São Paulo – The low global demand, due to the economic crisis, is minimizing the benefits that appreciation of the dollar could have on exports and on revenues of Brazilian companies with foreign trade. Despite the North American dollar having ended July at around R$ 2, as against an exchange rate of R$ 1.8 early this year, and R$ 1.5 in July 2011, Brazilian exports dropped 10% in the accumulated result this year up to the end of last month.
"With the lower demand, prices of some products, like ores and some grain, are dropping. This neutralizes the effects of exchange rates,” said Luís Filipe Rossi, Economics and Finance professor at the Brazilian Institute of Capital Markets (Ibmec) and the Pontifical Catholic University of Rio de Janeiro (PUC-RJ).
The economist and member of research group Structural Macroeconomics of Development, Luciano D’Agostini, also does not believe that current exchange rates brought benefits to export companies, as the real exchange rate is not so favourable to Brazil. The nominal rate is the price of the foreign currency as against the national currency, but the real rate also takes into consideration inflation in both countries involved in the transaction.
"Our inflation is still high if compared to that of other economies, despite being within the target. It should be between 3% and 4% [a year]", stated D’Agostini. The Broad Consumer Price Index (IPCA) over the last 12 months was 5.2%. The real rate is important as it represents there real buying power of Brazilian companies.
Of course there is some benefit to exporters with the appreciation of the dollar as against periods in which the currency was depreciated. But without a scenery of crisis and low demand, however, exporters could be living a better moment.
Rossi believes that the US economy is giving signs of recovery, but the problem, according to him, is Europe and the lower Chinese imports. Despite the US being the second main international market for the country, individually, Europe as a whole plays a greater part in the Brazilian trade balance than do the North Americans. Rossi believes in the recovery of Europe only in the middle-term.
On the other hand, the competitiveness of exports may become greater with a new reduction of interest rates. The reduction of interest makes the Brazilian market less attractive to investors abroad, reducing the inflow of dollars in the country and pushing exchange rates of the US currency up. Currently, the Selic, Brazil’s benchmark interest rate, is at 8% a year. D’Agostini believes that it may be reduced to 7% by the end of the year.
Lower interest rates, apart from the impact on exchange rates, favour investment by Brazilian companies and allow them to supply the domestic and foreign market with greater ease. D’Agostini says that to improve exports, however, it is important for there to be structural reforms in Brazil, with the reduction of taxes, greater productivity of labour through the training of workers and improvement in logistics.
Wrong way
Despite the lower Brazilian exports as a whole this year, some companies had growth in revenues with international trade in the second quarter. Among them are companies that work with emerging markets, like the Arab countries, which are not living the crisis like Europe and the United States. Minerva Slaughterhouse, for example, had 25% growth in revenues with sales on the foreign market, in reals, in the second quarter of 2012 as against the same period in 2011, whereas the group had lower growth, of 16%, in gross revenues.
Randon, which sells to the Arab world, increased its export revenues by 22%, despite the reduction of 18% in total revenues in the second half of the year. Revenues of BR Foods with international sales grew 11% in the quarter, while revenues on the domestic market rose just 7%. The Middle East answered to 35.2% of exports of Brazilian producers of foods. In their balance sheets, all companies mentioned attribute part of their expansion in exports to the appreciation of the dollar.
*Translated by Mark Ament
