Brazil’s chemicals trade deficit expected at $47bn in 2023

Jonathan Lopez

27-Nov-2023

SAO PAULO (ICIS)–Brazil’s chemicals trade deficit is expected to reach $47bn this year as imports continue by far outpacing exports, the country’s chemicals trade group Abiquim said on Monday.

In the January-October period, Brazilian chemicals trade deficit with the rest of the world stood at $40bn, following the trend observed in previous months.

Abiquim said in October Brazil’s domestic chemicals production stood at a 30-year low as demand is increasingly being covered by abundant and unexpensive imports from overseas, notably from Asia.

Consequently, capacity utilisation stood at 65% in average during the period.

The $40bn trade deficit year to October was the result of $52bn in imports into Brazil but only $12.1bn in exports.

To put the figures into context, Brazil’s chemicals industry posted sales of $187bn in 2022. According to Abiquim, the sector employs 2m people directly and indirectly, and would represent 12% of Brazil’s industrial GDP.

“Up to October, significant increases [in imports] were recorded in plasticizers (up 79.1%), thermoplastic resins (16.7%), basic petrochemical products (12.6%), intermediates chemicals for detergents (6.5%), and other various chemical products for industrial use (12.8%),” said Abiquim.

“[These imports are being] carried out at predatory prices – on average 22.9% lower year on year – which are unbalancing the domestic market and threatening national manufacturing of strategic products for various value-adding chains in the chemicals industry in the country.”

“The government’s recent decision on the return of chemical import rates to the standard level of the Common External Tariff was a first and indispensable step towards reestablishing the real conditions of competitiveness of the national industry, and consequently, increasing the industry’s participation in GDP,” said Abiquim’s director of economics and statistics, Fatima Coviello.

REIQ IS BACK
The Brazilian government in office since January has given the chemicals industry two concessions it had been lobbying for; in March, it hiked import tariffs for some polymers and rubbers, in a protectionist move aimed at protecting domestic producer.

Meanwhile, earlier this year the cabinet said it would reinstate a tax break for chemicals which the previous administration had withdrawn, the so-called Special Regime for the Chemical Industry (REIQ).

The tax break was finally reinstated as of November 23. Abiquim’s executive president, Andre Passos, said however REIQ “cannot be seen as a benefit” to chemicals in detriment of other industrial sectors, but rather as an attempt to reduce the “gigantic disparity” in costs between local players and peers overseas.

“The turnover tax in Brazil is 40-45%, while competitors in the US and Europe pay only 20-25%. Raw material gas costs are three times higher in Brazil than in competing countries. Not to mention the high logistical and bureaucracy costs,” said Passos.

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