained strong, bolstering imports of consumer goods such as electronics and clothes by 3.2 percent in the year.

Herald with Reuters

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