FOCAL POINTS:

Macro Environment with GDP expanding by 0.9% quarter-on-quarter. Sectorally, the economy showed. While agriculture contracted due to lower output of key crops such as corn and soybeans, the industrial sector recorded growth, driven by strong activity in construction and manufacturing.

FX and money markets

In November, Brazil’s inflation rate rose 4.87% year-on-year. This uptick to the continued depreciation of the Brazilian real, driving up the cost of imports. The Brazilian Real experienced further depreciation against the USDollar during the past month, reaching the lowest level in the last five years. Exports In November, Brazil’s corn exports totalled 4.7million tonnes, showing a significant 28.71% year-on-year decline. Soybean exports totalled 2.6 million tonnes, reflecting a 49.96 % annual decrease. Imports Wheat imports in November reached 427.5 thousand tonnes, a significant 22.61 % month-on-month decrease. Figures however showed a significant 32.95 % year-on-year surge.

MACRO ENVIRONMENT

• Brazil’s economy maintained its growth trajectory in the third quarter, with GDP expanding by 0.9% quarter-on-quarter.

• Although this marks a slowdown from the 1.4% growth observed in Q2, the annual growth rate reached an impressive 4.0 %.

•Analysts forecast that Brazil’s GDP growth for 2024 will surpass 3 %, signalling continued economic stability despite challenges.

•Sectorally, the economy showed mixed performance. While agriculture contracted due to lower output of key crops such as corn and soybeans, the industrial sector recorded growth, driven by strong activity in construction and manufacturing.

•In October, $7 billion, supported by exports of $28 billion and imports totalling $20.9 billion.

•Although export values declined by 4.4 %month-on-month, a substantial 16.4 % drop in imports contributed to a remarkable 67.6% increase in the trade surplus compared to the previous month.

•On a year-on-year basis, trade volumes demonstrated growth, with exports rising by 9.9% and imports increasing modestly by 0.5%.

PRICE ENVIRONMENT

•In November2024, Brazil’s inflation rate rose to 4.87 % year-on-year, up from4.76 % in October. This uptick can be attributed to the continued depreciation of the Brazilian real, driving up the cost of imports.

•Despite forecasts of an economic slowdown in Latin America’s largest economy, Brazil demonstrated sustained growth in November.

•On a month-on-month basis, the Consumer Price Index (CPI) increased by 0.36 %, marking a de-celeration from the 0.56% rise recorded in October.

•In the industrial sector, the Producer Price Index (PPI) rose by 0.94% in October, with growth reported across 15 out of 24 monitored sectors.

•The extractive sector stood out with a significant increase of 7.84%, while the manufacturing of wooden products posted a 2.42%rise.

•On a year-on-year basis, the PPI increased by 5.89% in October, highlighting persistent inflationary pressures within Brazil’s industrial landscape.

FX AND MONEY MARKETS

•Brazil’s central bank raised interest rates by a 50 basis points during November, with the rate now standing at11.25%.

•This reflects policy makers’ determination to curb rising inflation and inflation expectations amid robust economic activity, a tight labour market and a weaker currency.

•Brazil’s central bank warned that additional deterioration of inflation expectations could lead to protracted tightening cycle, days after policy makers doubled the pace of their interest rate hikes.

•The Brazilian Real continued its depreciation against the USDollar in November, with the BRL/USD exchange rate averaging 5.8.

•The decline was steady through the month, with the exchange rate closing the month at around 5.97, the highest of the past five years.

• Despite Brazil’s status as the largest economy in Latin America, the BRL’s performance has been influenced by domestic fiscal concerns and global market dynamics.

EXPORTS 1/3

Brazil’s iron ore exports declined for the 2nd month in a row, totalling 33.7 million tonnes in November, representing a 4.53 % decline month-on-month. Despite that, exports were
7.27 % higher year-on-year.
During the first eleven months of 2024, iron ore exports amounted to 358.8 million tonnes, a 5.9 % increase year-on-year.
China remained the dominant importer, accounting for 67 % of Brazil’s iron ore exports, underscoring the sustained demand from steel manufacturers, even amid global market fluctuations.
Soybean exports in November totalled 2.6 million tonnes, reflecting a 44.68 % decline month-on-month. Compared to the same month last year, exports were down by 49.96
%, which is attributed to reduced inventories.
Year-to-date, soybean exports reached 96.8 million tonnes, a 1.31 % decline year-on-year.
Legislative changes in key soybean- producing states, have raised environmental
concerns as new laws removing tax incentives for companies adhering to the Amazon Soy Moratorium could undermine efforts to curb
deforestation.

EXPORTS 2/3

In November, Brazil’s corn exports totalled
4.7 million tonnes, showing a significant 26.22
% decrease month-on-month and a 28.71 % year-on-year decline compared to November last year.
Year-to-date, corn exports amounted to
35.53 million tonnes, marking a steep 28.71 % decrease compared to the same period in 2023.
The reduction in exports is attributed to limited demand from China, decreased competitiveness in the international market and logistical challenges. In early October, barge transportation along key Brazilian rivers was halted due to drought, disrupting the flow of grain exports.
Sugar exports reached 3.39 million tonnes in November, a 9.07 % month-on-month decline. At the same time, exports showed a notable
6.95 % year-on-year decrease, compared to October 2023.
So far this year, sugar exports have totalled
35.47 million tonnes, a 28.8 % rise compared to the same period last year.
Despite the robust performance this year, November is the third consecutive month of declining sugar exports.

EXPORTS 3/3

In November, Brazil exported 9.9 million tonnes of crude oil, representing a 28.6 % increase month-on-month and a 29 % rise year-on-year.
Year-to-date, exports have reached 85.7 million tonnes, reflecting a 14.65 % growth over the same period in 2023.
The surge in exports positioned oil as Brazil’s leading export, surpassing soybeans and iron ore in total value ($42.76 bn). The rise in oil exports was primarily driven by increased volumes, which grew by 14.4 %, offsetting a 4.3 % decline in average prices.
Brazil exported 1.65 million tonnes of wood pulp in November, a 7.2 % month-on-month decrease. Compared to the same period last year, exports increased by 7.68 % year-on- year.
Year-to-date pulp exports amounted to 18 million tonnes, reflecting a 3.9 % increase from the same period last year.
The EU’s impending deforestation
regulation, set to take effect on December 30, 2024, introduces potential challenges. This legislation aims to ban imports of products linked to deforestation, including wood pulp.

IMPORTS

Brazil’s imports of chemical fertilizers totalled
4.2 million tonnes this past November, marking a 9.7 % year-on-year increase and a
14.85 % decrease when compared to the record-breaking month of October.
Year-to-date imports totalled 40.94 million tonnes, reflecting a 10.6 % growth compared to the same period in 2023.
Brazil’s government implemented new import tariff-rate quotas effective from
November 27, 2024, to November 26, 2025, reducing import tariffs on various products, including chemicals.
Wheat imports in November reached 427.5 thousand tonnes, a significant 22.61 % month-on-month decrease. Figures however showed a solid 32.95 % year-on-year surge.
Total wheat imports for 2024 until November amount to 6.1 million tonnes, representing a significant 62 % rise year-on-year.
This overall increase in imports is attributed to a substantial decline in Brazil’s domestic wheat supply. Forecasts for wheat imports for the following year have been raised to 6 million tonnes.

PORT CONGESTION

In November, the Port of Santos experienced an average congestion of 28 vessels, maintaining steady average levels throughout the month.

•This marks a significant month-over-month decrease in congestion of 40.31%.

•The decrease in congestion is most notable when comparing to the average of the same period last year. In October 2023, the average number of congested vessels in Santos was 91.

•Combined congestion at the Ports of Tubarao and Vitória averaged 21 vessels in November 2024, slightly lower than the 25 vessels observed in October, marking a 16 % decrease.

Year-on-year, the average congestion remained at the same level, in contrast to the port of Santos

While congestion in November reached up to 29 vessels, by the end of the month, the number of vessels congested was 21.

Baltic Indices

In November, the Capesize Baltic C3
(Tubarao/Qingdao) Index closed at 20.05
USD/mt, with the monthly average settling at 22.82 USD/mt.
This reflects a 3.94 % month-on month decline from October’s average of 23.76 USD/mt, emphasizing a continuing downturn in the Atlantic iron ore trade route.
On a year-on-year basis, the C3 Index saw a marginal 1.6 % decrease. While the index has outperformed 2023 throughout the year, last month’s levels were closer to those during the same period last year.
The Panamax Baltic P8 (Santos/Qingdao) Index closed October at 31.4 USD/mt, with a monthly average of 33.36 USD/mt.
This represents a notable 12.24 % decline month-on-month from October’s average of 38.02 USD/mt, in continuation of the downward trend in the sector.
Year-on-year, the P8 Index recorded a 20.41 % decrease compared to the November 2023 average of 41.92 USD/mt, reflecting broader market conditions.

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Brazil Economic Outlook