The Brazilian economy's balance of trade in goods totaled US$45,065 million in the 1st half’23, an increase of 31.5% compared to the same period in 2022. Little of this, however, had to do with our export performance. Imports shrank 7% to US$120,615 million, and the growth of exports, which totaled US$165,680 million, was of only 1% in the period. 

This mediocre performance of our foreign sales was due to the fall in prices of the main commodities exported by Brazil in a context of global slowdown associated with the tightening of monetary policy in advanced economies, which has become the most intense since the 1970s. 

According to the IMF's current outlook, the world economy is expected to grow 3.0% in 2023 against 3.5% in 2022. This drop resulted in a negative price effect that more than canceled out the 8.2% increase in the quantum exported by Brazil. 

Comparing the performance in the first half of the year and the variation of the last quarter under analysis (always in relation to the equivalent period of the previous year), there is indication of strong deceleration: exports and imports fell 1.7% and 12.9%, respectively, in Q2'23.

Our export performance was heterogeneous across the three major sectors both in pace and composition, that is, considering the price effect and/or the quantity effect. While the first mainly affected agricultural and extractive goods, manufacturing was the only one whose exported quantum decreased in the first half of 2023. 

Foreign sales of agriculture in the period had the best performance (+6.8%) in relation to the first half of 2022, driven by the significant increase in the exported quantum (+10.2%), which more than offset the fall in commodity prices. This positive evolution was associated with the growth of exports to China. 

In the extractive industry, although the exported quantum also rose (+18.2%), the negative price effect was more intense and more severe than in agriculture, resulting in a 4%  fall in the value exported. This drop was mainly due to the deflation in the international price of oil. 

Foreign sales of the manufacturing industry, on the other hand, suffered the negative influence of the quantity effect (1.2% decrease), stemming from the slowdown in external demand. Despite this, there was a slightly positive price effect associated with export contracts of commodity-derived manufacturing goods, which were signed when international quotations were at a higher level. The net result was stability in relation to the same period of 2022. 

Among the different branches of manufacturing, some even outperformed the aggregate of the sector, but were in the minority. Exports of 11 branches out of a total of 23 increased in relation to the same period of the previous year, which represents 48% of the total. This performance is significantly lower than in 2022, when foreign sales of 21 industrial branches increased year-to-date, as discussed in Letter IEDI n. 1195. 

The first position among the branches that exported the most was occupied by "other transport equipment", whose exports increased 43.7% compared to the 1st half/2022. "Machinery and equipment" took the second position (+17%) and "manufacture of tobacco products" the third (+16.3%), followed by "manufacture of motor vehicles, trailers and semi-trailers" (+14.8%). 

As for imports of goods, they shrank 7.1% in the 1st half’23, due to the decline in commodity prices. The virtual stability of the imported quantum (-0.3%) also contributed to this, despite the rise in the import volume of the extractive industry (+5.6%). The 0.9% contraction in the quantum imported by the manufacturing industry ended up prevailing. 

This evolution signals that the domestic market slowdown in early 2023, which greatly affected the industry, began to have an effect on the sector's foreign purchases. In addition, the loss of dynamism in the global economy contributed to a negative price effect not only in primary goods but also in industrial goods.