Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
External Trade in Brazil:
Recent Developments
Pablo Fonseca P. dos Santos
Paris - OECD
November 22, 2004
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Graph I: Nominal and Real Exchange Rate1, 1998 - 2004 (October)
(index: July 1994 = 100)
425
400
375
350
325
300
275
250
225
200
175
150
125
100
75
50
425
400
375
350
325
300
275
250
225
200
175
150
125
100
75
50
Nominal Exchange Rate
(R$/US$)
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
Jan-00
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Real Exchange Rate
Sources: Central Bank of Brazil and Federal Reserve Bank of Saint Louis.
1. Monthly average. Deflators: consumer price indices of Brazil (IPCA) and the US (CPI).
2
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Graph II: Trade Balance, 1998 - 2004 (October)
(US$ billions; accumulated over 12 months)
100
35
90
30
80
25
Imports (left scale)
70
20
60
15
50
40
10
Exports (left scale)
5
30
0
20
Trade Balance (right scale)
10
0
1998
-5
-10
1999
2000
2001
2002
2003
2004
Sources: Central Bank of Brazil and Ministry of Development, Industry and Trade.
3
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table I: Exports by Main Markets, 1997 and 2004
(US$ billions)
Items
Total Exports
1997
US$ billions
% of total
2004*
US$ billions
% of total
53.0
100.0
90.6
100.0
14.5
27.4
22.6
25.0
USA 1
9.4
17.8
18.9
20.9
Argentina
6.8
12.8
6.8
7.5
China
1.1
2.1
5.5
6.1
Mexico
0.8
1.6
3.6
4.0
Japan
3.1
5.8
2.6
2.9
Others
17.3
32.7
30.5
33.7
Russia
0.8
1.4
1.6
1.7
Iran
0.2
0.5
1.2
1.3
South Africa
0.3
0.6
0.9
1.0
European Union
Sources: Central Bank of Brazil and Ministry of Development, Industry and Foreign Trade.
* Acumulated over 12 months until September.
1. Includes Puerto Rico.
4
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Graph III: Exports Quantum by Class of Products
(12 months moving average)
300
250
Primary
200
150
Manufactured
Semimanufactured
100
50
out/92
out/94
out/96
out/98
out/00
out/02
out/04
Source: Funcex.
5
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table II: Exports by Main Products, 1997 and 2004
(US$ billions)
Items
1997
US$ billions
Total Exports 1
Primary Products
2
soybeans
crude petroleum
chicken meat
Semimanufactured
chemical wood pulp
soybean oil
Manufactured
transportation equipment
3
4
passenger motor vehicles
airplanes
transmission and reception
apparatus and components
petroleum products
% of total
2004*
US$ billions
% of total
53.0
100.0
83.4
100.0
14.5
5.1
0.6
0.9
27.3
9.7
1.1
1.7
25.2
8.4
2.4
2.1
30.2
10.1
2.9
2.6
8.5
1.0
0.5
16.0
1.9
1.0
11.9
1.7
1.2
14.3
2.1
1.5
29.2
55.1
45.0
53.9
7.3
13.7
12.4
14.9
1.5
0.7
2.8
1.3
3.0
2.6
3.6
3.1
0.6
1.0
1.1
1.9
1.5
2.8
1.8
3.3
Sources: Central Bank of Brazil and Ministry of Development, Industry and Foreign Trade.
* Acumulated over 12 months until June.
1. Includes special operations.
2. Includes grinded, oil-cake and other residues from soybeans.
3. Includes parts and components.
4. Includes automobiles, buses, trucks and tractors.
6
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Some Facts About the Structural Component of the
Brazilian Trade Performance
• Liberalizing reforms of the 1990’s
- Privatizations
- Reduction of trade tariffs
• Some industry examples
- airplanes
- steel
- textiles
• FDI
- automobiles
- mobile phones
• R&D and investments in the agricultural sector
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Graph IV: Export Quantum, 1997 - 2004*
(% change over previous year)
22
22
Brazil
18
18
14
14
10
10
6
6
World
2
2
-2
-2
1997
1998
1999
2000
2001
2002
2003
2004*
Sources: FUNCEX and IMF.
*2004 Brazil's data is the percentage change of the average index of January - October over the same period of the previous
year.
8
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Graph V: Exports of Goods and Services, 1999 - 2003
1.0
24.0
20.0
Brazil's exports / Worldwide exports
(%; scale to the left)
0.9
16.0
Brazil's exports / GDP
(%; scale to the right)
0.8
0.7
12.0
8.0
1999
2000
2001
2002
2003
Sources: IMF and Central Bank of Brazil.
9
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table III: Balance of Payments, 1998 - 2005
(US$ billions)
p
p
Items
1998
1999
2000
2001
2002
2003
Current Account
-33.4
-25.3
-24.2
-23.2
-7.7
4.0
6.7
0.1
-6.6
-1.2
-0.7
2.7
13.1
24.8
30.0
24.5
Exports
51.1
48.0
55.1
58.2
60.4
73.1
90.0
94.5
Imports
57.7
49.2
55.8
55.6
47.2
48.3
60.0
70.0
Non-Factor Services
-10.1
-7.0
-7.2
-7.8
-5.0
-5.1
-5.7
-6.9
Balance of Goods and Non-Factor Services
-16.7
-8.2
-7.9
-5.1
8.1
19.7
24.3
17.6
Factor Services
-18.2
-18.8
-17.9
-19.7
-18.2
-18.6
-20.8
-20.5
1.5
1.7
1.5
1.6
2.4
2.9
3.2
3.0
Foreign Direct Investment
28.9
28.6
32.8
22.5
16.6
9.9
17.0
14.0
Other Capitals 1
-3.4
-11.1
-10.8
4.1
-8.6
-5.4
-22.2
-8.7
Overall Balance
-8.0
-7.8
-2.3
3.3
0.3
8.5
1.5
5.4
86.4
112.8
135.3
96.7
215.2
-
-
-
Trade Balance ( FOB )
Unilateral Transfers
2004
2005
Memo
Foreign Direct Investment over Current Account Déficit (%)
Source: Central Bank of Brazil.
1. Includes errors and omissions and IMF loans.
p. Projection.
10
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table IV: Balance of Payments: Selected Indicators, 1998 - 2005
Items
p
1998
1999
2000
2001
2002
2003
2004
Current Account
-4.2
-4.7
-4.0
-4.6
-1.7
0.8
1.3
Exports of Goods and Services
7.5
10.3
10.7
13.2
15.2
16.9
17.9
2
n.a
17.1
22.1
22.8
27.5
28.7
29.9
31.2
2
n.a
63.2
70.8
56.2
58.4
38.8
23.2
28.1
32.2
IMF Loans Amortizations (US$ billions)
0.0
2.0
6.9
0.0
4.6
12.8
4.3
6.7
Intercompany Loans Amortizations (US$ billions)
3.1
6.5
3.8
5.2
7.4
4.6
9.4
3.8
International Investment Position (US$ billions)
n.a.
n.a.
n.a. -265.0 -230.5 -272.3 -276.7
2005
(% of GDP)
Exports and Imports of Goods and Services
0.0
(US$ billions)
Gross External Financing Needs 1
Memo
3
n.a
Source: Central Bank of Brazil.
1. Excludes payments of Central Bank debt and intercompany loans.
2. Acumulated over the last 12 months until June.
3. In March.
p. Projection.
n.a. Not available.
11
p
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table V: External Debt Indicators, 1999 - 2004
(%)
Items
1999
2000
2001
2002
2003
2004
3
June
Net External Debt 1 over Exports of Goods and Non-Factor Services
342.8
284.8
257.7
247.1
198.1
163.3
35.3
30.5
34.1
37.6
33.6
29.4
127.5
80.6
74.9
72.9
64.7
61.1
13.1
8.6
9.9
11.1
11.0
11.0
1
Net External Debt over GDP
External Debt Service 2 over Exports of Goods and Non-Factor Services
2
External Debt Service over GDP
Source: Central Bank of Brazil.
1. Net of international reserves (international liquidity concept).
2. Includes payments of Central Bank debt and excludes refinanced amortizations and amortizations of intercompany loans.
3. Acumulated over last 12 months
12
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Will Export Performance Keep Up?
•
Brazilian firms are increasingly becoming more export oriented
- Policies to incentive exports
•
Macroeconomic Stability
- Necessary but not sufficient condition
•
Microeconomic Reforms Agenda
- Improvement of the business environment
- Reduction of the cost of credit
- Infrastructure investment (PPP, regulatory framework)
- Improvement of the tax structure
- R&D (new law being discussed by the Senate)
- education
•
Trade negotiations
- High tariffs and non tariff restrictions on products that Brazil is more
competitive
Ministry of Finance of Brazil
Secretariat of International Affairs
November 2004
Table VI: Improving Business Climate
Structural Reform Checklist
Status
Type of
Approved
Reform/measure
measure
/issued
Transformation of COFINS in a VAT
Law
Elimination of PIS/COFINS on Financial Decree
Receipts
Work in progress


Real Estate Sector Reform Law
Law
Loans guarateed by Payroll
Law
Securitization of Bank Credits
Law
Investment Account Law
Law
Tax incentives for long-term
Decree
investment, M Ps206/9
Bankruptcy Law
Draft Law
Approved by the Senate. Expects ratification in the Lower House
Framework to subject the financial
Draft Law
Approved in the Financial and Tax Commission, is under consideration in
system to the Anti-trust Authority





the Constitution and Justice Commission
Private-Public Partnership Law
Draft Law
Being discussed by Senate Committees; eventual ratification at the House
Regulatory Agencies Law
Draft Law
Under discussion in the Lower House
Judicial Reform
Draft Law
The base text was approved in the first reading in July 2004.
Industrial Development Agency Act
Draft Law
Under discussion in the Senate
Technological Innovation Law
Draft Law
Approved in the Lower House in July 2004, going to the Senate vote
14