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August 22, 2013 7:01 pm
The fall in the value of Brazil’s currency against the dollar amid recent emerging market turmoil is having a positive effect on exports, according to early indications from trade data compiled by the Maersk Line shipping group.
Brazil’s container trade with the rest of the world accelerated in the three months to June – rising 3.8 per cent, compared with a 1.6 per cent rise the previous quarter – helped by the US economic recovery.
“The positive is that exports are recovering,” said Peter Gyde, Maersk Line Brazil’s managing director. “Some of that is to do with the global economy doing better and some of that is to do with the favourable currency.”
The Brazilian real has fallen about 15 per cent this year amid the emerging market sell-off driven by speculation that the US Federal Reserve is preparing to slow the pace of its asset purchases, reversing the flows of western central bank-supplied money that entered their economies.
Brazilian policy makers have long argued that the real is overvalued against the dollar. At the height of the emerging market economic boom after the 2008-9 financial crisis, the real reached levels of near R$1.50 to the US currency. Guido Mantega, the finance minister, coined the phrase “currency wars”. He complained that developed economies were possibly using quantitative easing to devalue their currencies and boost growth.
Economists are warning Brazil, however, that while a depreciation in the longer term should help with competitiveness, the country must be careful about the recent velocity of falls in the value of its currency, which could also have negative effects.
Even policy makers appear not to be entirely happy with the pace of the decline, despite generally being happy with a weaker real.
Alexandre Tombini, the Central Bank of Brazil’s governor, cancelled his US trip this week to Jackson Hole for the annual gathering of central bankers in the wake of the declines.
Meanwhile, what is good for exporters is not necessarily good for other industries, such as the airlines, which have requested support from the government due to soaring fuel prices.
“What is driving the exchange rate to weaker levels now is actually contractionary in the short term because it’s coming from capital outflows and a loss of confidence,” said Alberto Ramos, a senior economist with Goldman Sachs. “That’s why it is important for the central bank to anchor [the exchange rate] as soon as they can.”
But if indications from Maersk’s figures are borne out by further data during the year, the currency’s fall may be starting to lead to a rebalancing of the economy to lessen its dependence on consumption.
Maersk found in its report that “dry cargo” exports rose 2.7 per cent in the second quarter of the year, reversing a decline in the previous three months of 2.6 per cent, on strong Asian demand for products such as pulp and paper, wood, sugar and tobacco, and stronger shipments to the US.
Refrigerated exports, known as “reefer”, fell 1.9 per cent, driven by falls in pork and poultry, but partially offset by higher beef exports to Hong Kong.
Imports during the second quarter rose 5.9 per cent compared with the previous quarter’s growth of 3.4 per cent on the back of inputs for Brazilian factories, such as plastics and rubber, automotive and transportation goods, chemicals and food and beverages.
“The better second quarter performance represents a positive start but is yet to become a trend as key factors such as the pace of the US economic recovery, the Chinese economic slowdown and the state of the European economy will impact the third and fourth quarter performances,” said Maersk.
Mr Gyde said Brazilian trade and the competitiveness of the country’s producers continued to be held back by inefficient port bureaucracy and infrastructure.
A turnround time for containers of 21 days at the country’s biggest port, Santos, near São Paulo – compared with one to two days internationally – meant that unnecessary resources were being expended on warehousing.
Just simplifying the bureaucracy, such as unnecessarily burdensome customs processes that benefited no one, would provide an enormous boost.
“With legislation, you could do a lot to reduce that without investing a dollar,” he said.
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