São Paulo – The appreciating US dollar in relation to Brazil’s real helped the machinery and equipment industry to boost exports in September and in the first nine months this year, compared with these same periods last year. Exports were up 5.6% last month, at US$ 1.8 billion, and 9.4% in the nine-month period ended September, at US$ 9.43 billion, according to figures released by the Brazilian Machinery and Equipment Industry Association (Abimaq) this Wednesday (31st). The increase also helped reduce the industry’s trade deficit.
According to Abimaq director Carlos Pastoriza, exports were up mostly due to the exchange rate, once the Brazilian real began appreciating in March this year. The US dollar at that time was equivalent to R$ 1.7, and is now at R$ 2. Pastoriza also believes multinationals in the industry tried to make up for the market share they lost, as a result of weak domestic demand, by relocating orders from foreign to their branches in Brazil.
Increased exports enabled a reduction in the deficit, i.e. negative outcome for exports minus imports, which stood at US$ 12.8 billion from January to September this year, down 4.1% from the same period in 2011. Another cause is slower imports due to weak domestic demand. “It’s a reflection of the low-investment situation in Brazil,” Pastoriza explains. Imports were down 4.7% in September at US$ 2.2 billion, but up 1.2% year-to-date at US$ 22.2 billion.
In September, the industry also saw a significant decline in revenues, which were down 19.6% from September 2011 at R$ 6.1 billion. In the nine-month period ended September this year, revenues were down 2.2% from the same period in 2011. Pastoriza ascribes the decline to machinery imports, which compete against the local industry. He claims the situation should improve late this year and in the first quarter of next year.
He claims the market has had no time yet to feel the impact of the renewal of the PSI-Finame line of financing for capital goods, and the lowering of the interest rate from 5.5% to 2.5% a year, which took place in August. It will remain in effect until the end of the year, but Abimaq should bid for another renewal from the federal government. According to the director, the fact that there have been no dismissals in the industry means that plants have been placed orders, and revenues should improve. However, he does not expect very high quarter-four figures, because during the period many companies go on holidays, and thus do not want equipment deliveries.
Pastoriza mentioned measures taken by the federal government in the last few months, which have favoured the machinery industry, such as exemption from the IPI, PIS and Cofins taxes on capital goods, and lowered payroll taxes for the industry. In the latter case, instead of paying 20% on wages, the industry will pay 1% to 2% of revenues. Thus, the director says, importers pay the tax as well. He also praised the decline in interest rate. “The effect is timid, but we are in the right direction,” he says.
*Translated by Gabriel Pomerancblum
