Since late May, Brazil's northeast was frequently hit by heavy rainfall, resulting in flooding in many places, the average amount of rainfall for the third since 1980. This is also the second time that Brazil has been hit by heavy rainfall in just three months, following the disaster caused by heavy rainfall in Rio de Janeiro state in February this year. The past two or three years Brazil has endured a hundred years of drought, and now ravaged by heavy rains, which has a considerable negative impact on Brazil's agriculture and economy.

In the face of extreme weather and agricultural damage, Brazil continues its efforts to expand food production on the one hand. Brazilian Agriculture Minister Marcos Montes said on June 7 that the 2022/23 Brazilian food crop is "in sight" because Russia is still exporting fertilizers to Brazil. Faced with uncertainty over the supply of related products due to the Russian-Ukrainian conflict, Brazil negotiated with Russia to ensure the transport of fertilizers. According to shipping agency Cargonave, Brazil has purchased 16.64 million tons of fertilizer as of May, up 16.5% from the same period in 2021, which greatly alleviates the severe shortage of fertilizer in agricultural production and ensures the security of food production.

On the other hand, by reducing import tariffs to reduce domestic food prices and ease inflationary pressures. Brazil's Ministry of Economy Foreign Trade Commission (CAMEX) approved a temporary tariff reduction on May 23, reducing import tariffs by 10% for 6,195 items. The policy covers 87% of all Brazilian imports, effective from June 1 of this year until December 31, 2023. This is the second time since last November the Brazilian government announced a 10% reduction in tariffs on such goods. Data from the Brazilian Ministry of Economy shows that through two adjustments, the import tariffs on the above goods will be reduced by 20% or directly to zero tariffs. The temporary measure applies to products such as beans, meat, pasta, cookies, rice and construction materials, which also involve Mercosur External Tariff (TEC) products. Another 1,387 products were maintained at their original tariffs, including textiles, footwear, toys, dairy products and some automotive products.

Statistics also show that in the past 12 months to May this year, the cumulative inflation rate in Brazil was 11.75%, which is more than twice the 5% inflation control target set by the Brazilian government this year. The Organization for Economic Cooperation and Development (OECD) predicts that Brazil's inflation rate will be as high as 9.7% this year. The Brazilian Foreign Trade Association (AEB) recently released a study showing that the price of imports in U.S. dollars increased by 34.4%, while at the same time, the volume of imports fell by 6.9%. This indicates a considerable increase in the prices of imported products, showing the characteristics of Brazil's imported inflation cycle, which is at the root of the difficulty of cooling inflation in Brazil in the short term. Influenced by the higher inflation rate, the Central Bank of Brazil has raised interest rates for 10 consecutive times, and the interest rate has been raised to 12.75%.

The OECD's Global Economic Outlook report released on June 8 lowered Brazil's economic growth forecast to 0.6 percent this year from 1.4 percent last December, a fifth of the world average (estimated at 3 percent). The report concluded that economic activity in Brazil will slow sharply this year due to high inflation, the Russia-Ukraine conflict, slow recovery in the labor market and political uncertainty caused by the presidential election this October.

However, the closer economic and trade between China and Brazil will help boost the Brazilian economy. In recent years, bilateral trade between China and Brazil has exceeded $100 billion for four consecutive years, China has been Brazil's largest trading partner for 13 consecutive years, and Brazil is the largest destination for Chinese investment in Latin America. 2022 quarter, China's exports to Brazil totaled about $19 billion, accounting for 23% of Brazil's total imports; China's imports from Brazil totaled $19.7 billion, accounting for 29% of Brazil's total exports.

Following the sixth plenary session of the China-Brazil High-Level Coordination and Cooperation Committee, held on May 23, it was announced that Brazil is committed to expanding bilateral trade with China in the long term. In addition, the Chinese Ministry of Commerce also released to the public a list of outcomes of the sixth meeting of the China-Brazil High-Level Coordination and Cooperation Committee. The list shows that China and Brazil agreed on matters of cooperation in promoting the development of agricultural trade between the two countries, low-carbon and clean technology investments, and agreed to actively cooperate in areas such as the digital economy.

Translated with www.DeepL.com/Translator (free version)