MercoPress. South Atlantic News Agency

Strong Real threatens Brazil's export growth.

Brazil exports soared 30% this year compared to 2003 but economists warn that a weak dollar is threatening the current rate of expansion. The Brazilian currency, Real, as have the euro and the yen have been consistently appreciating against the weakening US dollar.

A stronger Real makes Brazilian products relatively more expensive abroad but also helps purchasing imports, mainly energy and inputs for local industry.

With only a week remaining in 2004, Brazilian exports are forecasted to total 94 billion US dollars.

Jose Augusto de Castro, vice president of the Brazilian Foreign Trade Association, said this year's good showing was the result of a favourable combination of internal and external factors.

The outbreak of avian flu in Asia significantly helped local poultry exporters. Brazilian beef exporters also benefited from the repercussions of isolated cases of mad cow disease reported in the United States and Canada.

Japanese meat buyers, among others, turned to Brazil when their government temporarily banned imports of U.S. beef.

High and bullish internationals prices for soybeans, a major Brazilian export, as well as iron ore also boosted the trade and current account surpluses, mainly because of the apparently insatiable Chinese demand for commodities and energy.

Mr. De Castro pointed out that the export boom was accompanied by a rise in imports, which he said underscored the expansion of the internal market, a sign he described as encouraging.

For most of the year, the exchange rate has been in the range of three Reales to the US dollar, but the Brazilian Central Bank policy has been to let markets establish the adequate balance between currencies.

Mr. De Castro finally warned that if the exchange rate continues at the current 2.70 Reales per US dollar "it could complicate the growth of Brazilian exports in 2005.The ideal rate should be 3 Reales to one US dollar".