São Paulo – Exports from Brazil to Arab countries amounted to USD 5.24 billion in the first half of this year, down from USD 5.79 billion in H1 2015 – a drop of 9.45%, or USD 546.8 million, according to numbers from the Brazilian federal government’s Foreign Trade Secretariat (Secex) compiled by the Arab Brazilian Chamber of Commerce.
Iron ore was the chief culprit in the decline. Sales of the product to the Middle East and North Africa fetched USD 242.7 million in H1, down 68% from USD 756.86 million in H1 2015. In absolute numbers, it was a USD 514.13 million drop, roughly equivalent to the decline in total foreign sales from Brazil.
This Thursday (21), the Brazilian mining company Vale reported that the decline was due to maintenance shutdowns in one of its Oman production lines between May and June. The company’s facilities in the Omani city of Sohar produced 1.8 million tons of pellets in Q2, down 4.5% from Q1 and 23.9% from Q1 2015.
The decline in output affected Brazilian iron ore exports, which fell 21.24% to Oman in H1; 29.4% to the United Arab Emirates; 3.32% to Saudi Arabia; and 4.66% to Egypt. These are four of the five top Arab buyers of Brazilian products.
The exception was Algeria, the fourth leading buyer, whose imports from Brazil soared by nearly 12% in H1 2016 from H1 2015. Sales to the North African country came out to USD 541.53 million in the first half. Algeria’s imports increased primarily for agribusiness products, such as sugar, maize, and soya oil. Machinery and equipment purchases also went up.
Foodstuffs
Brazil’s exports of foodstuffs in general remained relatively flat in H1, with a 2% drop in animal-based products, a 3.6% increase in processed foods, and a 4.3% increase in plant-based products.
However, food exports fell significantly in June, by 19.2% to USD 892 million compared with June 2015. Animal- and plant-based products and processed foods sales all went down, but the sharpest drop was in iron ore exports.
The Arab Chamber’s CEO, Michel Alaby, pointed out that June’s decline in food exports was due to the Ramadan, the month in the Muslim calendar in which followers fast from sunrise to sunset. This year, the religious period coincided almost fully with the month of June.
Arab importers usually replenish stocks before Ramadan and during it trade activities in general decrease. “Sales [external] during Ramadan usually are not as strong as before [Ramadan]”, said Alaby.
He expects a performance improvement regarding exports to the Arab world to be reflected in July’s data already, after the end of Ramadan, when people and companies resume their regular business rhythm.
Alaby added that some Brazilian companies in the food sector are planning to raise their prices in dollar, since the North American currency is losing value against the real in the last few months. “It’s a negative effect from the foreign exchange rate”, he said. According to him, there are companies that prefer to wait for a more favorable moment regarding the foreign exchange rate to close deals.
The executive emphasized, however, that even with the declined registered in H1 and in June, Brazilian exports to the Arab world continue to experience a “good rhythm”. However, he declined to make forecasts for the second semester, particularly because of the foreign exchange rate volatility.
Imports
On the other hand, Brazilian imports from the Arab world totaled USD 2.667 billion, a decline of 21% over the first six months in 2015. In June, purchases totaled USD 892 million, a decrease of 19% over the same month of last year.
Purchases declined especially with oil and by-products, since imports of organic and inorganic fertilizers increased 31% in comparison to 2015’s first semester. Organic and inorganic fertilizers are the second most important group of products in the exports agenda from the Arab world to Brazil, trailing only the oil trade.
*Translated by Gabriel Pomerancblum and Sérgio Kakitani
