In the first half of 2024, the manufacturing trade deficit increased 25.7% in relation to the same period of the previous year, reaching US$28.4 billion. This was the highest level for a first half-year in the last decade, in current values, losing only to the 1st half of 2014 (deficit of US$34.8 billion).

The IEDI's monitoring of the Brazilian industry's foreign trade flows by the technology intensity of its sectors, following the OECD methodology, shows that three of the four groups identified saw a trade balance worsening. The exception was the low technology intensity range of manufacturing, whose activity is close to extractive and agricultural activities.

It should be noted that in the branches of greater technology intensity (high and medium-high) the deterioration of the balance was due to the shrinking of exports and expansion of imports. Only the medium-low technology group showed a favorable dynamic of its trade flows: increased exports and reduced imports.

For manufacturing as a whole and especially for the two groups of greater technology intensity, the deterioration recorded in the first half of 2024 is largely due to the performance in Q2'24. In aggregate, the sector's trade deficit had shrunk 1% in Q1'24, but advanced significantly (+61.5%) in Q2'24 compared to the same period of the previous year.

The deficit of the high-tech industry rose +12.2% in Q2'24 compared to an increase of +3.2% in Q1'24, while for the medium-high range the rises were of +23.1% and +4.5%, respectively. In the first group, the pharmaceutical and aircraft branches were decisive for the result; in the second group, the automobile industry explains 90% of the balance deterioration.

The medium technology intensity industry, which, like the medium-low group, is traditionally in surplus, saw its balance shrink 73.4% in Q2'24 in relation to Q2'23, after having already seen a 55.2% reduction in Q1'24. Since mid-2022, this group has been registering double-digit rates of decline in surpluses, with an intensification now in 2024.

Two branches are driving this path: rubber and plastic, whose deficit expanded 27.1%, and above all the sharp drop in metallurgy’s surplus (-38.3% in Q2'24), which includes the steel industry, under great pressure from Chinese competition since the pandemic. In Jan–Jun'24, the fall in metallurgy’s surplus represented something like 71% of the worsening in the balance of the medium technology range.

For the three more technology-intensive groups, imports are on the rise in 2024. The greatest advance in foreign purchases happened precisely in the medium technology industry: +8.1% in Jan–Jun'24 compared to Jan–Jun'23, under the influence of metallurgy (+6.9%) and rubber and plastic (+10.1%).

Next, we have imports of high-tech manufacturing products: +6.7% in Jan–Jun'24, due to all of its branches, but mainly to aircrafts (+27.4%). In third place is the increase in imports of medium-high technology goods: +4.1%, due to vehicles (+33.2%) and both electrical and mechanical machinery and equipment.

As for exports, in Jan–Jun '24 they fell only in the intermediate groups. In the medium-high industry, shipments fell 11.3% compared to Jan–Jun'23, due to chemicals, vehicles and capital goods. In the medium technology intensity industry, exports declined by 17.6%, under the negative influence of metallurgy.

Finally, we should comment on the recent evolution of the only group whose performance was favorable, the medium-low technology intensity industry. Its trade surplus increased +16.5% in the first half of the year. Although it decelerated a little in Q2'24, its pace remained strong: +10.4% compared to Q2'23.

Medium-low exports grew +8.7% in Jan–Jun'24, mainly due to food, beverages and tobacco (+8.4%), which accounted for 64% of the increase. The second quarter signaled a slowdown in shipments from the food industry (+2.5% versus Q2'23), but with partial mitigation stemming from petroleum and biofuel derivatives and from wood, paper and cellulose.

Medium-low imports, on the other hand, were virtually stagnant in the 1st half of 2024 (-0.3%), but with an indication of increase in Q2'24 (+4.6 compared to Q2'23). The decline in foreign purchases of petroleum derivatives and biofuels has been an important brake on the expansion of imports from this group as a whole.

The full text is available in Portuguese.