Brazilian Economy shows great signs of vitality in the International Trade

Published on website, January 05, 2016, São Paulo, Brazil.

The Ministry of Development, Industry and Foreign Trade (MDIC) released on January 4, 2016, the statistics of Brazil’s performance in the area of its trade balance in 2015. According to the figures presented by the MDIC the country had a balance surplus of US$ 19.7 billion, the best of the last four years. The good news was not only due to the absolute quantitative value, but also due to the qualitative profile of exports.

The embattled Brazilian industrial sector, that has suffered a great deal in recent years by an unbalanced exchange rate policy, was the most contributive to the positive result, with 51.9%, exceeding the basic products, which accounted for 45.6% of foreign sales. The month of December 2015 showed the best results, once the new exchange rate reality was already in place and its maintenance was ensured.

The good performance of the trade balance last year should put Brazil’s foreign currency reserves around US$ 390 billion, among one of the largest in the world. It is known that foreign exchange reserves of a country are the main credibility factor to attract foreign investments, as it allows both the repatriation of investments and possible remittance of profits abroad. Furthermore, reserves ensure the compliance by both public sector entities and private companies to loans obtained from the international financial voluntary markets.

A very favorable situation in Brazil may be even better evaluated when making a comparative analysis of foreign reserves. In fact, Brazil has approximately as many foreign reserves as all other Latin American countries together. The country’s reserves are equivalent to those of Germany, France and Spain combined and also close to those of the United States of America (USA), which issues its own reserve currency.

Now that Brazil has made the necessary exchange rate adjustment, bringing the exchange rate of Real to a realistic level and compatible with international competitiveness requirements of the Brazilian economy, the result is a stable platform for the production in the country, destined for the foreign markets.

A healthy reserve position, along with exchange rate stability at a reasonable level, not only reduces the flight of Brazilian capital, but also brings credibility to the country and encourages investment by the domestic private sector in the production of goods, merchandise and services to be placed on the international markets. Gradually, this potentially virtuous scenario could also bring positive impact on domestic economic order, improving other indices.

It seems certain that last year’s numbers of Brazilian foreign sector encourage and recommend a resumption of domestic and foreign private investments seeking a greater role in the international trade.

We are on track.