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Agribusiness exports grow 65% in February

Soy export in Paranaguá — Foto: Fabio Scremin/APPA
Soy export in Paranaguá — Foto: Fabio Scremin/APPA

Brazilian agribusiness exports reached $10.51 billion last month, 65.8% more than a year earlier and a new record for February, according to data from the Secretariat of Foreign Trade (Secex) compiled by the Ministry of Agriculture. So far, the best February ever had been 2019.

Both the average prices of exported products and volumes increased and helped the result — rising 24% and 33.7%, respectively. As a result, the share of agriculture in Brazil’s total exports grew again and reached 45.9%. In February 2021, the share was 38.7%.

The sector’s trade balance saw a surplus of $9.2 billion, as imports dropped 2.1% in February, to $1.25 billion, despite the increase in average prices of several imported products, such as wheat, malt, salmon and palm oil.

Imports compiled by the ministry do not consider inputs used in the sector, but it released a balance of purchases of these products in February – fertilizer imports increased 124.1%, to $1.63 billion. The average price grew 128.7% in the period.

“It is important to point out that, in February, the survey of international fertilizer prices carried out by the World Bank indicated an average price increase of almost 100% in the last 12 months. To clarify this point, the volume of fertilizers imported by Brazil was about 2% lower compared to February of the last two years (2021 and 2020): from 3 million tonnes in February 2021 to 2.94 million tonnes in February 2022,” the ministry said. The main fertilizer suppliers to Brazil were Russia, Canada, China, Oman and Qatar.

The positive performance of agribusiness exports in February was driven by shipments of soy beans, fresh beef, green coffee, soy meal, fresh chicken and wheat, the latter a product that typically makes up the country’s import basket.

The volume of soybeans exported was a record in February, with 6.27 million tonnes, up 137% compared to the same period last year, when 2.6 million tonnes were shipped.

The value of these shipments saw an even more expressive increase, 203%, to $3.1 billion from $1 billion. The average price per tonne increased 28%, to $501 from $392.

China is the largest importer of soybeans from Brazil. In February, the Asian country increased the amount purchased by 130%, reaching 4.3 million tonnes, about 69% of all Brazilian soybeans sold to the world. The amount paid for the product increased 186.6% year over year and stood at $2.17 billion.

With the normalization of sales to China, exports of fresh beef grew by 75.1%, reaching $965 million. The volume exported increased by 42%, and the average export price grew by 23.3%.

China doubled the value of purchases compared to February 2021, to $546.49 million and 87,100 tonnes from $261.79 million and 56,410 tonnes.

Foreign sales of chicken meat rose 26%, to $643.11 million. The increase in the average export price was 18.8%, and 6% in the volume exported.

Brazilian exports of green coffee increased 83.5% in price. Brazil exported 208,500 tonnes, up 9.1% from 2021.

The ministry also highlighted wheat in the list of the main products exported. “The grain exports exceeded imports: $246.3 exported (836,600 tonnes), compared to $141.58 million imported (498,800 tonnes).”

According to a report by the Center of Advanced Studies on Applied Economics (Cepea) of the Luiz de Queiroz College of Agriculture (Esalq/USP), the favorable conditions of international prices and the greater external acceptance of wheat with lower pH, a characteristic of the local product, have driven the increase seen in Brazilian exports.

Source: Valor International

https://valorinternational.globo.com

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Manufacturing industry worsens deficit; exports lose sophistication

Helping the manufacturing industry rebound from the pandemic | World Economic Forum

While the trade balance as a whole ended 2021 with a record surplus, the manufacturing industry saw its deficit deepen to $53.3 billion, the worst result since 2014. In the pre-pandemic period, in 2019, the negative balance was $42 billion, according to data from the Institute for Industrial Development Studies (IEDI).

In another type of calculation, by product class, a survey by the Brazilian Foreign Trade Association (AEB) shows that the deficit in manufactured goods reached $111 billion last year, the worst since at least 2000. The difference is almost $40 billion compared to 2019, when the deficit in this calculation was $82.7 billion.

The deficit in the manufacturing industry last year deepened even with the 26.3% increase in sector exports compared to 2020. In comparison with 2019, there was also a rise: 14%. Imports, however, grew at a faster pace. From 2020 to last year, it was up 35.1%.

“It is also necessary to point out that there is a low basis for comparison,” points out economist Rafael Cagnin, with IEDI. Even before the pandemic, he recalls, in 2019, exports from the manufacturing industry fell by 5.2% against the previous year, under the effects of the trade conflict between the U.S. and China and the already weakened Argentine economy.

More than the size of the deficit, says Mr. Cagnin, what is more, worrying is the sharp deterioration in sectors with greater technological intensity, important not only for providing economic dynamism but also for greater insertion in global production chains. IEDI’s series since 1997 shows that in 2013 the manufacturing industry had the worst deficit ($65.3 billion).

In that year, the medium-high and high-tech sectors accounted for 36.1% of total manufacturing industry exports. Last year the share was 27.6%. In these two technological bands are the aircraft, pharmaceutical, automobile and electrical machinery and material industries, among others.

High technology, specifically, highlights Mr. Cagnin, fell to 3.9% from 6.4% in the same period. In this group, he says, the aircraft industry is still experiencing the overall effects of the Covid-19 pandemic. The scenario shows, however, that the loss of space on the scale had already been happening before.

Mr. Cagnin draws attention to a kind of “mirroring” in the data related to the composition of the import and export agenda according to technological intensity. While 72.4% of manufacturing industry exports are of low and medium-low technological intensity goods and less than 30% are of high and medium-high technology, the opposite is true for imports. In the list of imports, 71.6% are typical goods from the medium-high and high technology industry, and the rest are medium-low and low technology.

“This pattern reflects lags in technology and innovation that have become more pronounced in recent years and that could become even more pronounced,” warns Mr. Cagnin. He recalls that the world is currently undergoing a process of transformation, such as digitalization, which redefines the technological standards that are used in the rest of the world and result in greater competitiveness.

For Mr. Cagnin, integrating into global value chains is crucial to keep in line with this evolution. For this, he says, an environment of modernization and technological innovation is needed, as well as conditions for this insertion. It is necessary, he argues, to advance in the competitiveness and trade integration agenda, which involves the discussion of old and unresolved issues (tax overhaul, for example), as well as new debates related to the technological race and the policies aimed at it.

Trade integration, says Mr. Cagnin, demands a commercial opening that should generate not only imports but also exports. An opening that goes beyond tariff issues, but that allows the country to be in harmony with various regulations, such as phytosanitary and technical standards, traceability mechanisms, seals, and certifications. “There is an opportunity to advance in this integration and set foot in the changing world.”

For Livio Ribeiro, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and a partner at the BRCG consultancy, the IEDI data show that Brazil’s strategic position in terms of sectors, comparative advantages, and value-added research and development is very limited to specific segments that have a more global reach. “Furthermore, in the aggregate, our export-oriented manufacturing industry has an overly regional tone. In addition, there is a mid-chain industry that is not competitive in the world and is increasingly less competitive in our region.” A reflection of this, he says, is the loss of market in South America to Asian countries.

For Mr. Ribeiro, it is necessary to assess which sectors may be able to compete and could be the target of a policy in this respect. However, he says, this needs to be done carefully, which allows the sector to walk in its own ways. The evaluation, he defends, should consider the industry in a broad way, with a view to the best cost-benefit for the country.

The data compiled by AEB, based on a survey by the Foundation for Foreign Trade Studies Center (Funcex), also show that the loss of share of manufactured goods in total Brazilian exports is a long-standing phenomenon. In 2011, they accounted for 36.1% of shipments, a share that dropped to 27.4% last year. It was the basic products that advanced in the period, to 59.4% from 47.8% of Brazilian exports, almost seven percentage points more than in 2019. Semi-manufactured products had a very similar share, to 13, 2% in 2021 from 14.1% in 2011.

AEB’s president José Augusto de Castro points out that the share of manufactured goods was the lowest since 2000. The greater shipment of basic goods, a class made up mainly of agricultural and metallic commodities, is due to the high Brazilian productivity in these sectors, which has provided robust trade surpluses for the country. He argues, however, that greater conditions of competitiveness are needed to stimulate the export of manufactured goods with higher added value, which would also contribute to the generation of more jobs in the country.

Haroldo Ferreira, executive president of footwear industry association Abicalçados, says that exports contributed to the recovery of the sector last year. According to the association, the shipment of Brazilian shoes rose 32% in volume in 2021 compared to the previous year. In values, the high was 36%. The biggest foreign market was the U.S.

Daiane Santos, an economist at Funcex, points out that it is necessary to look at the main export destinations for manufactured goods. China, despite being Brazil’s main trading partner, with 31% of Brazilian shipments in 2021, consumed only 2.3% of exported Brazilian manufactured goods. The main buyer of goods in this class was the United States, which absorbed 21.6% of manufactured goods. Argentina was left with 12.9%. In total Brazilian exports in 2021, the two countries had a share of 11% and 4%, respectively.

Source: Valor International

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Brazil loses lead in exports bound for Argentina

Argentina desobriga teste PCR para brasileiros vacinados

Brazil lost in 2021 the historical crown of exports bound for Argentina. After a technical draw in 2020, China surpassed Brazilian sales to Argentines by more than $1 billion last year. The Asian country’s achievement is unprecedented, records from the Argentine government since 2002 show.

China had already been ahead of Brazil by a few months in the last two years. In the full year 2020, China “won” by a difference of under $10 million, which left the Asian country and Brazil with an equal 20.4 percent share of Argentina’s $42.4 billion in total imports. Last year, the Chinese lead became clear.

With a total of $13.5 billion shipped last year to Argentina, the Chinese have accelerated exports and will hold just over a fifth – 21.4% – of Argentina’s foreign purchases in 2021, compared with 14.3% in 2011. Brazil increased its shipments to the neighboring country last year, but not at the same pace. With shipments of $12.4 billion, or 19.6% of Argentina’s import share in 2021, Brazil has lost ground in the last decade. In 2011, the country held 30% of the foreign purchases of the Mercosur partner. The data are from Indec, Argentina’s official statistics agency.

The Chinese have come to stay in first place in the ranking of suppliers to Argentina, experts say. “We must get used to this reality. We took Argentina’s market for granted,” said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). “And China will maintain its effort to gain markets, whether they are close or geographically distant.”

Last year, the sale of Chinese goods to Argentina rose 56.3%. The pace was much faster than Argentina’s total imports average growth of 49.2%. Brazilian exports to the neighboring country grew 43.3%. Among the main products exported by China to Argentina last year were vaccines, certainly driven by Covid-19. The records show, however, that the Asian country’s advance is not cyclical. It is a growing trend over more than a decade.

Well before overtaking Brazil, China took from the United States, in 2010, the position of second largest supplier to Argentina. That year, Argentina imported $6.1 billion from the U.S. and $7.7 billion from China. Brazil still led the pack, with $18 billion imported by the neighbor. In the following year, Brazilian exports to Argentina peaked at $22.2 billion, more than double the $10.6 billion sold by the Chinese.

In the following decade, however, this situation gradually changed. Following Argentina’s economic roller-coaster ride since then, both Brazilian and Chinese shipments to the country of Diego Maradona – and Alfredo Di Stéfano and Lionel Messi – saw ups and downs. But in each recovery of the Argentine economy, the Asian country’s appetite was greater and Argentina absorbed products made in China at a faster pace than those of Brazilian origin. The difference in shipments became smaller and smaller, until the technical draw in 2020, when the Chinese sold $8.66 billion in goods to Argentina, while Brazilians exported $7.6 million less. Last year, with a new and more vigorous start from China, Brazil lagged behind.

Considering broader factors, Brazil may have been even more favored last year than China in exports to Argentina, Mr. Castro said. That’s because most Brazilian goods imported by Argentina are transported by roads, so they felt less the logistical supply shocks that hit ships and containers needed for the goods to cross the sea from Asia. Moreover, Mr. Castro said, Brazilian shipments were also favored by the high prices of iron ore, one of the five Brazilian items most exported to Argentina last year.

Welber Barral, a consultant and a partner at BMJ, highlights that due to the relatively low exports from Argentina to China, their bilateral trade resulted in a deficit of $7.4 billion for Argentina in 2021. With Brazil, which typically imports higher values, the negative balance was much smaller, at $665 million. “The trade deficit is important at this moment for Argentina, given the more complicated scenario of their external sector,” he said. Even so, Argentina has not stopped buying more Chinese products.

“Some people said that the Common External Tariff would create a protection for intra-bloc trade, but this was not enough,” Mr. Barral said, referring to the set of tariffs charged when a country in the Southern Common Market (Mercosur) imports products from non-members. Brazil’s official figures also show that the trade relations with the bloc’s partner have lost steam. In 2010, the neighboring country accounted for 9.2% of total Brazilian exports. In 2018, the share fell to 6.4% and has not recovered further. Last year it was 4.2%.

The strengthening of the China-Argentina trade relations is not an outlier, said the economist Livio Ribeiro, a researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and partner at BRCG Consulting. “China has been advancing in the provision of industrial goods to Latin America as a whole since the mid-2000s, and in the last decade products made in China have invaded the region,” he said. This simply shows that China is more competitive, according to him. “It is hard to see a scenario in which the space it occupies does not increase. Right now, I can’t imagine something that would lead to a stagnation of Chinese expansion” in the region.

And it’s not just about China’s advance taking space from Brazil in the region’s markets, Mr. Barral said. In last year’s data, the former Brazilian foreign trade secretary said, other Asian countries such as Indonesia, Thailand and Korea increased their exports to Argentina at a rate above the average. These values are smaller, but form a representative set and show that the recovery of Brazilian shipments with the recovery of the economy expected for the region will face competition from Asia as a whole and not only from China. According to Indec data, the import of Thai products by Argentina totaled $1.6 billion in 2021, up 54% year over year. Imports of Korean products totaled $648.3 million, up 77.4% year over year.

As for the products, more than half of what China exported to Argentina last year were capital goods plus parts and pieces. The Asian country is furthest ahead in this category. Brazil still exports more intermediate goods and vehicles to Argentina, something that is based, experts indicate, on the integration of the two countries in the Mercosur.

Of the $13.5 billion that the Argentines bought last year from China, $4.3 billion were capital goods and $2.7 billion were parts and pieces for this category of use. Brazil exported, respectively, $1.6 billion and $2.4 billion, considering a total of $12.4 billion in exports to the Mercosur partner.

“Brazil is losing ground in machinery and equipment. This means that Argentina may even remain as the largest importer of industrialized products from Brazil, but in an increasingly less representative way. Even as Argentina is recovering in capital goods purchases, there hasn’t been a greater absorption of Brazilian products,” Mr. Barral said.

According to data from Argentina’s Indec, imports of capital goods in 2021 rose 38.1% year over year on average. The purchase of products in this category from China went well beyond, with an increase of 56.4%. Imports from Brazil in this category rose 17.6%. Mr. Barral believes that, in addition to competitiveness issues, the lack of financing lines that encourage exports of machinery and equipment to the neighboring country affects Brazilian performance.

Source: Valor international

https://valorinternational.globo.com/

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As Brazilian exports grow, China grabs larger share

Lia Valls — Foto: Leo Pinheiro/Valor
Lia Valls — Foto: Leo Pinheiro/Valor

Brazilian exports grew 34% year over year in value in 2021, more than offsetting the 5% loss reported in the previous year. The growth led to a record shipment of $280.6 billion last year, but had uneven distribution by destinations. The increase in shipments was almost all directed to China, which grabbed a larger share of Brazilian exports compared with before the pandemic. The Chinese share of the values shipped by Brazil rose to 31.3% last year from 28.7% in 2019. Asia as a whole advanced four percentage points in the same period, reaching 46% in 2021.

Exports to the United States, European Union and South America also grew last year compared with 2019, but at a lower rate than China’s 38,5% rise over the same period or than the average of Brazilian shipments, according to federal government data. With this, the American share in the value of Brazilian exports fell to 11.1% from 13.4%. The European Union had a small reduction, to 13% from 13.6%, but now holds the lowest share since official records began, in 1997. South America’s share shrunk to 12.1% from 12.6%. This is not the lowest share ever because last year, as the region’s economy suffered more due to the pandemic, its share was 10.8%.

The Foreign Trade Indicator (Icomex), which is surveyed by Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and considers the volume alone, excluding the price effect, shows growth in shipments to China. Even as there were slowdowns or even falls in some periods, the survey suggests that shipments to China are on the rise considering data since 2008, said Lia Valls, a research associate at Ibre. The volume exported by Brazil to the Asian country grew more than 360% in 2021 versus 2008, the Icomex shows. On the other hand, the volume shipped to the United States fell 18.6%, while exports to Argentina and the European Union dropped 30% and 28%, respectively, in the same comparison.

It is important to highlight the effect of volumes, Ms. Valls said, because the value shipped by Brazil last year grew predominantly by the price factor, driven by key items like agricultural and metal commodities. Iron ore had a prominent role. Still according to Icomex, the average price of exports rose 29.3% year over year in 2021. In volume, shipments increased at a much slower pace, 3.2%.

Structural and cyclical issues explain Asia’s largest share in Brazilian exports, said Livio Ribeiro, a researcher at Ibre and a partner at BRCG Economic Consultants. “The most structural issue is that we are developing an export agenda that is very complementary to the Asian value chain. This is true for China, which leads many of the region’s productive processes, but it includes other countries on the continent, such as Korea, Malaysia, Singapore and even Indonesia,” he said. That’s why the increase in export value in 2021 was not evenly distributed among the blocs, according to him. “About 90% of that margin went almost entirely to China.”

Brazil’s tariff structure for exports to the European Union, Mr. Ribeiro compares, is not very different from China, considering the prominent role of agricultural and metal commodities. “But Asia has been buying the incremental [volume], and this makes sense when you consider that China and Asia have been growing above the global average and the eurozone countries have been growing less than the United States.”

The long-term path in volumes follows similar logic, Ms. Valls said. The European Union has had much lower growth than Asia and the United States since the 2008 financial crisis, she recalled. The picture is similar to the recovery seen over the past year, after the first cycle of the pandemic, Mr. Ribeiro said, which is already the broader factor of the scenario, as Asia overcame the health crisis more quickly with the first variants of Covid-19 and resumed economic growth with more vigor.

In relation to South America, the Argentina factor weighs the most. For economists, there is no prospect of a faster recovery in the values exported to the region if there is no more sustained recovery of the Argentine economy over time. At the same time, Mr. Ribeiro said, there is also a reorganization of the automotive sector, with many factories settled in Argentina, which does not favor Brazil.

Source: Valor international

https://valorinternational.globo.com/

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Brazil to adopt unilateral retaliation in foreign trade

The Brazilian government will use an arsenal to apply unilateral retaliation against countries that were convicted of illegal measures on Brazilian exports, but use tricks to maintain restrictions, Valor has learned.

A provisional measure already approved in ministerial meetings, and currently in the Chief of Staff Office, authorizes the federal government to retaliate proportionally and unilaterally, in cases of litigation victories at the WTO, when the losing country makes the so-called “appeal in the void”.

This is what happened this week with India in the sugar dispute and with Indonesia at the end of 2020 in a dispute involving barriers to entry of chicken meat. Both countries appealed to the Appellate Body knowing that the mechanism is inoperative and cannot decide; hence the term “appeal in the void”. With that, in practice, they stop the Brazilian victory and maintain the measures considered illegal by the panel, which cost millions of dollars in losses to Brazilian producers.

India and Indonesia are thus potentially the first to be threatened when the provisional measure comes into force. Retaliation takes the form of surcharges on goods and services from the targeted countries, or suspension of intellectual property rights.

Sarquis JB Sarquis, secretary of Foreign Trade and Economic Affairs at the Foreign Affairs Ministry, known as Itamaraty, emphasized that “the current paralysis of the WTO Appellate Body is at the origin of the initiative conceived by Itamaraty, which aims both to protect the country’s legitimate commercial interests within the framework of the multilateral trading system and to promote the full functioning of the system based on the rules and fundamental principles of the WTO”.

“Once the WTO Appellate Body is back to normal, the initiative will have served its purpose,” he added.

In the same vein, the secretary of Foreign Trade at the Economy Ministry, Lucas Ferraz, stated: “We understand that it is a very important mechanism to face the current situation of appeals in a void. The Brazilian government is committed to the WTO reform process, as well as the timely restoration of its Appellate Body. We cannot condone the opportunistic use of the current situation, in clear detriment to our productive sector.”

Current WTO rules allow a country to apply trade retaliation if the convicted country fails to implement the recommendations of the Appellate Body, a kind of supreme court for international trade.

However, the Appellate Body is paralyzed, without any of its seven permanent judges, because Washington blocks the appointment of new arbitrators. As long as this legal fact (which no one had foreseen) persists, WTO members have the possibility to circumvent the condemnations established by the panel and avoid changing the measures considered irregular.

Brazil will now follow the example of the European Union, with the unilateral retaliation mechanism. As long as the Appellate Body does not function, and the convicted country does not participate in a parallel arbitration mechanism, Brasília will impose what negotiators call the precautionary principle to protect the interests of domestic producers.

A group of 25 WTO members, including the European Union (27 countries), tried to alleviate the problem of the Appellate Body blockade by creating a plurilateral parallel arbitration system. The disputes between its participants thus have a final decision. For example, the most recent dispute opened by Brazil, against the European Union, involving barriers to chicken meat in the European market, is guaranteed to have a decision implemented, because both participate in this plurilateral mechanism.

India and Indonesia do not participate in this plurilateral mechanism. In 2019, when Brazil denounced India for illegal policies to support the sugar sector, which affect international prices, the Itamaraty mentioned that expert estimates pointed to losses of up to $1.3 billion for Brazilian exporters per year.

In the case of Indonesia, calculations are that Brazil could sell up to 3,000 tonnes of chicken meat a year in the initial phase, if restrictions were lifted. But the Indonesian government has resisted for years.

Brazil won, without actually seen results, a dispute against the Asian country in 2017. A WTO panel found Brazil right that year. Indonesia had until July 2018 to implement the judges’ recommendations. It made some changes that Brazil considered insufficient.

Another panel was then formed to examine the implementation of the judges’ recommendations, and Brazil won again by proving that Indonesia maintained restrictions on Brazilian exports. Indonesia then appealed “to the void” in December 2020, knowing that the WTO Appellate Body does not work.

India and Indonesia are now among the countries that most subsidize agriculture in the world. And the paralysis of the WTO Appellate Body actually ends up benefiting them. “Brazil continues to work actively for the re-establishment of the Appellate Body and for the full development of WTO rules and reform, including in agriculture and subsidy disciplines, in accordance with terms and mandates established since the Uruguay Round,” said Mr. Sarquis.

The paralysis of the Appellate Body caused by the Americans “is very serious, it gives the impression that the U.S. no longer wants the WTO, as a system of rules and multilateral disciplines, agreed upon, applied, with a litigation process which obliges the losing party to comply” with the decision, notes Pascal Lamy, former WTO director-general.

He recalls that this obligation to respect decisions, under penalty of retaliation, is what distinguished the WTO from other organizations whose rules are more or less applied and in which the countries, when they lose a case before the International Court of Justice in The Hague, for example, keep the sovereignty to apply or not the result.

In Mr. Lamy’s view, the U.S. is obsessed with China and wants to be able to strike unilaterally without being tied to WTO rules and decisions of its Appellate Body. This American absence causes a degradation of the multilateral system, and more countries seek unilateral arsenals.

Source: Valor international

https://valorinternational.globo.com/

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Commodities dominate exports even in São Paulo

Commodities: o que é e como funciona?

Commodities are grabbing an increasing share of exports across nationwide. In all regions, products related to agribusiness or the extractive industries ended the year dominating foreign sales. Soybeans have become the champion of shipments in ten states, crude oil or oil products are in the lead in three federative units and iron ore is now the main product exported in three others.

According to data from the Secretariat of Foreign Trade (Secex), the share of the manufacturing industry in Brazilian exports shrank to 51.3% in 2021 from 63% in 2010. This category also covers agribusiness products that undergo some type of industrial processing, such as meat, pulp and refined sugar.

Even São Paulo, Brazil’s most industrialized state, has its export basket led by commodities. Sugar ($5.6 billion last year) and crude oil ($4.3 billion) — whose production has soared in recent years because of the pre-salt layer — are the two goods most sold abroad. Embraer aircraft, the first purely industry item, came in third and contributed $2.3 billion.

In Paraná, passenger vehicle — which come at the front among manufactured goods outside agribusiness or extractive industry — are only the eighth most exported product. Also in eighth are shoes in the state of Rio Grande do Sul. Both states had soybeans as a prominent product in 2021.

For economist Paulo Gala, professor at the School of Economics at Fundação Getulio Vargas, the fact that the Brazilian map is now dominated by commodities allows for two thoughts. First: no state manages to have a sufficiently sophisticated exports agenda to have highly technological products — instead of grains, oil or minerals — as sales champions. Second: the Brazilian industry is predominantly focused on the domestic market and still lacks greater global competitiveness.

In his view, only a few micro-regions of the country — around cities like Campinas, Piracicaba (both in São Paulo), Caxias do Sul (Rio Grande do Sul) and Betim (Minas Gerais) — managed to transform themselves into “islands” of innovation and productivity, with leading industries. No wonder, he adds, they are among the municipalities with the highest per capita income.

“Only a few hubs have sophisticated export-oriented industries driving the local economy, but these hubs don’t come to dominate a entire state,” Mr. Gala said. “What brings jobs, income and reduced inequality is the production of complex goods. They require research and development, technology, patents. Embraer, WEG and Marcopolo are counterexamples of our incapacity for commercial insertion in the world,” he said.

According to the professor, not even the weakened real since the beginning of 2020 has been enough to avoid the loss of space of the industry in exports, compared to agribusiness and mineral extraction. “The weakened real helps price competitiveness, not quality competitiveness. The real exchange rate is at its lowest level in the last 20 years, but we need a much heavier science and technology policy and industrial stimulus,” he said.

The domination of commodities has intensified, said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). He estimates the deficit in manufactured products at $70 billion to $80 billion. On Monday, Secex unveiled a record balance of $61 billion in the balance of trade last year – obviously counting all kinds of products, not only those related to industry.

In his view, Brazil is now excessively dependent on three products (soy, oil and iron ore), which represent around 40% of total shipments, and on a single market (China) that buys 32% of our exports.

“In the 1980s, people complained a lot about the dependence on the United States, but the American market absorbed around 25% of Brazilian exports and there was more product diversification. At that time, eight of the ten main export items were manufactured goods. Now, the top 15 are commodities.”

In descending order, the 15 main products sold by Brazil last year were: iron ore, soybeans, crude oil, refined sugar, beef, soybean meal, fuel oils, chicken meat, pulp, semi-finished products or ingots of iron and steel, coffee, gold, corn, cotton and copper.

Therefore, Mr. Castro links the recent trade balance surpluses to the favorable price environment, not to the support of public policies. “The Brazil cost is still very high and the government has ended Reintegra [a program that reimburses companies for part of the taxes paid along the production chain], in addition to having reduced resources for financing exports, under Proex.”

Source: Valor international

https://valorinternational.globo.com/

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