Expert: Brazilian international trade activity ‘recovering’
After a period of difficulty, Brazil’s international trading activity appears to be improving, with a recent report from the country’s central bank showing that the national current account deficit narrowed to $535 million (£323.9 million), from $2.78 billion the year before.
Trade surplus helped to boost this figure, moving up to $4.63 bullion in June from $2.65 billion in May, due to increased demand for Brazilian commodities and manufactured exports.
The results all make for good reading if you have invested in property in Brazil, or are considering doing so in the near future, as the economy appears to be strengthening following a lull brought about by the global recession.
“This has been one sector in which we’ve felt the crisis,” says Flavio Marega, minister councillor responsible for economic and financial issues at the Brazilian Embassy in the UK.
“We have companies related to foreign trade that very much felt the impact of the crisis, especially because we export lots of commodities, iron ore, the whole soy bean complex, and this of course in the initial downturn of the international crisis we felt a lot,” he explains.
“Now we are starting to re-export, particularly to China, as the Chinese economy is starting to regain its momentum, we have started to export again to China,” he adds.
As part of the efforts to improve international trading links with the Asian nation, the two countries are working towards using their own currencies rather than the US dollar for transactions.
China is now Brazil’s biggest trading partner, ahead of the US, and presidents Luiz Inacio Lula da Silva and Hu Jintao discussed the currency proposals at the G20 summit in London in April.
“We have started the experience with Argentina because we have free trade agreements through the Mercosur [common market of the south] with other American countries – Chile, Uruguay, Paraguay, Brazil, Argentina and Bolivia also – but it’s not mandatory, it is something for the businessmen to decide,” Mr Marega explains.
Currently, around five per cent of transactions are being conducted directly using the Brazilian reais and Argentinean peso.
“We hope the same thing will take place with China,” Mr Marega adds.
In addition, the Brazilian government has been campaigning for a fairer world trade regime.
Last month the country’s foreign minister made a joint statement along with equivalent representatives from Brazil, India and South Africa, calling for a “rules-based multilateral trading regime that is fair, equitable and addresses the legitimate aspirations of the developing countries”.
President Lula has been outspoken about the need, not only for a positive outcome from the stalled Doha round of trade negotiations, but also for better regulation of financial markets.
He has called for the Bric nations – Brazil, Russia, India and China – to have more say in major decisions regarding the world’s economy.
“We’re going to pursue that, but whether we are to be able to achieve it or not, that’s another issue,” Mr Marega says.
“The present situation, with important emerging countries like the Brics not having the corresponding importance in terms of international financial institutions, and in terms of regulation, of course we feel we need to change that.
“It is something that will have to be renegotiated and fortunately we have the G20 grouping where we can deal with those issues, but these are not reforms easily done,” he adds.
Mr Marega insists that Brazil is in a position to make a major contribution to the debate on financial regulation as it’s economy was not hit so hard by the recession due to the directives governing its fiscal system.
The Brazilian financial institutions were privatised in the 1990s and the country believes that this procedure could be followed by other countries.
“But of course on the other hand, tougher regulation means interfering in bank’s business and we understand that countries like the US and the UK where the system is more liberalised, it’s difficult to adopt,” he concludes.
