Rising Real Value in Brazil and Rio Grande Do Sul

Transcription

1 GOVERNO DO ESTADO DO RIO GRANDE DO SUL Secretaria do Planejamento e Gestão FUNDAÇÃO DE ECONOMIA E ESTATÍSTICA Siegfried Emanuel Heuser 18 th YEAR No. 11 Nov/2009 Monthly Letter The importance of stopping the appreciation of the real It seems that the Government finally got wise to the dangers of the appreciation of the national currency. After a long time of sticking to the traditional praise of the free-floating exchange, the Ministry of the Treasure decided to levy a 2.0% tax on financial operations involving foreign portfolios entering the country. The measure has little practical effects. This is an important measure at a time when the appetite for risky investments is beginning to grow again. This is because developed countries are introducing a large amount of money in the financial system to offset the crisis from the previous two years. The measure shows that the Government understands that the appreciation of the real represents a threat to growth. It seems that the view that the notion that the free-floating exchange is good when it doesn t free-float, adopted by Asian countries, is beginning to echo in Brazil. This is a positive change in the Government s point of view. Those who defend the appreciation of the real argue that cheaper imports put pricing pressures on domestic production, and that there are possible productivity gains with more favorable imports of capital goods and inputs. Inflation is under control mostly due to the modifications in the terms of exchange, which now favor the Brazilian economy. The economy was previously being pressured by the industry production from developed countries and from Asia. Considering that the excessive appreciation of the real can affect the domestic demand for industry products, it is hard to believe that the appreciation would boost investment decisions in a context of weak worldwide demand. It is important to remember that volatility of the exchange has a negative effect on investment decisions, and Brazil has been one of the countries with considerable variation in the exchange in the past two years: big depreciation in exchange value in the second semester of 2008 followed by a strong appreciation starting March In this sense, though a depreciated exchange means a decrease in the real income of Brazilians in comparison to other countries, it also means more growth potential and more jobs, which is why the Government is trying to contain volatility and excessive appreciation of the currency. It is important to note that the effective exchange rate for Brazilian exports, which is pondered based on the relative participation of 15 countries in Brazilian exports, has shown that the appreciation is well below the appreciation observed in the real-dollar exchange. The difference is caused by the strong depreciation of the dollar in comparison to other currencies (it has lost 8.0% of its value in the past six months), which, in turn, is being caused by the extremely low interest rates and poor perspective of growth in the US. These two factors combined have lead investors to seek bigger returns in other markets, be it in raw materials (e.g. the recent increase in interest in oil) or be it in countries that offer more immediate returns. The international financial system is facing turbulence in the role of the countries and of the institutions, and in the regulation of the markets. In such a context of deep changes, the silver lining is that the Brazilian Government is concerned with the excessive appreciation of the national currency; hopefully the concern is true. Index for effective and real exchange rate Jan/08-Sept/ Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept SOURCE : Brazil Central Bank. NOTE : Index based on June 1994 = 100. Legend: Effective Real (IPCA) André Scherer (NEPE/FEE)

2 2 Recent changes in years of schooling in Rio Grande do Sul From 1998 to 2008 the evolution of the schooling of the Rio Grande do Sul population shows two trends for the different levels of schooling established by the National Household Sample Survey (called PNAD). The first trend is the stable percentage of people in the no schooling or less than one year of schooling group, with approximately 5.0% of the population in the state. The percentages of people in the other groups have varied considerably, and suggest the second trend: increase in years of schooling in Rio Grande do Sul. This trend is observable in the simultaneous decrease in percentage of people in the lower brackets of schooling, and the increase in percentage of people in the higher brackets of schooling. In 1998 the bracket of one to three years of schooling had 12.42% of the population, and of three to four years had 35.33%. In 2008, the one-to-three year s bracket dropped to 9.21%, and the three-to-four year s bracket dropped to 30.21%. However, the populations in the bracket of eight to ten years of schooling, and of eleven to fourteen years of schooling were of and 11.88% in 1998, and increased to and 19.87%, respectively, in % distribution of the population according to schooling, Rio Grande do Sul Legend: SOURCE : National Household Survey. No schooling or < 1 year 1 to 3 years 4 to 7 years 8 to 10 years 11 to 14 years Gabriele dos Anjos (FEE/CEES) Government support for technological innovation in Brazil and Rio Grande do Sul Technological innovation is a complex and systemic phenomenon and governments have an important role to play in it by promoting innovative processes with policies aimed at developing science and technology. The influence of government can be observed in several of the countries that exert great influence in innovation. The situation of Brazil and Rio Grande do Sul from in relation to government support to innovation offered by federal institutions shows that for the national mining and quarrying and manufacturing industries, 19.2% of the innovations implemented were supported by the government. In Rio Grande do Sul, the percentage was slightly higher, 21.1%. Evaluation of the type of support given by the state and federal government show that the support provided locally was better than the support provided by the federal government. In terms of tax incentives (to R & D and to the computer sector) there is basically a tie between the support given locally and nationally: both made poor investments. In Rio Grande do Sul, only 1.8% of companies received tax incentives, in Brazil, 1.7%. But the percentage of credit given to innovation was more significant, 13.6% in Brazil and 17.2% in Rio Grande do Sul. In sum, there is a lot of ground to cover in terms of government investments. The main challenges facing the country and the state are in establishing a new institutional and legal standard, and in increasing the participation of those involved in innovation policies. BRAZIL AND RS Companies in mining and quarrying and in manufacturing that implemented innovation receiving Government support, according to type of support, Brazil and RS Total Total % COMPANIES THAT INNOVATED Type of Government Support Tax incentive Credit Other Total % Total % Total % Brazil RS SOURCE OF RAW DATA: Pintec (IBGE/Finep/MCT). Iván G. Peyré Tartaruga (FEE/CEES

3 BRAZILIAN ECONOMY MONTHS AND YEARS ANNUAL GROWTH RATE OF GDP (1) (IBGE) RATE OF INVESTMENT (2) (% OF GDP) (IPEA) AVERAGE OPEN UNEMPLOYMENT RATE (3) (% of the economically active population IBGE) Selected macroeconomic variables Dec/96-Sept/09 ANNUAL PRICE INDEX CHANGE RATE (%) (4) (IPCA/IBGE) CENTRAL BANK PRIME RATE SELIC (% per year) (Central Bank) EFFECTIVE EXCHANGE RATE (5) (Funcex) Index (Base: Dec/93 = 100) INDUSTRIAL REAL WAGES (IBGE) Index (Base: Jan/01 = 100) MONETARY BASE (millions of R$) (Central Bank) Dec/96 2,1 21,0-10,1 23, ,2 0, Dec/97 3,4 22,2-5,2 38, ,8 0, Dec/98 0,0 21,2-1,7 29, ,3-0, Dec/99 0,3 19,6-8,9 19, ,4 0, Dec/00 4,3 20,3-6,0 16, ,3 0, Dec/01 1,3 19,2 10,6 7,7 19, ,7 25, Dec/02 2,7-10,5 12,5 22, ,4 20, Dec/03 1,1-10,9 9,3 17, ,4 21, Dec/04 5,7-9,6 7,6 17,25 88,9-134,4 24, Dec/05 2,9-8,3 5,7 18,50 75,7-14,8 135,5 21, Dec/06 3,8-8,4 3,1 13,25 73,8-2,5 135,1 19, Oct/ ,7 4,1 11,25 64,9-10,7 105,7 3, Nov/ ,2 4,2 11,25 64,5-12,0 115,7 9, Dec/07 5,7-7,4 4,5 11,25 63,9-13,4 140,8 21, Jan/ ,0 4,6 11,25 63,7-12,5 112,0-20, Feb/ ,7 4,6 11,25 62,7-12,7 106,6-4, Mar/08 5,9-8,6 4,7 11,25 63,5-12,0 108,1 1, Apr/ ,5 5,0 11,25 63,1-13,4 106,1-1, May/ ,9 5,6 11,75 61,2-14,8 108,7 2, Jun/08 6,0-7,9 6,1 12,25 59,8-14,6 107,2-1, Jul/ ,1 6,4 13,00 59,1-14,3 109,6 2, Aug/ ,6 6,2 13,75 58,6-17,2 109,9 0, Sept/08 6,3-7,6 6,3 13,75 63,4-6,9 108,4-1, Oct/ ,5 6,4 13,75 70,6 8,8 109,1 0, Nov/ ,6 6,4 13,75 70,2 8,8 120,3 10, Dec/08 5,1-6,8 5,9 13,75 74,5 16,6 148,1 23, Jan/ ,2 5,8 12,75 71,1 11,6 113,7-23, Feb/ ,5 5,9 12,75 70,1 11,8 113,2-0, Mar/09 3,1-9,0 5,6 11,25 69,7 9,8 111,0-1, Apr/ ,9 5,5 10,25 68,1 7,9 110,0-0, May/ ,8 5,2 10,25 65,0 6,2 114,7 4, Jun/09 1,3-8,1 4,8 9,25 63,2 5,7 112,1-2, Jul/ ,0 4,5 8,75 63,0 6,6 113,3 1, Aug/ ,1 4,4 8, ,5-2, Sept/ ,3 8, Rate of Change (%) (4) Rate of Change (%) (7) (continue) 3

4 BRAZILIAN ECONOMY MONTHS AND YEARS PUBLIC SECTOR BORROWINGS REQUIREMENTS (6) (% of GDP) (Central Bank) NET PUBLIC SECTOR DEBT (% of GDP) (Central Bank) Industrial Production Index (Base: 2002 = 100) Growth Rates (%) (IBGE) Industrial production (1) INDUSTRY Selected macroeconomic variables Dec/96-Sept/09 Industrial productivity (7) Industry Capacity Utilization (%) (IBRE) (8) Growth Rates (Secex/MICT) International Reserves (International liquidity concept) (US$ millions) (Central Bank) Dec/96 0,09 33,3 83,87 1,7-84,0 2,7 6,7-2,98 1,28 1, Dec/97 0,98 34,5 81,16 3,9-83,2 11,0 15,1-4,16 2,13 2, Dec/98-0,01 42,6 79,26-2,0-81,0-3,5-6,2-4,24 3,66 0, Dec/99-3,13 49,7 86,06-0,7-81,5-6,1-14,9-4,32 4,87-0, Dec/00-3,56 48,8 92,66 6,6-82,7 14,7 13,8-3,76 5,08-1, Dec/01-3,67 52,6 86,69 1,6-10,7 80,2 5,7 0,1-4,19 4,06 0, Dec/02-3,96 55,5 93,75 2,7-9,9 80,9 3,7-15,4-1,51 3,29-1, Dec/03-4,37 57,2 98,23 0,4-6,9 81,9 21,1 2,3 0,75 1,83-2, Dec/04-4,59 51,7 106,41 8,3-6,6 84,4 32,0 30,0 1,76 2,73-4, Dec/05-4,83 46,5 109,34 3,1-5,1 83,7 22,6 17,2 1,58 1,71-3, Dec/06-3,88 44,0 109,65 2,8-8,1 84,4 16,2 24,1 1,27 1,76-3, Oct/07-4,19 43,2 136,83 5,3 8,0 87,0 15,9 28,4 0,40 2,81-3, Nov/07-4,21 42,4 130,47 5,5-4,0 87,2 16,6 29,3 0,19 2,75-2, Dec/07-3,97 43,9 116,58 6,0-8,3 86,7 16,8 32,1 0,12 2,59-2, Jan/08-4,14 41,9 118,75 6,3 3,0 84,3 17,0 33,4-0,16 2,73-2, Feb/08-4,18 42,0 114,18 6,8-3,8 84,7 17,8 36,6-0,32 2,65-2, Mar/08-4,47 41,2 123,04 6,6 5,9 85,2 16,3 36,0-0,64 2,64-2, Apr/08-4,25 40,9 124,96 7,0 1,4 85,1 15,3 38,0-0,97 2,63-1, May/08-4,35 40,6 128,53 6,7 1,5 85,6 16,5 40,0-1,00 2,65-1, Jun/08-4,24 40,5 129,51 6,7 0,8 86,3 18,9 43,8-1,22 2,09-0, Jul/08-4,33 40,7 136,50 6,9 4,1 86,1 22,6 46,0-1,29 2,03-0, Aug/08-4,37 40,5 135,10 6,4-1,0 86,6 24,5 48,2-1,44 2,18-0, Sept/08-4,55 37,8 136,17 6,8 0,3 86,3 27,0 50,7-1,63 2,46-0, Oct/08-4,47 36,2 138,29 5,9 0,6 86,3 26,3 50,3-1,68 2,47-0, Nov/08-4,27 34,9 122,10 4,8-9,6 85,2 24,5 46,0-1,63 2,42-0, Dec/08-3,68 38,8 99,40 3,1-15,3 80,6 23,0 41,9-1,79 2,86-1, Jan/09-3,20 36,9 98,00 1,0 1,8 76,7 19,2 35,8-1,75 2,74-0, Feb/09-3,03 37,1 94,98-1,0-0,9 77,0 15,3 27,6-1,71 2,88-1, Mar/09-2,83 40,6 111,06-1,9 15,0 77,1 15,0 24,4-1,56 2,84-1, Apr/09-2,55 41,4 106,44-3,9-3, ,8 18,0-1,38 2,88-1, May/09-2,29 42,6 114,14-5,1 6,5 78,7 4,9 9,2-1,47 3,02-1, Jun/09-2,04 43,3 115,41-6,5 1,3 79,0-0,6 0,3-1,33 2,97-1, Jul/09-1,77 44,0 122,80-8,1 5,9 79,8-7,5-7,7-1,30 2,84-1, Aug/09-1,59 44,0 125,38-8,9 1,5 81,6-12,9-15,3-1,28 2,64-1, Sept/ ,8-18,6-21,5-1,23 2,28-1, SOURCE: IPEA. IBGE. Central Bank. DIEESE. FGV. IBRE. Macrométrica. (1) Percentage change of the last 12 months in relation to previous 12 months. (2) Quarterly rate of investment (at 1990 prices). Rate calculated by the ratio between the index of real Gross Capital Formation and the index of real GDP (both seasonally adjusted fixed base indexes). (3) Individuals who effectively sought for employment in the thirty days prior to the interview and had not worked in any kind of job. (4) Percentage change in relations to the same month of previous yar. (5) R$/basket of 13 currencies: Eurozone, USA, Japan, Argentina, China, South Korea, Russia, Canada, Uruguay, Paraguay, Chile, Mexico, and United Kingdom. (6) Refers to past 12 months. (7) Base: previous month. (8) Monthly data. Exports (1) Imports (1) Current account balance (6) EXTERNAL SECTOR % of GDP (Central Bank) Direct investments (6) Transactions not covered by direct investments (6) Total External Debt (US$ millions) 4

5 5 ECONOMY OF THE STATE OF RIO GRANDE DO SUL Selected variables May/07-Sept/09 MONTHS AND YEARS GDP (1) INDUSTRIAL PRODUCTION Fixed Base Index (4) Monthly Index (5) Accumulated in the Year (6) ICM (State value-added tax) (R$ millions) Industry Wholesale Trade Retail Trade Total PRICE INDEXES IEPE (7) CUB (Basic Unit Cost) (R$) May/07-118,51 109,31 108,70 468,1 243,9 103,0 970,4 87,19 913,28 Jun/07-108,10 106,78 108,37 415,1 323,5 128,0 993,3 88,10 919,60 Jul/07-112,43 108,99 108,46 401,5 281,8 120,8 926,8 88,81 942,88 Aug/07-113,04 106,48 108,20 513,2 236,3 135, ,1 88,95 945,05 Sept/07-100,21 101,59 107,48 434,1 297,5 138, ,5 89,00 948,23 Oct/07-115,45 109,56 107,69 466,6 288,9 132, ,4 89,03 951,56 Nov/07-110,37 106,87 107,62 550,4 320,1 130, ,5 90,04 953,61 Dec/07 7,0 98,53 105,22 107,43 509,5 340,0 121, ,9 90,76 957,09 Jan/08-102,86 108,95 108,95 520,0 336,8 219, ,3 91,71 957,57 Feb/08-105,86 112,17 110,56 511,9 308,3 139, ,0 91,48 959,14 Mar/08-113,20 99,04 106,22 514,4 280,7 117, ,9 92,09 964,44 Apr/08-120,91 107,59 106,59 523,5 368,0 137, ,1 92,77 967,72 May/08-114,61 96,70 104,39 492,2 392,1 129, ,8 94,23 969,38 Jun/08-115,69 107,02 104,83 651,0 303,1 156, ,2 95,53 981,24 Jul/08-119,12 105,95 105,00 449,0 431,3 146, ,7 96, ,71 Aug/08-114,87 101,61 104,56 536,3 340,2 144, ,6 96, ,38 Sept/08-116,12 115,87 105,73 575,8 390,2 154, ,5 96, ,99 Oct/08-118,38 102,53 105,39 547,6 416,4 128, ,5 97, ,21 Nov/08-99,17 89,85 103,95 538,0 482,3 136, ,3 98, ,22 Dec/08 3,8 81,68 82,89 102,35 508,2 368,8 131, ,8 98, ,27 Jan/09-81,60 79,32 79,32 651,5 304,8 194, ,0 98, ,83 Feb/09-84,17 79,51 79,42 531,3 264,6 129, ,4 99, ,34 Mar/09-101,90 90,01 83,15 513,9 276,8 132, ,7 99,61 - Apr/09-104,50 86,42 84,04 666,3 303,1 119, ,4 100,00 - May/09-105,32 91,89 85,65 631,7 284,8 137, ,6 100,44 - Jun/09-104,71 90,50 86,49 554,0 287,5 156, ,8 100,86 - Jul/09-110,02 92,36 87,37 552,8 283,0 149, ,1 100,83 - Aug/09-108,28 94,26 88,24 585,2 295,7 148, ,5 100,51 - Sept/ ,3 293,8 156, ,3 100,86 - (continue)

6 6 ECONOMY OF THE STATE OF RIO GRANDE DO SUL Selected variables May/07-Sept/09 MONTHS AND YEARS BALANCE OF OPENED POSITIONS AND LAYOFFS UNEMPLOYMENT AT RMPA (Porto Alegre Metropolitan Region) Unemployment Rate (%) Open Total AVERAGE REAL EARNINGS AT RMPA (2) Occupied (8) Wage Earners (9) ELECTRICAL ENERGY CONSUMPTION (3) (mwh) Industrial Total EXPORTS (US$ 1 000) May/ ,6 14, Jun/ ,8 14, Jul/ ,3 13, Aug/ ,0 13, Sept/ ,6 12, Oct/ ,5 12, Nov/ ,2 11, Dec/ ,7 11, Jan/ ,4 11, Feb/ ,3 11, Mar/ ,7 11, Apr/ ,0 12, May/ ,2 12, Jun/ ,7 11, Jul/ ,7 11, Aug/ ,3 11, Sept/ ,3 11, Oct/ ,9 10, Nov/ ,7 10, Dec/ ,4 9, Jan/ ,6 10, Feb/ ,8 10, Mar/ ,0 11, Apr/ ,7 12, May/ ,1 12, Jun/ ,5 12, Jul/ ,2 12, Aug/ ,8 11, Sept/ ,4 11, SOURCE: FEE. IBGE. MICT. PED-RMPA. Finance Department-RS. IEPE. SINDUSCON. Ministry of Labor and Employment. (1) Refers to the annual growth rate. (2) Prince index used: IPC-IEPE. Values in R$ as of Aug/09. (3) Refers to the total energy consumption data released by the three main power providers in the State (RGE, AES-SUL and CEEE). (4) Base: average 2002 = 100. (5) Base: same month of previous year = 100. (6) Base: same period of previous year = 100. (7) Base: Apr/09 = 100. (8) Excluding wage earners and domestic wage earners employees who had not received their wages during that month, family workers who do not receive wages, and workers who are paid exclusively in cash or in kind. (9) Excluding wage earners who had not received their wages during that month and domestic employees.

7 7 Laborers with flexible contracts in the Metropolitan Area of Porto Alegre: adverse conditions of labor Flexible labor contracts, also known as atypical labor, have intensified and grown since the 1990s. These contracts are tied with business strategies of outsourcing and reducing labor costs, in a context of restructuring production and changes in labor organization. The labor workers with flexible contracts include wage-earners without a signed labor card, and outsourced and autonomous wage-earners working for a company. Therefore, these workers are different from the traditional workers (wage-earners with legal and direct labor contract) and even from the traditional informal market. An evaluation of the characteristics of this segment of labor in the Metropolitan Area of Porto Alegre between 1993 and 2008 shows that it is the only segment that showed relative growth. Its proportion in relation to the total population of employed laborers increased from 8.8 to 14.4%. But the evaluation also shows that this segment has the most adverse working conditions in the market. To be sure, comparison of the different segments shows that flexible labor was the most unstable. It had an average of three years of employment, versus six years for standard contracted labor. It had the lowest degree of social security, with only 60.0% actually paying social security, and it had the lowest real average earnings: 33.7% lower than standard contracted labor. These figures show that flexible contracts are here to stay and show the adverse conditions to which these workers are subjected. It is important to remember social inclusion when dealing with labor market problems. Distribution of labor contracts according to selected indicators for the Metropolitan Area of Porto Alegre Jul/92-Jun/94 and Jul/06-Jun/08 LABOR CONTRACT % OF TOTAL JOBS Jul/92- -Jun/94 Jul/06- -Jun/08 % NOT PAYING SOCIAL SECURITY Jul/92- -Jun/94 Jul/06- -Jun/08 AVERAGE DURATION OF EMPLOYMENT (months) Jul/92- -Jun/94 Jul/06- -Jun/08 REAL AVERAGE EARNINGS (1) Jul/92- -Jun/94 Flexible contract Formal employment Jul/06- -Jun/08 Informal SOURCE: PED-RMPA - Partnership FEE, FGTAS/SINE-RS, SEADE-SP, DIEESE and supported by PMPA. (1) Inflation calculated based on the consumer price index (IPC-IEPE); values in R$ for May/08. Mirian de Toni (FEE/CEES) Rio Grande do Sul ranked second worst in schooling for children aged four to five years There is a consensus among educators that access to early education, i.e. kindergarten for children aged zero to three years, and preschool education, for children aged four to five years, is fundamental for the development of children independently of social status. Basic education (kindergarten through high school) is aimed at addressing physical, psychological, intellectual, and social needs of children and preparing them for later stages of school life. With this in mind, the Government created the Fund for the Maintenance and Development of Basic Education (called Fundeb), which has ensured the financing of basic education in the country and improved enrollment (which is historically poor in early education). The national household survey for 2008 shows that in Brazil the population enrolled in school relative to the actual population of their age group for children aged four to five years is 72.8%. In absolute numbers, this means there are approximately 1,568,400 children without access to education. The breakdown of the percentages per state is diverse, with the best numbers in Ceará (88.4%), Piauí (85.7%) and Roraima (81.9%). Rio Grande do Sul is at the second to last position in the ranking. The percentage of children in early education is only 49.0%, which means that 146,500 children aged four to five years are not in school at an important age for the development of their rights as citizens. The last place was the state of Rondônia, with 43.6%. School enrollment for children aged four to five years in selected states and in Brazil 2008 DESCRIPTION POPULATION (1,000 people) STUDENTS ENROLLMENT ENROLLED (%) (1,000 people) Ceará Piauí Roraima Rondônia Rio Grande do Sul Mato Grosso SOURCE: PNAD, Salvatore Santagada (FEE/CIE)

8 8 Decrease in exports to Argentina The global financial crisis has caused Argentina to adopt tough measures against trade with Brazil. Some of the measures include increasing bureaucracy in import accreditation, minimum pricing for some imports, antidumping investigations, and agreements of voluntary restriction to exports with trade partners. These measures show the advancement of post-liberal regionalism in Argentina, with increasing resistance to an open economy and to intra-mercosur block liberalization. As a result, in 2009 the trade barriers imposed by Argentina have already affected 14.0% of Brazilian exports to its neighbor. In 2008, the measures had affected 4.3% of exports. With increasing complaints from the Brazilian Government and from the affected sectors of the economy, the Argentinean Government has proposed negotiations with specific sectors between businesspeople of both countries. The goal was to establish voluntary decreases in Brazilian exports to those sectors where our economy competes with Argentina. The sectors that have suffered the most from the measures are footwear, textile and apparel, auto parts, broach manufacture, wood furniture, kitchen and laundry domestic appliances, and cellulose and paper. Furniture and footwear are two of the most important items in Rio Grande do Sul exports, and they reached their agreements with Argentina during the first semester of In the case of wood furniture, Brazilian manufacturers accepted a 35.0% reduction in exports in relation to the U$ 155 million exported in The footwear agreement established a quota of 15 million pairs of shoes per year until 2011, which represents a 19.0% reduction in comparison to the 18.5 millions of pairs exported in Since Argentina has been trying to protect its national footwear industry for years, some of the Rio Grande do Sul footwear companies, such as Paquetá, Vulcabrás/Azaléia, and Dilly have chosen to install, duplicate or buy manufacturing plants in Argentina in order to evade the trade barrier. An evaluation of footwear and furniture exports from Rio Grande do Sul to Argentina in the present decade shows that the values of exports had strong fluctuations in the period, especially in 2002 when Argentina decided to drop the monetary policy of pegging the peso to the dollar. Neither the footwear nor the furniture sector were able to recover to 2000 exports values, while Chinese exports are continuing to gain market shares in Argentina in these sectors. From January to September 2009, the exports of footwear and furniture from Rio Grande do Sul to Argentina have decreased 14.5 and 53.0%, respectively. The decrease in exports for footwear was not as bad as the total losses of exports from Rio Grande do Sul to Argentina, which amounted to 27.6%. The losses in furniture were, obviously, worse. Nonetheless, the total losses in Rio Grande do Sul exports to Argentina are still below the national losses for the same period, 39.9%. PERIOD Footwear and furntiture exports from RS to Argentina 2000-Sept/09 FOOTWEAR Value % (US$ FOB) FURNITURE Value % (US$ FOB) Jan-Sept/ Jan-Sept/ SOURCE: MDIC/Aliceweb. Beky Macadar (FEE/CEES) FEE s MONTHLY LETTER (with information up to ). ISSN FEE s MONTHLY LETTER does not express an official position of the Foundation or of the Planing and Management Secretary, the editorialists are responsible for their opinions. President: Adelar Fochezatto Technical Director: Octavio Augusto Camargo Technical Director Conceição Administrative Director: Nóra Angela Gundlach Administrative Director: Kraemer Monthly Letter s Editorial Board: Octavio Augusto Camargo Conceição, Adalberto Alves Maia Neto, Roberto da Silva Wiltgen and Sônia Unikowsky Teruckin. Nucleus of data: Marilene Gauer (coordinator), Ana Maria de Oliveira Feijó and Jussara Lima do Nascimento. English translation: Augusto Buchweitz. Fundação de Economia e Estatística Siegfried Emanuel Heuser Rua Duque de Caxias, 1691 Porto Alegre - CEP conjuntura@fee.tche.br EDITING Supervision: Valesca Casa Nova Nonnig. Secretary: Vera Lúcia Pires Dalberto. Expedition: Lisete Maria Girotto. Proofreading Coordination: Susana Kerschner. Readers: Maria Inacia Flôr Reinaldo and Sidonia Therezinha Hahn Calvete. Electronic Editing Composition, diagramming and final art: Cirei Pereira da Silveira, Denize Maria Maciel, Ieda Terezinha Koch Leal, Rejane Maria Bondanza Lopes. Checking: Jose Antonio da Silva, Lourdes Teresinha dos Santos and Vera Sonia Silva de Castro. Printing: Cassiano Osvaldo Machado Vargas and Luiz Carlos da Silva.