Alana Gandra
Reporter - Agência Brasil

Rio - Brazilian textile exports rose 11.65% to a total of US$ 804.45 million in the first five months of 2005, compared with the same period in 2004. On Thursday (16), at the Fashion Business event in Rio de Janeiro, the director-superintendent of the Brazilian Textile and Clothing Industry Association (Abit), Fernando Pimentel, observed that this result, even though it is positive, represents considerably less than what was achieved between January and May of last year, when exports rose 19.77% in relation to 2003.

Pimentel blamed the deceleration on the exchange rate. He said that, although Brazilian exports have been expanding overall, the situation of manufactured goods is starting to cause concern, and various sectors, including textiles and clothing, are already feeling the impact of an exchange rate appreciation amounting to 28% in the past 12 months and 10% in the first 5 months of 2005.

"This has a simple interpretation," Pimentel affirmed. "No matter how much a company raises its productivity and gains new markets, as has been the case - Brazilian industries have increased their foreign sales at an annual rate of over 15% in the last 5 years -, the exchange rate shock is very powerful, and it is not offset in the short run by any kind of official action."

The director-superintendent of the Abit cited the case of China, the world's biggest textile producer, in which the government has kept the currency (yuan) undervalued by around 30%. "In the past 10 years the quotation of the yuan has oscillated between US$ 8.28 and US$ 8.33, and China is a country that accumulate US$ 1 billion in reserves daily. It already possesses a reserve stockpile worth US$ 650 billion, it is growing at a annual rate of 8% or 9%, and its currency remains totally unchanged." According to Pimentel, this is the result of an explicit State policy to enhance competitiveness.

The director judges that growth in the Brazilian textile and clothing sector will be more modest this year than last. He reaffirms that the exchange rate question has a tremendous impact on the capacity to compete in the short run. In the medium and long run, he says, greater fiscal benefits could eventually mitigate this impact.

Translation: David Silberstein