The Lowdown on Brazil: Country Gets First Trade Deficit Since 2001

January brought Brazil its first monthly trade deficit in almost eight years as exports plunged by a record amount on falling prices for the country's commodities, according to the latest release from the Brazilian Development, Industry and Trade ministry.

The US$ 518 million deficit was the first since March 2001 and the largest since November 2000 and compares with a US$ 2.3 billion surplus in December.

Brazil's exports fell 29% to 9.8 billion USD, the biggest month-over-month drop since 1991, while imports declined to 10.3 billion from 11.5 billion USD in December, the ministry said.

"There's a downward trend in Brazilian exports, with lower demand from traditional markets such as the US and Europe," Trade Secretary Welber Barral told reporters on Monday in Brazilian capital Brasí­lia.

Brazilian exports to the US fell 36% in January from a year earlier while sales to the European Union dropped 27.4%. Latin America and the Caribbean bought 37.4% less last month, said Barral.

Imports from the US rose 10.1% in January from a year earlier to US$ 2.01 billion on purchases of medicine, TAM Airlines' acquisition of a Boeing aircraft and shipments of coal.

"The developed countries will only begin recovering from a decline in GDP in 2010," Barral said. "Emerging countries will grow a little, and this will continue to shift Brazilian exports to those countries," Barral said.

Exports of industrial goods fell 29.4% to US$ 6 billion from US$ 8.9 billion in a year earlier. Daily average automobile sales abroad fell 56% to US$ 170 million from US$ 405 million. Beef exports fell 51.8% and crude oil sales sank 44.7%.

The Brazilian Central Bank expects the country's trade surplus to narrow to US$ 14 billion this year from US$ 24.7 billion in 2008.

Trade surplus have been one of the main pillars of Brazil's fiscal equilibrium and strong growth performance. In 2007, the trade surplus was a record US$ 40 billion USD, the strong Brazilian currency, the real, helped soar imports and the surplus almost halved to US$ 24 billion last year.

In related news the Central Bank weekly poll among leading analysts showed that Brazil is forecasted to grow 1.8%, instead of 2%, from the previous estimate.

Similarly the basic interest rate Selic is expected to end 2009 at 10.75%, down from the previous 11%. Consumer inflation is also anticipated will fall to 4.6%, just above the Central Bank target (plus or minus two percentage points).

Mercopress