The Brazilian real appears to have stabilized around 3.50 against the US dollar after the real appreciated from 4.15 in January end to 3.43 by late April. The political dust begins to calm down following the Senate’s acceptance of procedures of impeachment against Dilma Rousseff. The new government is expected to prevent the real from appreciating further as a weaker real is needed in recession to buffer the impacts of declining domestic demand, said Barclays in a research note.
However, the real continues to be weak in historical terms in spite of appreciating early in 2016. This has resulted in Brazil to build up trade surplus of USD 13.2 billion year-to-date, as compared with a deficit of USD 5.05 billion in the same period of 2015. Decline in imports of 32% y/y YTD mostly helped in piling up surplus, after shrinking 25% last year. Exports have rebounded. They declined just 3.4% y/y YTD, as compared with the decline of 15% in the same period in 2015.
Amongst exports, manufacturing goods, which fell 7% in the past twelve months, have performed better than exports of raw products. Meanwhile, within imports, all the components are shrinking at a same rate. However, the situation is unlikely to continue for the remainder of 2016. As manufacturing exports keep on recovering, imports of intermediate goods are likely to grow slightly, according to Barclays.
