São Paulo – Domestic consumption of imported goods in Brazil is still growing at a higher rate than exports. According to calculations made by the Federation of Industries of the State of São Paulo (Fiesp), from July to September this year, imported products have accounted for 22.7% of domestic consumption, as against 20.7% in the second quarter. This is the highest but Fiesp analysts believe that imported goods had not had a share this significant since the 1990s.
Brazilian exports during the period have also increased, having reached a result (19.2%) close to those of the last two quarters of 2008 (prior to the last world economic crisis, in late 2008), at around 20%. Nonetheless, the gap between the import and export ratio has widened.
Since the third quarter of 2009, by which the import and export ratios calculated by the Fiesp were virtually equal (respectively 18.1% and 18.2%), consumption of foreign products has grown by 4.6%. Exports, in turn, slowed down in the last three months of 2009 and nearly stagnated in the first half of 2010, after which they grew by only 1%. In other words, from July 2009 until late September this year, the ratio of imported products has grown more than four times more than exports.
According to the director of the Fiesp’s International Relations and Foreign Trade Department, Roberto Giannetti da Fonseca, the volume of imports tends to continue growing for as long as the current exchange rate is maintained and the real (Brazilian currency) remains appreciated against the dollar. This exchange rate scenario, according to the economist, also leads Brazilian businessmen to prefer importing goods and products than manufacturing them domestically, which in turn causes an imbalance in domestic accounts and results in less jobs due to lack of investment in production.
"We cannot accept that the country should sit and watch passively as our exports of manufactured goods decline," said Giannetti, to whom a rate of 2 reals to US$ 1 would be a good, balanced one. He also claimed that currently, the Brazilian portfolio of export products consists basically of commodities, primary goods such as ores, and low value-added grain.
In the third quarter of 2010, the best-performing export sectors were food and beverages and automobiles, lorries and buses. The growth of imports, in turn, was much more widespread and driven mainly by purchase of industrial and commercial machinery and equipment, but also by chemicals, oil refining and automobiles, lorries and buses.
In order to illustrate what he calls "primarization of the export basket," the economist points out the fact that out of the ten Brazilian products most sold to foreign countries from January until September this year, only one (automobiles) is manufactured, whereas in the same period of 2006, the same list included four manufactured goods as against six primary ones. Further, Giannetti also criticizes the concentration of exports in but a few primary goods, as currently, only four items (iron ore, crude petroleum, soy and sugar cane) account for one third of foreign sales. As of 2006, the ten items most sold combined accounted for one third of Brazilian exports.
To Giannetti, the figures disclosed this Thursday (18th) in the city of São Paulo (state of São Paulo) attest to what the Fiesp has been warning of for a long time now: a de-industrialization process is underway and the government, according to him, is adopting ineffective measures, based on the rationale that the balance of trade shows a surplus, which according to the economist has only been possible thanks to exports of commodities, especially to China. Besides, Giannetti also claims that as exports decline, the Brazilian industrial production has been growing thanks to the increase in domestic income and credit, factors which, according to him, are not going to be sustained.
"We may be on the verge of a recession as early as 2012m," says the economist. "We need to take a triple vaccine by altering the exchange rate, returning all of the tax credits to the exporters and lowering the tax on logistics investment, in addition to improve the management of foreign trade policies," he stated.
*Translated by Gabriel Pomerancblum
