The consequences of reaching above the limit

BRAZIL ECONOMICS - Report 13 Jan 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The reduction in the trade balance surplus in 2024 is largely explained by import performance. We estimated a model to project the growth of imported quantum, aiming to analyze its relationship with economic growth and movements in the real exchange rate. The model indicates that a 1% increase in GDP is associated with a 1.8% growth in imported quantum.

In 2024, imports also experienced an additional boost from growth driven by domestic demand, while the economy was at full employment. We expect the value of imports to continue growing in 2025, despite the economic slowdown and currency depreciation. On the other hand, exports should benefit from the projected growth in the soybean harvest and oil production. Our expectation is a trade surplus of $77 billion in 2025, close to the value recorded last year.

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