Economic situation, Brazilian foreign trade and Vietnam - Brazil trade exchange in the first 6 months of 2016

Brazilian economic situation in the first 6 months of 2016

In addition, long-term strategic issues such as: reduced public investment and reduced infrastructure investment have reduced the competitiveness of the economy in general. Currently, Brazil is being evaluated as extremely weak in governance and policy planning for economic development and development of key industries.

The above problems have seriously weakened South America's largest economy, the most obvious manifestation being the sharp devaluation of the Brazilian currency. large (over 30%) causes a lot of kDifficulties for import businesses: many economic contracts, many import orders were canceled or delayed, causing chain breakdown for many businesses, credit was narrowed and tightened, unemployment rate increased.

Brazil's economic crisis is also exacerbated by a crisis of confidence, when the Government is too busy with political issues and does not give much priority to orientations and policies to support domestic business development.

In the first quarter, in an effort to regain people's confidence, President Dilma's Government increased public spending, increasing spending on social policies that only partly alleviated the recession on the surface, but internally the economy was still in serious recession. Currently, President Dilma has been removed from power due to investigation, interim President Terme has come to power and has appointed many experienced economists to the new apparatus, but the situation cannot improve in a few months. In addition, the new Government has increased the collection of taxes and fees, causing businesses to have increasingly heavier costs. According to calculations by experts, Brazilians currently have to work over 150 days to pay taxes to the Government, which is nearly half of their income.People's money is only for paying taxes and fees.

Official figures show that in the first quarter of 2016, the Brazilian economy continued to decline by 0.3% compared to the previous quarter (Q4 2015), so the Brazilian economy has been in recession for 5 consecutive quarters, in total, the Brazilian economy has declined by 5.4% compared to the first quarter of 2015. Although, the level of recession is less than expected. 0.8%, but it is uncertain whether the Brazilian economy has stopped the recession, whether the recession has reached the bottom, or whether this is just a temporary manifestation due to the impact of President Dilma's increased spending before being removed from power.

Brazil's economy in the second quarter of 2016 may continue to decline at a lower level while the unemployment rate continues to increase, currently reaching about 11 million people.

Brazilian foreign trade in the first 6 months of the year

Brazil's total import-export turnover in the first 6 months of 2016 only reached 156.9 billion USD, down 15.7% over the same period in 2015. Of which, exports reached 90.3 billion USD, down 4.3%, imports reached 60.6 billion USD, down 27.8% over the same period.

According to many information, this year's crop of main agricultural products such as corn, soybeans... of Brazil faces many difficulties, export prices as well as domestic prices of these products will increase, leading to increased animal feed costs, reducing Brazil's ability to export livestock products. Therefore, it is forecast that Brazil's exports will continue to decline more strongly in the last 6 months of the year. On the contrary, Brazil's imports will show signs of recovery thanks to the depreciation of the USD compared to the local currency as well as increased production and consumption demand at the end of the year.

Brazil - Vietnam trade exchange in the first 6 months of the year

According to data from Vietnam Customs, in the first 6 months of 2016, two-way trade turnover between Vietnam and Brazil reached 1,567.0 million USD, down 11.2% over the same period in 2015. In particular, Vietnam's exports to Brazil decreased sharply, reaching only 591.3 million USD, down 23.9% over the same period. Imports from Brazil reached 975.7 million USD, down 1.2% over the same period.

However, according to data published by the Ministry of Industry, Foreign Trade and Services of Brazil, the country's export turnover to Vietnam is only about 700 million USD, and imports are also about 700 million USD. The difference compared to Vietnam's announced number is due to the Brazilian side's statistics on exports based on FOB prices and imports based on CIF prices.

Data from both sides show that two-way trade exchange is greatly affected by Brazil's economic recession, especially having a great impact on Vietnam's export ability to Brazil.

Vietnam's exports to Brazil have decreased due to the fact that Brazil is suffering from a serious economic recession, reducing import demand, and the local currency appreciation has a strong impact on import prices. It is forecasted that in the last months of the year, with the economic recession in Brazil showing signs of slowing down and the local currency increasing in value compared to the USD, Vietnam's exports are likely to increase again. In the opposite direction, Vietnam's imports from Brazil may be affected due to increased prices of agricultural products and difficult harvests as mentioned above. Vietnam's trade deficit with Brazil could be pulled down.

As analyzed above, Brazil's economic recession, especially the difficulties of import businesses, greatly affected two-way trade between Vietnam and Brazil in the first 6 months of 2016.

According to Brazilian data, the trade balance between the two countries is relatively balanced, however, recently there has been a trend of Vietnam increasing the import of agricultural raw materials from Brazil with an increasingly large turnover value. Meanwhile, Vietnam's export products are mainly processed goods and electronic goods, facing many difficulties in export, making the trade balance increasingly tilted towards Brazil.

Some issues raised

Regarding the structure of bilaterally exchanged items, the total quantity shows a relative balance between basic products (agricultural products) and processed and manufactured products.

The commodity structure also shows the high complementarity of the two economies. Brazil mainly exports basic goods (accounting for 84% of Brazil's exports to Vietnam). Meanwhile, Vietnam exports mainly processed and manufactured goods (accounting for 92% of Brazil's imports from Vietnam in the first 3 months of 2016). This shows that the potential for trade exchange between the two countries is still very large because each country can make good use of its competitiveness in areas of strength.

However:

The proportion of semi-processed goods in bilateral trade exchange is still very low, accounting for only nearly 6% of total turnover, showing that the investment and industrial production cooperation between the two countries is still very limited.

The economic recession in Brazil is still very serious, the domestic currency has not shown clear signs of recovery, the Brazilian Government has increased measures to collect taxes and fees, especially targeting import and export activities of goods, causing the competitiveness of Vietnamese export products to decrease. Vietnam's trade deficit with Brazil may become larger and larger.

Brazil is also currently strengthening trade defense measures, especially anti-dumping measures and safeguard taxes, so there are more stringent measures in verifying the origin of goods as well as stricter import control measures.

Source: Ministry of Industry and Trade