Brazil's trade balance was USD 4.2 billion in July, leading to an accrued balance of USD 34 billion in the first seven months of 2018 – down USD 18.5 billion year over year. Imports accounted for 49.5% between July 2017 and 2018, higher than the result for exports (22%). Imports grew 22% and exports 7.9% year to date until July 2018, compared to 2017.

The growth in exports in July is linked to the good performance of commodities, while import growth was influenced by imports of oil rigs. The analysis of price indexes and volume of trade flows account for the performance of the trade balance.

In July, the exported volume grew by 8.7% year over year, while imports grew 38.3%. Year to date until July, these variations are: 2.6% for exports and 13.4% for imports. Regarding prices, the result for exports is higher in the monthly and year to date comparison of variations recorded for volume, which does not happen with imports.

The export performance in July is explained by the behavior of commodities, which recorded an increase of 16.5% in prices and 21.9% in volume month over month. The increase in the exported volume of the soy complex (40%), oil and byproducts (41.5%) and meat (16.2%) stand out. In addition, price increases above double digits were recorded in the soy complex (11%), iron ore (34%) and oil and byproducts (50%). China played an important role for these results. Soybean exports rose 65%, followed by oil (154%) and over 100% upsurges in sales of beef and pork products.

However, in the year to date comparison until July, the variation in the prices of non-commodities is higher than for commodities and, in terms of volume, both grow at the same rate.

The higher growth in export prices compared to imports explains the improvement in terms of trade since May 2018. Compared to 2017, terms of trade grew by 3.9% in the monthly comparison, but dropped 2.4% year to date until July 2017/2018. Trump’s restrictions to soy exports from China may have contributed to the increase in the prices of this particular product. However, the scenario of rising protectionism and slower global trade will negatively affect commodity prices.

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