One benefit of a weakening currency should be exports priced to move in the global marketplace. So the slide in value of, for example, Brazil’s real should be translating into rising exports. But that’s not happening in Brazil or other key emerging markets that the Wall Street Journal calls “unlucky.”
We took a look at our trade data through June 2015 for Brazil and its fellow founding members of Mercosur: we found falling currencies failing to lift exports in Argentina, Brazil and Uruguay – with Paraguay bucking the trend in first-half 2015.
Argentina’s trade policies aimed at controlling its balance of payments have had an impact on exports as well as imports. But there are global trends overwhelming any effects of devalued currencies.
Commodities prices have been battered as overall global demand has been and is expected to remain weak (see, for instance, the World Bank’s latest outlook). The Mercosur countries’ mainstay exports are commodities – minerals, oil (for Brazil), soybeans and other agricultural products (download our free report, Quick [email protected] Trade in 2014, for each member’s top exports).
And the top customer for many of these commodities is China, now engaged in rebalancing its economy and so trimming imports (as the data shows).
Note that China is also Brazil’s No. 1, Uruguay’s No. 2 and Argentina’s No. 3 export market. Again, Paraguay breaks ranks with its fellow block members: China generally ranks around 21st among the country’s markets, accounting for less than 1% of its exports.