In 2023, despite the global slowdown in the wake of interest rates increases in many economies and the reduction in commodity prices, Brazil managed to register a record trade surplus in the first half of the year. In current values, the total result was US$45.1 billion, an increase of +31.5% compared to Jan–Jun'22. 

Thus, the year should end with a surplus of US$72.3 billion, according to the latest expectations collected by the Central Bank's Focus Bulletin, a much higher level than projections indicated at the beginning of the year (US$56.6 billion). If the estimate is proven right, we will have a rise of almost +20% in relation to last year. 

Sectorally, two movements contributed to the performance in the first half of 2023.

First, primary products, that is, agriculture, fishery and minerals, also had a record positive balance: US$67.4 billion in Jan–Jun'23. At its origin are exports, which reached US$79.3 billion, with an increase in current values of 2.1% compared to Jan–Jun'22 and 75% in relation to the pre-pandemic level (Jan–Jun'19).

Secondly, there was a reduction of the deficit in typical manufacturing industry's products, from US$27.6 billion in Jan-Jun'22 to US$22.3 billion in Jan-Jun'23, that is, -19.2%. As discussed in Letter IEDI n. 1217, although there was a decline in the amount of industrial goods exported, the value of foreign sales of domestic manufacturing was stable at US$86.4 billion. 

In other words, the decrease in the sector's trade deficit was due to the 4.7% fall of its imports between Jan–Jun'22 and Jan–Jun'23, to US$108.7 billion. This was associated with the reduction in commodity prices, which tend to influence the initial links in production chains, but also with the slowdown in Brazilian industry, as shown in Letter IEDI n. 1218.

Today's Letter analyzes the foreign trade performance of our manufacturing industry by grouping its sectors into different technology intensity ranges, following the OECD methodology.

Manufacturing comprises four categories: high, medium-high, medium and medium-low technology. The latter also covers products from the extractive industry and some goods related to services. In the low-intensity range are products from agriculture, forestry, fisheries and aquaculture, but it does not include manufacturing goods.

The behavior of the manufacturing trade balance in the 1st half'23, in turn, was under two crucial influences: on the one hand, the reduction of the deficit of the medium-high technology industry and, on the other hand, the resilience of the surplus of the medium-low category.

The contraction of the medium-high technology trade deficit was of 16.9% in relation to Jan–Jun'22, that is, almost 3.5 times the decline in the deficit of manufacturing as a whole. Much of this was due to the drop in its imports (-9.5%), which was the most intense among the technology ranges. Its main driver were the external purchases of the chemical industry (-25.2%), with the help of lower prices of oil and its derivatives.

Another factor influencing the reduction of the medium-high category deficit was the expansion of its exports, unlike what occurred in the manufacturing industry in as a whole. The increase was of 4.7% against Jan–Jun'22, boosted by shipments from the vehicle (+14.8%) and machinery and equipment (+17.0%) sectors.

The other prominent group was the medium-low technology intensity category, which traditionally registers surplus and shows the largest balance. Its surplus varied only -0.2% in Jan–Jun'23 versus Jan–Jun'22, thanks to the food, beverages and tobacco branch (+4.1%).

In this case, exports were also in the red (-0.6%), under the influence of petroleum products (-11.9%), wood (-9.1%) and textiles, clothing and footwear (-13.1%), which offset the 5.8% increase in food, beverages and tobacco. The medium-low range's imports, on the other hand, fell 1.0% in the 1st half'23, largely due to oil products (-9.1%).

As for the other ranges, it is worth mentioning the significant increase in exports of the high technology category (+22.5% against Jan–Jun'22), due to all of its branches, notably aircrafts (+32.5%), and the growth in imports of the medium technology intensity industry (+3.1%), due to rubber and plastic products (+10.1%).

It is also worth commenting on the most recent developments, since it was mainly Q2'23 that set the tone for the performance of the first half of this year. The deceleration trend of manufacturing exports, which had been going on since Q2'22, entered a new phase by returning to negative ground in Q2'23 (-5.0%), something that had not occurred since the end of 2020. 

The deterioration of the industry's export momentum in Apr–Jun'23 was influenced by practically all technology intensity groups, with the largest decline recorded by medium technology (-10.3%). The exception was the high-tech industry (+22.6%), mainly due to aircrafts.

On the imports side, Q2'23 also brought a contraction — and a very intense one: -11.4% in relation to Q2'22. Two of the four ranges contributed to this: the medium-high (-15.2%), due to the drop in chemicals and deceleration in vehicles, and the medium-low category (-18.0%), due to the decline in petroleum products and the lower growth in imports of food, beverages and tobacco.

The full text is available in Portuguese.