Why Brazil’s foreign trade hit a record high as a share of GDP

The sum of Brazil’s exports and imports reached a record level of 35% of the Gross Domestic Product (GDP).

Economists point out the measure as a way to calculate a country’s level of trade openness and the insertion of the economy in global trade.

This rate has been between 15% and 25% for Brazil since 2000 and started to rise at the end of 2018, reaching a record level this year.

The data were calculated by the team of economists at Bank of America Merrill Lynch (BofA), led by David Beker, and released in a report to clients on Thursday, October 20.

According to economists, the growth of the trade opening rate is related to the increase in commodity prices, which made export revenues rise.

The main products exported by Brazil are soybeans, crude oil, iron ore, and beef.

The heating up of the economy last year also raised imports, allowing the country’s foreign trade to grow.

“On the export side, most of the recent growth has come from price increases, while imports have their levels driven by both quantities and prices.

“Such a development, while generally positive, results in a greater exposure of the Brazilian economy to global fluctuations,” the economists write in the report.

Despite the growth, Brazil’s trade openness rate remains below the level of major economies, according to the World Bank. The Latin American average is 53% of the GDP.

Among countries with high average per capita income, a group of which Brazil is part, the average is 49%.

BofA economists point out that despite the increase in commodity prices, the global scenario is less favorable for Brazil this year because products imported into the country have risen in price more quickly.

It caused the terms of trade – the difference between the prices of exported and imported products – to fall compared to last year.

The bank revised the projections for Brazilian exports and imports for 2022 upwards.

In the case of exports, the estimate went from US$315 billion to US$335 billion. For imports, the forecast is US$280 billion (from US$250 billion previously).

The bank also sees the balance of services worsening, which should pressure the result of the balance of payments.

The expectation is that Brazil will end the year with a current account deficit equivalent to 1.7% of GDP (compared to 0.5% in the previous projection), the same result as last year.

With information from Bloomberg