São Paulo – Brazil should see a trade surplus of roughly USD 15 billion by the end of the year, in the wake of a USD 4 billion-plus deficit in 2014. In 2016, the Brazilian minister of Development, Industry and Foreign Trade Armando Monteiro Neto expects the surplus to double. “Our assessment is that the surplus should widen greatly going forward. Brazil could double the amount, even though the outlook at this time is one of declining global trade,” the minister said in an interview to foreign correspondents this Thursday (10) in São Paulo.
Export revenues did not rise in 2015; the surplus was a result of imports dropping more than foreign sales. Monteiro bets, however, that 2016 surplus growth will also be underpinned by export revenues. “I firmly believe that we will see significant growth [in exports] in volume and value,” he said.
The hike of the US dollar relative to Brazil’s real since last year is one of the pillars of these forecasts, according to him. “We will continue having an export-friendly exchange rate,” he declared. Generally speaking, the strengthening of the American currency makes the prices of Brazilian goods more competitive abroad, while making foreign items more expensive in Brazil.
Monteiro stressed that Brazil’s export volume grew 9.3% this year, and the only reason for revenues diminishing was the falling prices of commodities which the country exports. Likewise, the cheapening oil helped drive down the value of imports.
According to him, the high dollar opens a “window of opportunity” to exporters, but in a “short-term perspective.” If the heightened competitiveness of Brazilian companies is to be sustained, the minister claims that structural issues need addressing, such as the precarious infrastructure and high tax burden.
The minister said the exchange rate has created the conditions for industries that had lost competitiveness on the foreign market to export again. He believes that as of next year, sales will go up for industrialized goods like automobiles, footwear, textiles, machinery and equipment. Besides, Monteiro believes there will be “some price recovery” in agricultural commodities and an increase in beef exports.
Agreements
The Brazilian economy’s weak performance is another stimulus for companies to seek markets abroad. According to him, this generated in the government also the need to seek “a more active stance on the external front.”
In this sense, he listed agreements that were signed this year, such as the framework agreement on regulatory coherence and cooperation in the area of patents with the United States; and the auto industry agreements signed or renewed with Mexico, Argentina, Uruguay and Colombia. The minister believes in a strong performance of auto exports in 2016.
Monteiro also mentioned investments facilitation agreements signed with Mexico, Angola, Colombia, Mozambique, Chile and Malawi.
For next year, Monteiro is waiting on the exchange of offers between the Mercosur and the European Union so the talks for a trade treaty between the two blocs can continue. “This is strategic, especially after the new movements that modify the structure of global trade”, he said, mentioning the Trans-Pacific Partnership (TPP), agreement that removes trade tariffs between countries from the Americas, Asia and Oceania.
With Maurício Macri taking office as Argentina’s president this Thursday (10th), the minister also hopes for a greater interest from the neighboring country in the progress of negotiations with the Europeans. According to Monteiro, Macri, who visited Brasília after being elected, “indicated, very clearly, that the partnership with Brazil is strategic”, that bilateral trade needs to be revitalized and that there’s a possibility of resuming negotiations of Mercosur with other blocs, “especially the European Union”.
In 2016, progress should be made in negotiations of trade agreements with Morocco, Tunisia and Lebanon, according to Monteiro.
Optimism
Monteiro expressed optimism about next year, not only when it comes to foreign trade, but also regarding the recovery of the Brazilian economy, especially in the second half. He said the fiscal adjustment must be completed as soon as possible and followed by social security and tax system reforms.
The minister was also emphatic in stating that he doesn’t believe the presidential impeachment proceedings against Dilma Rousseff will come to pass. “Our expectation is that the National Congress will address the issue in a relatively short time frame. I wish to assert my conviction that the possibility of the president being impeached will be put away, and that from then on she will resume her political initiative to a great extent,” said Monteiro, who is a senator on leave.
*Translated by Gabriel Pomerancblum & Sérgio Kakitani