BRAZIL | Industrial policy or protectionism? Industrial output fell 0.2% month-on-month in August, from a revised 0.3% growth in July. It was the tenth consecutive month of declining activity. The annual growth figure was 2.3%, the weakest since April. Local manufacturers complain that they are unable to compete with a flood of cheap imports and the strength of the Real, prompting official measures to support the industrial sector including tax incentives and import restrictions.
The administration led by President Dilma Rousseff is reportedly readying additional measures, leading some critics to accuse it of veiled protectionism. In Brussels this week, President Rousseff suggested that European countries should adopt the “Brazilian model” in order to get out of their economic stupor.
Rousseff makes no bones about the fact that a new industrial policy for Brazil is her principal priority. “Brazil cannot just be a commodities country”, she insists. The growing mismatch between the performance of the domestic industrial sector and the still-thriving consumer sector – which has gone on a massive spending spree on imported goods this year – is at the heart of Rousseff’s policy.
URUGUAY | Growing importance of China. China has displaced Argentina as the second biggest recipient of Uruguayan exports in the first nine months of 2011: Uruguayan exports to China grew by 62.5% to US$505m (8.3% of its total exports) compared with same period in 2010, while exports to Argentina grew by 22.4% to US$444m (7.3% of the total). The main destination for Uruguayan exports is Brazil, which took 19.2% of total exports (US$1.17bn) in the first nine months of 2011. This underpins the importance of the decision by the Brazilian government this week to exempt Uruguay from a recently imposed tariff of 30% on car imports, which had been fiercely criticised by Uruguay’s President José Mujica.
Uruguay’s main export was soya, up 21.9%, equivalent to US$861m, accounting for 14.2% of total exports, followed by frozen meat, which increased by 16.8% to US$737m (12.1% of total exports).
Uruguay posted a trade deficit of US$198m in the first nine months of 2011 as imports outstripped exports: exports amounted to US$6.08bn; imports, US$6.28bn. Nearly half of this deficit came in September alone as exports increased by 19% to US$719 but imports rose by 30% to US$806m, leaving a deficit of US$87m, according to official statistics.
