Letter IEDI n. 868–Industrial Trade Balance: deficit expansion, except for low technological intensity sectors
The Brazilian trade balance continues to present a robust surplus in 2018, but already shows signs of losing momentum in a context of acceleration of our imports, which have grown well above exports. This behavior is the result of economic recovery, which although very modest has been able to significantly stimulate the country's external purchases.
The first half of 2018 ended with a US$ 29.9 billion trade surplus, the second highest for the period (in current dollars) in the historical series, only below 2017's (US$ 36.2 billion). The contraction of the balance was, then, of 17.4%. Exports grew 5.6%, from US$ 107.7 billion to US$ 113.7 billion, the second consecutive year of expansion in the first six months. Imports grew even more: +17.2%.
The surplus accumulated in the first six months of 2018 was mainly due to the positive balance of the other products in our basket, mainly agricultural, fisheries and minerals, a record for January-June (US $ 39.4 billion). Meanwhile, the typical goods of the manufacturing industry showed a deficit of US$ 9.4 billion, significantly higher than that of the first half of 2017 (US$ 1.2 billion), although well below the marks obtained between 2010 and 2015 (average of -US$ 26 billion in the first half).
A positive aspect is that industrial exports continued to expand, reaching US$ 66.5 billion. This represented a 5.2% increase over the first half of 2017. Despite the increase, it is important to note the loss of dynamism, since for January-June 2017 over the same period of the previous year the rate was 10.6%.
While industrial exports slowed down, imports went the opposite way and gained speed, fomented by industrial recovery and the higher demand for intermediate goods. Their growth rate went from +7.6% in the first half of 2017 to +17.8% in the first half of 2018 (US$ 75.9 billion) compared to the same period of the previous year.
In this Letter, we draw some relevant observations about the results obtained in the first six months of 2018, based on the IEDI’s series constructed from the OECD classification of manufacturing according to technological intensity:
• Foreign exchange of high technological intensity goods showed a US$ 9.7 billion deficit, higher than in the two previous years for the period. Exports grew for the fifth consecutive time in this comparison, reaching US$ 5.6 billion, the highest level in the series. This advance was mainly due to the aeronautics industry, which achieved record exports and surpluses in 2018. On the other hand, electronics and pharmaceuticals had larger deficits in January-June 2018 and carry on with timid exports, even in those segments whose foreign sales grew in the period.
• The medium-high intensity category, in turn, obtained the highest deficit among the four tracks analyzed. Its value reached US$ 16.3 billion, above the deficits of the first half of both 2017 and 2016. Exports grew 4.3%, with a positive highlight coming from automotive products (motor vehicles, trailers and semi-trailers), the only surplus in this range. Mechanical or non-mechanical equipment and electric machines also achieved some progress in exports.
• For the goods of the medium-low technology industry, the balance went back to the red in the first half of 2018 (US$ 1.2 billion), after two consecutive years of positive results and three of improvement. This occurred despeite a 22.9% increase in exports, which reached US$ 16.7 billion, as imports grew even more strongly: +32.2%. This change reflected, on the one hand, the magnitude of the deficit in products derived from refined petroleum, alcohol and other fuels, even though it was lower than in the same half of 2017 and, on the other hand, the decline in the surplus of metallic products.
• As for the typical goods of low technological intensity activities, in January-June 2018 they achieved a surplus of US$ 17.8 billion. It is worth emphasizing that this was the only category with a positive balance in the period. The result was driven by exports of US$ 25.7 billion, but both foreign sales and total balance decreased compared to the same period of 2017. The 4.3% reduction in exports reflected the fall in external sales of the food, beverages and tobacco industry, which surpassed the growth of wood products, its derivatives, paper and pulp. In turn, the more labor-intensive branches of this range, such as textiles, clothing, leather goods and footwear, saw their deficits widen.