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UPDATE 1-Brazil trade surplus falls sharply in 2013

Thursday, 2 Jan 2014 | 2:02 PM ET

BRASILIA, Jan 2 (Reuters) - Brazil's trade surplus fell to its lowest level in over a decade in 2013, hurt by lower commodities prices, an increase in fuel imports and declining competitiveness among manufacturers.

Brazil posted a trade surplus of $2.561 billion in 2013, the Trade Ministry said on Thursday. It was the country's worst trade result since 2000 and a sharp drop from the $19.396 billion surplus posted in the previous year.

The worsening trade balance is a serious challenge for Brazil, which is struggling with a subdued global economy and productivity shortcomings at home. The diminishing surplus has also weakened the local currency, the real, as fewer U.S. dollars enter the economy. That could lead to additional inflation pressure as imports become more costly.

For December, Latin America's largest economy posted a trade surplus of $2.654 billion, above the median forecast for a $1.35 billion surplus in a Reuters survey of six analysts.

A 15.3 percent increase in manufactured goods over the previous year helped support the trade balance in December, with the largest portion of that attributed to the $1.2 billion export of an oil rig.

That oil rig, however, was sold by state-run oil firm Petroleo Brasileiro SA, known as Petrobras, to one of its foreign subsidiaries and will likely remain in Brazil.

Petrobras obtains certain tax and other benefits by registering its ships and offshore oil rigs in the Netherlands, and any transfer of ownership out of Brazil is accounted for as an export.

Imports reached a record $239.6 billion in 2013, a 6.5 percent increase over the previous year, the trade ministry said. In contrast, exports fell 1 percent to $242.2 billion.

President Dilma Rousseff's government has offered billions of dollars in subsidized lending to help exporters, mostly those who produce finished goods. Still, Brazilian manufacturers have struggled to remain competitive with their global peers due to a heavy tax burden, high labor costs and poor infrastructure.

Raw materials such soy, corn and iron-ore accounted for about half of total exports from Brazil last year, though the country is earning less for some of those products as prices on global markets decline. The Reuters/Jefferies CRB index of the 19 most-traded agricultural, energy and metals commodities fell 5 percent in 2013.

Imports, on the other hand, remain robust even after the real weakened a little over 13 percent against the U.S. dollar last year.

A big part of that is fuel, with the country's limited refining capacity requiring costly shipments from abroad. The total value of fuel and lubricant imports rose 13.8 percent in 2013 from the previous year, while intermediate goods rose 5.8 percent and capital goods rose 5.4 percent.

Brazilians' appetite for foreign products has also remained strong, bolstering imports of consumer goods such as electronics and clothes by 3.2 percent in the year.