RIO DE JANEIRO, BRAZIL – The shrinkage of regional trade in the last decade made Brazil stop exporting US$56.2 (R$308) billion to South America in the last ten years. The conclusion is reported in a survey conducted by the National Confederation of Industry (CNI).
According to the study, Brazil’s share in imports from other South American countries (Brazilian exports to neighboring countries) fell from 14.5% in 2010 to 10.7% in 2019. Likewise, the subcontinent’s countries reduced sales here – Brazil absorbed only 7.4% of South American exports in 2019, down from 10.5% in 2010.
According to CNI, the shrinkage of bilateral trade mainly hurts the industry. This is because South America is the main destination for Brazilian manufactured goods sales, concentrating 38% of industrial exports. When considering only Brazilian exports to South American countries, manufactured goods account for 82%.
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In recent years, the drop in trade with Argentina, affected by successive economic and exchange rate crises, was the main reason for the retraction in Brazilian exports to South America. Of the total loss of US$56.2 billion, US$39.2 billion (69.8%) are concentrated in the neighboring country. Brazil also stopped exporting US$5.9 billion (10.5%) to Peru, US$5.3 billion (9.4%) to Colombia, and US$2.4 billion to Chile (4.3%).
Brazil’s trade with South America has shrunk simultaneously as the other countries on the subcontinent have filled space with other trading partners. From 2010 to 2019, imports from South American economies rose 12.9%, mainly from China, the United States, and the European Union.
Estimate
To arrive at the calculation of the US$ 56.2 billion trade loss, CNI estimated the value that Brazil would have exported if it maintained the share of 14.5% in imports from South American countries recorded in 2010. On the other hand, China’s share in South American imports rose from 15% to 20.8%. Under the same criterion, the United States percentage rose from 17.5% to 19.5%, and the European Union grew more timidly, from 12.3% to 13.6%.
In the division by sectors, the segments of machines and appliances and electrical or mechanical materials accounted for 37% of the value that Brazil missed out exporting to South America, with a reduction of US$12.5 billion and US$8.1 billion in the decade, respectively. Other industrial sectors registered substantial shrinkage, such as automobiles (-US$4.8 billion), aircraft (-US$3.2 billion), and organic chemicals (-US$2.5 billion).
Competitiveness and partnerships
In CNI’s evaluation, two factors explain the drop in exports to South America: the loss of competitiveness of the Brazilian economy and the paralysis of Brazil’s trade agreement agenda with neighboring countries. Concerning trade treaties, the paralysis stems from the lack of ratification of some Congress agreements and the lack of updating and expansion of those in force.
Among the treaties pending in Congress is the Free Trade Agreement with Chile. It was concluded in 2018, already enacted by the partner, and agreements on public procurement and trade facilitation between Mercosur countries. In contrast, South American countries have concluded agreements with the United States, the European Union, South Korea, Chile, Peru, and China.
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CNI calls for the continuity of Brazil’s economic reform agenda and the expansion of tariff preferences, and the thematic scope of the country’s trade agreements with its South American neighbors. It also demands official support measures for exports, such as the restitution of tax credits on exported goods, the modernization of tax agreements, and the transfer pricing law’s reform (prices charged between imports and exports of companies in the same group).
Brazil is hurting itself
To the world, Brazil mostly sells primary products, raw materials, such as soy, chicken and beef, cellulose, coffee ore. To South America, 82% of Brazilian exports are industrialized products, such as automobiles, tractors, engines, footwear, processed food, and beverages.
Compared with primary products, industrialized products trigger a much more extensive and complex production chain and generate more jobs, income, and tax collection. With high added value products, trade with its neighbors benefits small and large companies in Brazil, the cooperatives, the workers, and contributes to its universities, research institutes, science, and technology.
With information from Agencia Brasil