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Brazilian economic data glitch unnerves analysts


Brazil’s economy ministry has revised its export figures for the second time in less than a week, casting doubt on key data releases and leaving analysts wondering whether they should still trust the reliability of Brazilian statistics.

Doubts surfaced last week when the country’s currency was hit by central bank figures showing a sharp deterioration in Brazil’s current account balance in the period January to October, driven by a slide in exports.

But the currency recovered on Thursday when the Ministry of Economy revealed that exports in the first four weeks of November were not, as previously stated, a disappointing $9.7bn, but a much better $13.5bn.

The controversy has continued this week. On Monday night, the economy ministry said its error had been caused by a failure to record large numbers of declarations by exporters for the past three months, and that exports in September and October had also been under-reported, by $1.37bn and $1.35bn respectively.

That was followed on Tuesday by better than expected data for third-quarter gross domestic product — compiled before Monday’s revised trade figures became available.

“The GDP numbers showed a pretty significant contraction in exports in the third quarter, so maybe that will be revised as well,” said Gustavo Rangel, chief economist for Latin America at ING Financial Markets in New York.

He said the GDP data, although better than expected, had raised doubts among some analysts because of an unusually large figure for company inventories, a negative indicator for economic activity. It was possible, he said, that some of the inventory had in fact been exported, but it was not yet possible to tell.

The recent revisions and the possibility of more to come have raised doubts for the first time about Brazilian data, long seen as an example of timeliness and transparency among emerging nations.

The Brazilian Institute of Geography and Statistics said it might have to revise the third-quarter data but would normally do so only a year from now. However, given the magnitude of the economy ministry’s error, it was possible that a revised number would be released along with the fourth-quarter figures, scheduled for early March.

The economy ministry said it was satisfied that the revised data on exports reflected the true position and stressed that it operated a policy of full transparency and good practice.

The IBGE said GDP rose 0.6 per cent in the third quarter compared with the second, and by 1.2 per cent compared with the third quarter last year, comfortably beating analysts’ expectations. However, it said exports of goods and services fell sharply, by 2.8 per cent from the second quarter.

The real advanced from R$4.22 to the dollar at Tuesday’s open to R$4.19 after the data release, before giving up some gains in later trading.

Last week’s moves were even sharper. The real started the week at about R$4.20 to the dollar and plunged to a record low of almost R$4.28 on Tuesday before rebounding to R$4.18 on Friday.

“The real sold down because of the sharp erosion of the trade balance and the current account, which would mean the underpinnings of the currency were weaker,” said Alberto Ramos, an analyst at Goldman Sachs in New York. “People certainly made or lost money” as a result of the confusion over the true state of exports, he added.

He said there was no suspicion that the data had been manipulated but that the incident had nevertheless raised various concerns.

“This is a big mistake,” he said. “I don’t think there is any foul play, just incompetence or negligence at a time when markets are getting anxious about the erosion of trade.”

Mr Rangel at ING said the true explanation was more likely to be that Brazil’s economy ministry — a “super ministry” created this year by merging the finance ministry with other parts of the government’s economic administration — had fallen victim to its own cost-cutting measures. “They can’t hire and a lot of people are retiring, so they are stretched,” he said.

“How does the public sector function when the fiscal accounts are so tight? There is even the risk of a government shutdown next year if they are unable to cut other spending.”



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