The Economic Commission for Latin America and the Caribbean (ECLAC) has reduced its growth forecast for Brazil and the Latin America region this year. The estimate for increase in Brazil’s gross domestic product (GDP), the total amount of goods and services produced by the country in a year, fell from 2.3 percent to 1.4 percent. For Latin America and the Caribbean, the prediction went from 2.7 percent to 2.2 percent.
According to ECLAC’s Brazil Director Carlos Mussi, the country’s projection was based on information collected up to the end of June, and did not include data that were “significantly worse than the industrial production” from last month. Mussi argued, however, that services and trade are likely to prevent a further decline in the GDP.
“There’s some expectation that maybe the sectors of services and commerce will not show a performance as poor as its industrial counterpart,” Mussi said. ECLAC’s Executive Secretary Alicia Bárcena believes that Brazil is a powerful country and should present better results in 2015.
According to ECLAC, the downgrade proved necessary because of the region’s “weakness in external demand, less dynamic domestic demand, insufficient investment, and limited room for implementing policies to spur an upturn.”
On their website, the commission reports that “The Economic Survey of Latin America and the Caribbean 2014 indicates that the economic slowdown observed in the last quarter of 2013 persisted during the first months of 2014, meaning that the region will grow less than it did last year (2.5%). Nevertheless, the report signals that a gradual improvement in some of the world’s major economies should enable the trend to change towards the end of 2014.”
In the view of ECLAC, “The resumption of economic growth in the United States will benefit Mexico and Central American countries, while the recovery of the United Kingdom and several economies in the euro zone will have a positive impact, especially in the Caribbean, due to the arrival of more tourists.”
“The main risk is the lower growth forecast for China in 2014, the report emphasizes. The regional economies that are more specialized in exporting commodities to that country could be affected if the Asian giant cannot maintain its growth above 7 percent,” ECLAC added.
Brazilian financial institutions’ estimate for the economy growth, this year, remains in a downward trend. For the tenth time in a row, the Gross Domestic Product (GDP) growth estimate has been revised down. This time, the estimate moved from 0.90% to 0.86%. For 2015, the GDP growth estimate remains at 1.5%.
These projections are part of the monthly Brazilian Central Bank poll of financial institutions. The estimate for the industrial output downturn was changed from 1.15% to 1.53%, and a rebound is expected, with a growth of 1.70%, for 2015. The trade surplus estimate (positive balance of exports minus imports) remains at US$ 2 billion, this year, and was moved down from US$ 9.4 billion to US$ 8.5 billion, in 2015.
As regards foreign direct investment, which goes to the productive sector of the economy, the projection remains at US$ 60 billion, in 2014, and US$ 55 billion, next year. Dollar price projection remains unchanged at R$ 2.35, this year, and R$ 2.50, in 2015.
Brazil’s Ministry of Development, Industry and Foreign Trade (MDIC) reported that Brazil’s trade surplus reached US$ 1.575 billion in July. The positive performance resulted from US$ 23.025 billion in exports and US$ 21.450 billion in imports.
There was an increase in sales of basic goods (16.5%), intermediate goods (18%) and manufactured goods (0.6%). The increase in crude oil exports (276%), which totaled a monthly US$ 2.6 billion, has been a large contribution in sustaining the surplus. An oil rig export was also reported at US$ 866 million.
Other remarkable increases within the commodities group include coffee beans (77.2%), beef (23.2%), poultry (11.7%), and pork (10.6%). Semi-finished goods have seen increased sales of iron and steel (148.2%), cast iron (45.7%), iron alloys (32%), and leather (26.3%). Leading exports of manufactured products include cast iron pipes (140.2%), oil rigs (127.7%) and aluminum oxides and hydroxides (111.8%).
On the other hand, the highest spending on foreign purchases were reported for capital goods (11.2%), consumer goods (9.2%), fuels and lubricants (7.4%), and raw materials and intermediate goods (0.5 %).
Brazilian auto industry drops 36% in June and drags industrial output
Brazil’s industrial output fell 6.9% in June compared to the same month last year, mostly due to a contraction of the automobile industry, reported the official stats office.
The institute noted that the drop in production was linked to the 2014 Brazil World Cup, which ran from June 12 to July 13 in 12 Brazilian cities, where additional holidays were declared and factories were temporarily closed.
Compared to May, industrial production fell 1.4% in June, closing the first six months of the year with an overall drop of 2.6% compared to the first half of 2013.
Only six of the 24 industrial sectors studied by the IBGE registered an increase in output, including petroleum byproducts, bio-fuels, and food and beverages, while the one that contracted the most from the month before was the auto industry, with 12.1%.
Compared to June 2013, output in the automobile sector dropped 36.3%.
Brazil, Latin America’s largest economy, is a major market for global automakers, such as Italy’s Fiat SpA, Germany’s Volkswagen and U.S.-based General Motors and Ford Motor.