beyondbrics

Take a look at Brazil’s trade balance and you might be surprised.

This is the country with one of the world’s most overvalued currencies, a currency which is now so strong that it is supposedly crippling exporters and flooding the country with cheap imports.

However, Brazil’s trade surplus actually widened for the third consecutive month in April and reached a record for the year, data showed on Monday.

Last month’s surplus hit $1.86bn, up from $1.55bn in March and $1.28bn a year earlier. It was almost a billion dollars higher than the median Bloomberg forecast.

The main reason for this, though, is the rapid rise in the price of commodities, the vast majority of those exports.

Take Vale, the iron ore producer, for example. The company is one of Brazil’s biggest exporters and would theoretically be hardest hit by the appreciation of the real, which has surged about 40 per cent against the dollar over the past two years.

But a rally in iron ore prices has more than compensated for the stronger currency, allowing Vale to almost triple profits last year.

If you look at any other Brazilian company that is not in the business of extracting raw materials, the effects of the strong currency become more obvious.

Steelmaker Usiminas, for example, recorded its lowest quarterly profit for two years last month as a result of greater competition from cheap Chinese imports and lower demand for its exports.

Like many things in Brazil, if you take away the commodity boom, the reality is often rather less positive.