Brazilian Trade Surplus Narrows to $3 Bln on Imports (Update1)
Nov. 3 (Bloomberg) -- Brazil's trade surplus narrowed for a fourth month in October as an expanding economy spurred imports of machinery and raw materials to a record and falling prices of commodities such as soybean and coffee cut into exports.
The surplus fell to $3.01 billion, a six-month low, from $3.17 billion in September, the government reported. Imports rose to $5.84 billion in October from $5.75 billion in September, the highest since the government started keeping records in 1959. Exports fell to $8.84 billion from $8.9 billion in September.
Industrial production is rising at its fastest pace in four years, leading such manufacturers as Timken Corp. to boost imports as they run their factories near full capacity. Brazilian exports, which have led the economy's fastest expansion in eight years, may keep falling as record oil prices and rising interest rates in China erode demand abroad.
``If all these factors lead to a global slowdown, all export- oriented businesses in Brazil, like mine, will suffer,'' Christelle Orzan, head of Latin American operations for Timken, the U.S.'s largest maker of industrial and automotive bearings, said in an interview in Sao Paulo.
Record high oil prices are weakening the U.S. and European economies, while China's decision last week to boost interest rates for the first time since 1995 will result in lower demand and prices for Brazilian commodities, said Jose Augusto de Castro, president of the Brazilian Trade Association. The U.S., Europe and China buy 60 percent of Brazil's annual exports.
Plans on Hold
Timken, which exports 90 percent of its production to the U.S., is withholding expansion plans in Brazil in part because of the 47 percent surge in crude oil prices this year, Orzan said. Record oil prices may dent consumer spending, de Castro said in a phone interview from Rio de Janeiro.
Exports, which rose one-fifth to $73 billion last year, may climb to a record $94 billion this year and $100 billion in 2005, Development and Trade Minister Luiz Fernando Furlan said in New York last week. Brazil will post a trade surplus of $32 billion this year and $25 billion in 2005, Furlan said.
Slowing export growth will reduce the current account surplus in Brazil in 2005 to $3 billion from an estimated $10 billion this year, said Zeina Latif, senior economist with HSBC Asset Management in Sao Paulo. Brazil depends on its current account surplus to bring in hard currency that helps it make payments on its $430 billion of debt, she said.
``Brazil will see the surplus stifling with lower commodity prices and a cooler global demand,'' Latif said.
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