Brazil’s economic woes provide container export silver lining

Rise in shipments of beef and poultry provide glimmer of hope amid deep recession
epa05152303 (FILE) A file photo dated 18 August 2013 showing the world's biggest container vessel Mærsk Mc-Kinney Moeller arriving at the container terminal during its maiden voyage in Bremerhaven, Germany. Danish shipping and oil group AP Moller-Maersk said 10 February 2016 its full-year 2015 net profit plunged 82 per cent due to lower freight rates and oil prices and writedowns of oil assets. The net profit of 925 million dollars compared with 5.2 billion dollars in 2014. The 2014 results were affected by gains from sales of stakes in a supermarket group and other assets. Turnover in 2015 declined 7.4 billion dollars year-on-year to 40.3 billion dollars. The group that operates Maersk Line, the world's biggest container shipper, said average freight rates dropped during the year. Weaker demand affected transportation to emerging markets as well as imports to Europe and Latin America, it said. EPA/INGO WAGNER
© EPA
 
by: Joe Leahy in São Paulo
Brazil has turned into a net exporter in terms of container traffic as a weakened currency fuels shipments of beef, poultry and other agricultural produce.
The trend has also been driven by a crash in imports as the deepest recession to afflict Latin America’s largest economy in more than a century undermines demand for consumer goods and other foreign products.
“If you would have told me this a year ago, I would have said: ‘No, you’re crazy, it’s not possible’,” said Antonio Dominguez, regional head of Maersk Line, the world’s largest shipping line, of Brazil’s conversion into a net exporter. “We continue to see [export] volumes moving up, we continue seeing opportunities, and we continue seeing producers in Brazil actively going after new markets.”
The recovery in Brazil’s export prowess is being seen by some economists as an early sign that its economy might soon be nearing the bottom after a near 4 per cent decline in gross domestic product last year that is expected to be repeated this year.
Brazil’s central bank kept interest rates on hold for the seventh straight meeting on Wednesday as the country struggles with the worst recession in its history and stubbornly high inflation.
In a widely expected move, the monetary policy committee voted to keep the benchmark Selic rate at its near-decade high of 14.25 per cent.
Any glimmers of hope in the economy would help interim president Michel Temer, who was brought to power last month by the start of an impeachment process against then-president Dilma Rousseff for allegedly manipulating the budget.
He has staked the legitimacy of his government on stabilising the economy by rebalancing the budget and securing inflation as well as structural reforms to pensions and public spending.
But his government has been battered by a sweeping investigation into corruption at Petrobras, the state-owned oil company, with two ministers forced to resign after becoming implicated in the scandal and fears that important allies in congress could be arrested.
An opinion poll released by research group CNT/MDA on Wednesday found that 11.3 per cent of Brazilians rated his government positive, with 28 per cent negative. A further 30.2 per cent thought it was “regular”, while 30.5 per cent did not have an opinion.
His personal approval rating, meanwhile, was 33.8 per cent compared with 40.4 per cent who disapproved of him.
Mr Dominguez, who manages Maersk Line in Brazil, Argentina, Uruguay and Paraguay, said the change of government had sparked some resurgence in business confidence, with the country’s deeply depressed automotive sector expected to begin exporting and importing more in the second quarter.
Brazil’s beef sector, in particular, was exporting increasing volumes to China and looking for new markets, with meat exports up 26 per cent in the first quarter compared with a year earlier.
Chicken exports rose 12 per cent on greater shipments to the Middle East. Pork exports rose 67 per cent.
Manufactured goods, however, rose only 7 per cent as Brazilian industry was still struggling with a lack of competitiveness because of its high costs after years of protectionism, Mr Dominguez said.
Brazil urgently needed to open new markets through trade talks, an area where the country has traditionally lagged behind, he said.
Meanwhile, the crash in imports was creating a trade surplus, but it was worrying because it was reducing shipping capacity coming to Brazil and in the long run would raise the cost of freight for exports, Mr Dominguez added.
He said import volumes of all goods had crashed by 31 per cent year-on-year in the three months to March, compounding a fall of just under 30 per cent in the final quarter of 2015.
“We have adjusted all capacity on … trade, we moved from having six [container ship] services coming into Brazil a week from Asia, for example, to only three now. That is a drastic reduction of space for imports and still we have more capacity [than the market is demanding].”
Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More on this topic

Suggestions below based on Brazil