Economic activity in the main Latin American countries is expected to remain weaker than expected at the beginning of 2019. The slowdown in the global economy, the trade war between China and the United States, and internal problems in these countries are causing more problems than expected and no acceleration is expected in the coming months.
On the other hand, with global GDP showing a downward trend, there should be greater flexibility in domestic interest rates in most countries to try to encourage growth in the domestic economy.
In Brazil, with the unfolding of the pension reform and how the global economy is expected to behave, a modest GDP growth is expected, with an increase of less than 1%, based on the population's fear of rising unemployment and the increasing caution of Brazilian families in consuming or investing. Inflation, on the other hand, should remain controlled and within the target expected for the year. Likewise, the exchange rate, despite the record increase in the price of the dollar in August, should reach the level of R$3,9000 in December, due to the prospect of good results in trade balances and foreign investments.
Paper And Cellulose
Throughout 2018, the pulp and paper market showed positive results, with Brazilian producers showing good exports to their main markets, mainly China and Europe. However, this scenario did not continue in the first half of 2019 and expectations for the second half of this year are not very different.
The market is suffering from global economic instability, with prices falling by up to 12%. China and Europe account for approximately 42% and 32% of all Brazilian sales to the international market, respectively. In China, there is a reduction in demand for cellulose due to the economic slowdown and the trade war with the United States. In the European case, demand has fallen due to uncertainties regarding the bloc's economy, in addition to large existing stocks that negatively impact prices.
Analysts estimate that the fall in prices for China will reach marginal cost in the second half of the year, meaning that further cuts in production are expected as profits approach production costs. As such, prices on the world market should continue to be pressured downwards as long as stocks remain high. However, the drop in supply could lead to expectations of an increase by the end of the year.
For other types of paper, price maintenance is more controlled, showing stability or a small expectation of increase during the second half of 2019.
New challenges are presented to the purchasing sector. Trade conflicts, a slowdown in the global economy and even the possibility of a recession. To understand this scenario and be prepared to face it, COSTDRIVERS prepared this report with an overview of the global and Brazilian economy and what to expect for the second half of 2019. Download now.
