Brazil’s capital goods sector hurt by Chinese imports

The utilisation rate in Brazil’s machinery and equipment industry hit its lowest level for 40 years in January-October 2012, according to the country’s capital goods association, Abimaq.

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The average rate reached 75% in the ten months, compared with 81.4% in the corresponding period in 2011 and 82.7% in 2010.

“This is a brutal decline,” Abimaq president Luiz Aubert said.

The drop is due to a strong influx of imported goods into the country, mainly from China, as the Brazilian domestic market is strong, he added.

Imports of machinery and equipment were valued at a total of $2.51 billion fob between January and October, up by 3.2% year-on-year.

China accounted for 15.5% of Brazil’s imports, against 13.9% a year ago. In 2004, it supplied only 2.1% of total imports.

“The gates are completely open and Brazil’s Chamber of Foreign Trade [Camex] is not structured to defend the national industry,” Aubert complained.

As a result, imports took 61.1% of the country’s capital goods market between January and October.

Apparent consumption of machinery and equipment was at 94.29 billion Reais ($45.14 billion), an increase of 1.9% over the corresponding period in 2011.

The sector, however, increased its exports by 11.2% in the same comparison to $10.77 billion, as a consequence of a favourable currency rate, Abimaq said.

Aubert also noted that the machinery and equipment trade deficit in Brazil will decline in 2012 for the first time since 2005.

Between January and October, the trade deficit came to $14.36 billion, down by 2.1% year-on-year.

“It is still at a high level when compared with 2005’s mark of $1.52 billion,” he added.

For 2013, the machinery and equipment industry is optimistic.

“2012 was a year to be forgotten, and next year will be better, driven by economic stimulus measures introduced by the federal government,” Aubert said.

Lower interest rates, a favourable currency rate, reduced energy costs and the availability of long-term financing tools are among the measures that are expected to increase the sector’s competitiveness.