Brazil's remarkable trade surplus
No other emerging market has seen its trade surplus soar quite like Brazil
The past decade has not been kind to emerging markets (EM). The single biggest reason for this is the massive appreciation of the Dollar, which - even after recent declines - is up a stunning 35 percent on a broad trade-weighted basis against EM. That rise has almost single-handedly wiped out local currency debt as an appealing asset class for foreign investors, because whatever money you make on holding local bonds gets wiped out once you convert things back into US Dollars.
Most EMs have struggled to make headway in such an environment, but there is one important exception. Brazil has transformed itself into a large trade surplus country, leaving the rest of EM far behind. That’s primarily due to massive efficiency gains in agriculture, with lots of those exports going to China, but oil exports are also picking up. Brazil is emerging as the newest export powerhouse in EM.
The chart above is based on monthly data for trade surpluses across a wide range of EMs. I’ve aggregated these trade surpluses into annual data by summing up monthly balances from January through August for every year from 2000 to 2025. It’s clear that something very unusual is going on in Brazil. It’s trade surplus has been on a growing trend, even as the rest of EM has remained stuck around zero. Turkey remains mired in large trade deficits as it continues to live way above its means, thanks to repeated credit impulses engineered by President Erdogan.
On the surface, this transformation of Brazil should be very positive for the Real, but there’s a catch. As I’ll show in coming posts, the current account hasn’t improved even as the trade surplus has gone through the roof. That’s because a lot of the agricultural exports behind the surplus are grown on foreign-owned farms, who repatriate profits back to their parent companies abroad. These outflows are heavily offsetting the rise in Brazil’s trade surplus. However, this will surely change with time, as more and more farms become domestically-owned. Brazil’s transformation into an agricultural powerhouse is an unambiguous positive.
I don’t think this information is accurate, in fact, most of brazilian agricultural production is done by locals. Once they are exported, they are exempted from taxes. The trade companies, that realize the exportation are foreign companies, and also, much of the inputs used in agriculture are provided by foreign companies.
the farm land owners are almost all local. They may keep their profits abroad, but that would go thru the capital account, not current account.