Brazil’s Export Boom Turning to Bust, Warns Industry Federation

Brazil’s main manufacturing organization warned that in the coming three years the country’s strong export thrust – 20% annual growths since 2003 – will begin to rapidly exhaust.

"Exports are an important source of growth for industry, manufacturing and farming but that source is running out," said he Sao Paulo State Federation of Industries, Fiesp during an open forum on Brazilian exports prospects.

Paulo Francini, head of Fiesp’s Economic Research and Studies Office said that the export boom end could happen in the "short term, if by short term we are referring to a period of one to three years."

Exports benefited from an increase in international prices that is "closely linked to favorable temporary conditions such as the world’s economy expansion – which is cyclical –  and commodities prices," he said.

"The loss of exports dynamism will have a strong impact on employment since the majority of sectors with difficulties in sustaining overseas sales are labor intensive," pointed out Francini.

Since 2003, Brazil’s overseas sales expanded at an annual rate above 20%, while world exports only did at 10%.

However given the strong appreciation of the Brazilian currency, real, in 2006, export growth will be closer to that of world sales: 13% and 8.8%, highlighting that since 2003, the US dollar in Brazil has experienced "an accumulated depreciation of 30%".

The Brazilian government forecasts exports of US$ 132 billion this year (11% over 2005) and imports of US$ 90 billion (up 22%) with an annual surplus of US$ 44 to 45 billion.

Brazilian Central Bank estimates that the economy will expand 3.1% this year and 3.5% in 2007. Inflation will be in the range of 3.3% and in 2007 between 4.4 and 4.5%.

Another interesting data which was released this week shows that for the first time in ten years, Brazilian workers’ average real income during 2005 increased (4.5%), but still is 15% below ten years ago.

Lower inflation expectations and a higher minimum wage in 2005 played a crucial part in reversing the ten year tendency. Brazil is also one of the countries in the world with the worst income per capita distribution.

Brazilian employment figures were also encouraging. The percentage of people employed, above ten years of age, over total population in 2005 reached 57% which compares favorably with the 56.5% of 2004.

However in spite of the good 2005 showing, the best since 1996, the percentage of Brazilian population employed is still below the average of the first half of the nineties, indicate official Brazilian statistics.

Mercopress

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