São Paulo – The market is expecting a lower trade surplus for Brazil in 2011. According to projections disclosed by the Brazilian Banking Federation (Febraban), exports should exceed imports by US$ 8 billion next year, as against an expected US$ 15.7 billion in 2010. In 2009, the result was US$ 25.3 billion.
According to the chief economist at Febraban, Rubens Sardenberg, the decline in trade surplus, however, will be brought about much more by growing imports than by decreasing exports. To him, Brazilian foreign purchases are already on the rise. "A significant share of imports consists of capital goods, because investment is increasing. But we also know that consumer goods imports are also growing."
According to him, the growth reflects the rising consumption, investment and exchange rate, which favours imports. The real (Brazilian currency) is appreciating against the dollar, especially due to the strong inflow of the United States currency into the country, attracted by high interest rates. This renders Brazilian exports less competitive. The Febraban’s survey points out that the dollar should be equivalent to 1.72 real by the end of this year, and 1.78 real in 2011.
The previous forecast of the Febraban, dating from September this year, estimated a US$ 9.4 billion trade surplus for Brazil in 2011. Sardenberg believes that in the short term, Brazil will go on trying to prevent the real from over-appreciating, and that in the long term, in addition to keeping the fiscal aspect under control, the trend will be for investment to be made so that Brazilian products will remain competitive at a more appreciated exchange rate.
The interest rate should remain attractive to foreigners in 2011. The Febraban believes the current benchmark interest rate should be maintained at 10.75% until the end of the year, and raised to 11.25% next year. This is the median projected rate, Sardenberg warns, adding that the matter depends on unknown variables, such as how the Brazilian fiscal policy will behave in the early months of 2011 and the foreign scenario itself, i.e. whether the economies of developed countries will become stronger or weaker.
According to the Febraban’s projections, the economic outlook for Brazil is a positive one, especially in the short term. There should be some inflationary pressure late this year and throughout next year, due to food and commodity prices. "Nothing to be alarmed about, however," he stated during a press conference. Credit in the country should decrease somewhat in 2011 compared with 2010, but insolvency rates should drop. In the medium term, inflation and the current account require attention, he advises.
*Translated by Gabriel Pomerancblum
