Brazil’s Trade Surplus Collapses Due to Cheap Dollar and Hot Economy

Brazil's trade surplus narrowed to a 5 and a half year low in January as a cheaper dollar and rising consumer demand pushed imports to a record high. Imports increased to US$ 12.3 billion in January from US$ 10.6 billion in December.

According to the Brazilian Trade Ministry Web Site, January's exports fell to US$ 13.3 billion from US$ 14.2 billion in December with the trade surplus the lowest since the US$ 679 million of June 2002.

The real, Brazil's currency, has appreciated 20% against the dollar in the last 12 months, the best performance among the 16 most-actively traded currencies. The cheaper dollar coupled with the fastest economic expansion since 2004 has boosted demand among Brazilian consumers for imports.

Brazil's monthly imports exceeded US$ 10 billion for the first time ever in July and have since remained above this threshold.

Market analysts anticipate that with the current imports thrust and exports under pressure because of the strong local currency, Brazil's annual trade surplus is expected to fall to US$ 30 billion from US$ 40 billion in 2007.

Contrary to government optimism analysts in São Paulo believe that Latin America's biggest economy could suffer if the US is hit by a recession and the global economy slows down as is happening.

Mercopress