Brazil's trade balance for February surprised on the upside, posting a surplus of $3.0bn, the biggest for the month in the historical series. Trade balance on a year-to-date basis recorded a surplus of $4.0bn, as compared with a deficit of $6.0b in February 2015. Total exports (adjusted by working days), which grew 4.6% y/y in the month, mainly helped the improvement in the trade balance. Meanwhile, imports continued to decline significantly by 34.6% y/y.

On the export side, manufacturing sector was the main highlight where exports grew 9.6% y/y. Meanwhile, on the imports side the intermediate and capital goods sector continued to contract strongly by around 33% y/y of international goods purchases. On a year-to-date basis, exports have fallen 4.7%, whereas imports declined 35%.

"We forecast that for the whole year, exports will increase a marginal 5.0% (1.5pp driven by prices and 3.5pp by volume), while imports should decline 5.9%, which leads to a trade balance of $37bn (2.7% of GDP), up from $17.7bn last year (1.0% of GDP)", says Barclays.

The rebound in Brazil's external sector numbers is a positive development; however, it comes on the back of solid domestic demand recession. With large international reserves and far away from a balance-of-payment crisis, it seems pressures on currency can be alleviated. But the Brazilian real has been driven by medium-term worries of debt sustainability and political developments, which are expected to remain in the coming future.