Saturday, March 8th 2014 – 06:47

Brazil recorded its largest February trade deficit ever, deepening a trade gap this year that underscores the lack of competitiveness from local industry. The deficit reached 2.125 billion dollars the trade ministry announced.

While imports increased, exports of raw materials were down 8.5%

 February adds to the January shortfall of 4.06 billion in January, its largest monthly trade gap ever. Last year the country posted a February trade deficit of 1.279 billion.

The trade balance has become a serious challenge for Brazil, which is struggling with weaker demand for its commodities exports and low productivity among Brazilian manufacturers or the ‘Brazil cost’ with an impact on the competitive edge.

The worsening trade position raises additional concerns about weakness in Brazil’s currency, the real, and persistently high inflation. As slowing exports and foreign investment reduce the inflow of dollars to the economy, a weaker real makes imports more costly.

A drop in the prices of some Brazilian exports like soy and economic problems in neighboring Argentina have raised fears that Brazil may post a smaller trade surplus than last year or even a deficit.

In 2013, Brazil posted its smallest trade surplus in more than a decade as imports of fuel and consumer goods gained speed while exports eased.

Exports of raw materials fell 8.5% in February on an annual basis to 7.17 billion, the trade ministry said. Semi-manufactured goods exports retreated 8.7%, while manufactured products slipped 9.2%.

However imports in February were marked by a 2% rise in consumer goods and a 7.9% in fuels and lubricants. Brazil although almost self sufficient in oil is suffering from a shortage of refining capacity, which must be imported.

Likewise since presidential elections are scheduled for next October, fuel prices are lagging with a great cost for the government managed giant Petrobras.