Trade surpluses: High also in 2019

BRAZIL ECONOMICS - Report 17 Dec 2018 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The mercantilist view that high trade surpluses are good for Brazil collapses when considering that their growth since the end of 2015 has largely been due to the reduction of imports, generated by the precipitous decline of fixed capital investments. Exports have also grown in the period, benefiting particularly from exports to China, mainly of commodities. Even with the deceleration of world growth – especially of China and Europe, the two leading importers of commodities – Brazil will likely maintain a trade surplus in 2019 similar to that in 2018 (in the neighborhood of US$ 60 billion) (Graph 1). The reason rests with the marked change in the structure of the oil sector, with a strong increase of domestic production and exports. Although the acceleration of GDP growth from 1.3% in 2018 to a projected 2.4% in 2019 will increase fixed capital investment, that growth will not trigger an elevation of imports that poses a risk to the projections for the trade balance.

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