Market Trends & Opportunities
1,300 flights impacted by security software failure
This week a major technology blackout affected airports, media companies, hospitals, banks, and payment institutions globally. This incident, now considered the largest IT failure in history, was caused by a technical problem with security software from a Microsoft subcontractor.
The impact of this problem was profound, with over 1,300 flights canceled worldwide. As the situation continues to escalate in a snowball effect, CrowdStrike, the responsible company, has yet to provide a timeline for resolution.
How Asian tensions impact Latin America?
Japan, one of the leading semiconductor suppliers to China, faced a 7.2% drop in exports in 2023. Concurrently, the US is planning new trade restrictions that will negatively affect Asian chip stocks and is announcing an initiative to produce semiconductors in Latin America.
Though Brazil is not included in the list of beneficiary countries, there could be indirect benefits. Currently, Brazil relies on semiconductor imports from China, South Korea, and Taiwan.
To change this, we need to strengthen our domestic production. A significant advantage is that Brazil possesses 10 million tons of rare earth elements (REEs), essential for high-tech manufacturing.
With China in crisis, what are the impacts on Brazil?
The second quarter of 2024 saw a 4.7% growth in the Chinese economy, below the 5% expectations. This reflects structural challenges, such as the real estate crisis caused by high indebtedness among builders.
Recent political events in the US have created uncertainties in the global financial market, affecting the dollar's value and creating volatility. For Brazil, this has mixed effects: while dollar appreciation makes imports more expensive, it enhances export competitiveness.
China's slowdown could reduce demand for Brazilian products, though the high demand for soybeans and corn offers some protection. In 2023, 73.1% of Brazil's soybean exports went to China, totaling US$ 105.7 billion in exports to the Asian country, a 16.6% increase from the previous year.
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Electric Vehicle Imports puts Brazilian industry in dire straits
In June, Chinese exports to Brazil increased by 24.4%, while imports rose by 8.3%. Despite a trade surplus of US$ 6.7 billion, the Brazilian trade balance faced a decline in exports (-1.9%) and a rise in imports (+14.4%) compared to the previous period.
Electric vehicles (EVs) have been the most imported items, with imports increasing by 473%, making them the most imported product in the country (8.9%), surpassing even fuel oils (5.8%).
This surge in EV imports has caused concern among local automakers, who threaten to halt operations unless the Brazilian government proactively raises import taxes on vehicles to 35%.
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