Letter IEDI n. 1240—Record balance, but stagnant exports
The Brazilian economy’s balance of trade in goods totaled US$71.3 billion in Jan–Sep'23, resulting from exports of US$253 billion and imports of US$181.7 billion. This figure is 50.4% higher than that recorded in the same period in 2022.
In Q3'23, analyzed in more detail in this Letter IEDI, as well as in the months that followed, the country's trade surplus increased, reaching a record level of US$89.5 billion in Jan–Nov'23.
This, however, has been due to the contraction in imports. The drop reached 19.7% in Q3'23 compared to Q3'22, in the wake of the Brazilian GDP slowdown. Exports, it is worth noting, also declined, but much less intensely in the period: -1.6%. In Jan–Sep'23 versus Jan–Sep'22, period covered by this Letter, the same pattern is observed: -11.7% for imports and -0.1% for exports.
In 2023, the decline in commodity prices and the slowdown in world economic growth have not helped our export performance. As discussed in Letter IEDI n. 1236, global GDP is expected to grow 3.0% in 2023 against 3.5% in 2022, remaining almost 4% below pre-pandemic projections, according to the IMF.
On the other hand, as we argued in the Analysis of December 5th, 2023, although Brazilian GDP avoided the negative ground in Q3'23, there was an important loss of pace compared to the first half of the year. The result was +0.1% against Q2'23 —vis-à-vis +1.4% in Jan–Mar'23 and +1.0% in Apr–Jun'23, and +2.0% in relation to the same period of the previous year— the lowest since Q1'22 in this comparison. This behavior was translated into lower imports.
In the case of our foreign sales, there was an increase of 8.9% in the total quantum exported in Jan–Sep'23, which was even stronger in Q3'23: 10.3% compared to the same period of the previous year. This expansion, however, was offset by the fall in prices of the main commodities exported until the middle of the year, which resulted in a negative price effect.
This performance, moreover, was heterogeneous among the three major sectors both in pace and in composition (price effect and/or quantity effect).
In Jan–Sep'23, foreign sales of agriculture had the best result, advancing 7.7% in relation to the same period in 2022, driven by the significant increase in the quantum exported (+20.3%), which more than offset the fall in commodity prices in the sector. In Q3'23 in particular, this movement was even stronger: 9.8% in value and 34.9% in quantity.
In the extractive industry, although the quantum exported also rose significantly (+19.4%) in Jan–Sep'23, the negative price effect was more intense than in agriculture, resulting in a 2.5% decrease in the value exported. In Q3'23, the change in value exported was positive: 1.2%.
On the other hand, manufacturing foreign sales decreased 2.9% due to both the fall in quantity exported (-1.1% compared to Jan–Sep'22) and the negative price effect associated with manufacturing products derived from commodities. In Q3'23 these trends worsened: -7.4% in value and -3.0% in quantity.
It is worth noting that, despite the drop in the value exported, the manufacturing industry continued to lead our shipments of goods, but not without a reduction in its share in the total value: from 56.1% in Jan–Sep'22 to 50.4% in Jan–Sep'23— the lowest participation since 2020. The story would be different if the country had not neglected the competitiveness of longer and more complex production chains. It is worth remembering that the share of manufacturing was almost 80% twenty years ago.
Sectorally, exports of 11 manufacturing branches out of a total of 23 branches (48% of them) increased in Jan–Sep'23 in relation to the same period of the previous year (10 branches in Q3'23). This performance is significantly weaker than in 2022, when foreign sales of 21 industrial branches increased in the equivalent period.
On the other hand, imports of goods fell 11.7% in Jan–Sep'23 compared to the same period of the previous year because the decline in commodity prices added to the drop in quantum imported (-2.5%). This decrease was due to the decline in the quantities imported of agriculture (-18.5%) and manufacturing (-2.8%) products, which more than offset the increase in the extractive industry's imported quantum (+2.2%).
The price effect was negative in the three sectors due to the drop in international prices of commodities imported by Brazil. The largest decline was recorded in the extractive industry due to deflation in the price of oil, since Brazil is an importer of derivatives of this commodity. As a result, the value imported by the extractive sector fell 26.6% in Jan–Sep'23. In agriculture and manufacturing, the drop in imported value was of 21.6% and 10.7%, respectively.