The trade surplus of Brazil declined sharply in August 2008 due to an increase in imports on account of weak dollar and rising sales of imported products in the domestic market.
There was a fall in trade surplus of Brazil in August 2008 compared to the same period last year (July 2007), said the trade ministry, as reported by Reuters.
In August 2008, the Brazilian trade surplus fell to $2.26 Billion in August this year from $3.3 Billion during July 2008. It also declined by 24.8% against a trade surplus of $3.54 Billion in the same month previous year (August 2007). Brazilian exports dropped 3.4% to $19.75 Billion over July 2008, when import rose 1.9% to touch $17.48 Billion. The trade surplus during the period spanning from January to August 2008 touched $16.9 Billion, inching up by an average of $01.2 Million each business day.
The reason for fall in the trade surplus of Brazil is rising import in the country. Depreciation in the US dollar along with rapid economic growth has increased the demand for imported products among Brazilian consumers. Moreover, people in higher income group prefer to buy imported goods, therefore the Brazilian trade surplus declined in August 2008.
Also, the slowdown in Brazilian export industry became one of the chief reasons for fall in trade surplus. The spiraling prices of Brazilian goods owing to jump in the country’s currency against the US dollar have reduced Brazil’s exports, leading to a reduction in trade surplus.
As per industry analysts, the increase in Brazilian currency Real over the US dollar is the greatest test for the Brazilian export and import industry. The sudden rise in Real makes Brazilian exports to the US market comparatively expensive, leading to a loss for the Brazilian firms against low-cost nations like China that have a comparatively stable currency against the US dollar. But several firms expect the condition will improve in the near future.
As per a Research Analyst at RNCOS, “The export is slumping and import is rising resulting in dipping Brazilian trade surplus. Declining trade surplus will specially impact the Brazilian economy as it is collecting little foreign exchange for the nation due to decline in exports. Besides, GDP of Brazil will also suffer due to decrease in its trade surplus.”
