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Falling Commodity Prices Impact Brazil’s Trade Balance


Nov. 20 2020, Updated 3:33 p.m. ET

Brazil’s trade balance narrowed in July

Latin America’s largest economy’s trade surplus narrowed in July, sending the iShares MSCI Brazil Capped (EWZ) down 2.27%. The Brazilian stock market has seen a rough year so far. The EWZ has lost about 23.22% so far in 2015.

Commodity-rich Brazil happens to be one of the important emerging markets (EEM) of the world. However, there’s currently more than one economic issue with Brazil.

  • The economy is contracting; gross domestic product contracted by 1.60% in 1Q15.
  • Declining commodity prices are impacting Brazil’s exports.
  • Brazil’s currency has been depreciating for a while.
  • Brazil’s unemployment rate is rising.
  • Inflation continues to soar despite subsequent rises in the Selic rate.

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Brazil recorded a trade surplus of $2.379 billion in July

On August 3, the Ministry of Development, Industry and Foreign Trade in Brazil came out with its monthly estimate of the trade balance in Brazil. According to the report, in the month of July, Brazil recorded a trade surplus of $2.379 billion. The figure amounts to a 52.2% rise from its July 2014 level and a -47% fall from the $4.5 billion level in June 2015. Exports in Brazil fell more than imports.

Falling commodity prices affect Brazilian exports

Brazil is a major exporter of commodities, including iron ore and food items such as soybeans and beef. Vale (VALE), Gerdau (GGB), and Companhia Siderúrgica Nacional (SID) are popular iron ore exporters in Brazil. BRF (BRFS) and JBS (JBSAY) count among the top food and meat producers.

Falling agricultural and mineral commodity prices have dampened export revenues for Brazilian exporters, also weighing down the trade balance of the economy.

Our recent comprehensive coverage of Brazil and its current economic situation may interest you. Be sure to read Why Brazil’s Economy May Be in Real Danger.

Stay updated on our latest analyses on the macro environment of the United States, the Eurozone, and the world (ACWI) by visiting Market Realist’s Macro ETF Analysis page.


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