A recent study by the Federation of Industries of the State of São Paulo (Fiesp) and the Brazilian Center for International Relations (Cebri) reveals a significant decline in Brazil’s market share in neighboring South American countries over the past decade.
This loss of competitiveness, particularly in sectors where Brazil enjoyed geographical and tariff advantages, has decreased approximately US$10.7 billion (R$52 billion) in exports to the region.
If Brazil had maintained its market share, it could have potentially increased its annual exports to neighboring countries by 30%.
The study highlights that China, among other countries, including the United States, India, and regional competitors like Paraguay and Argentina, has been a major contributor to displacing Brazilian exports in South America.
In fact, China’s increased global exports by 77% during the analyzed period, making it challenging for Brazil to counteract this trend.
The study also reveals a decline in Brazilian market share across various manufacturing sectors such as machinery, equipment, chemicals, plastics, iron, steel, and aluminum.
Additionally, Brazilian consumer goods purchases in South American countries have reduced by 27.6 percentage points over the past ten years.
The reasons for Brazil’s loss of weight in the region are attributed to both longstanding domestic competitiveness issues, such as inadequate infrastructure, difficulties in financing foreign trade, export taxes, and non-tariff barriers.
In contrast, countries like Chile, Peru, and Colombia in the Pacific Alliance have established agreements with global partners such as China, the United States, and Japan.
Argentina has pursued currency swap agreements and Chinese financing to address its chronic dollar shortage.
The study emphasizes the need for regulatory convergence in South America and removing technical trade barriers.
While China has enhanced its competitiveness across multiple sectors and addressed concerns about product quality, Brazil needs to unlock its potential by leveraging its logistical advantages in the region.
The recent approval of tax reform by the Chamber is considered a crucial step, as the implementation of value-added tax (VAT) will eliminate tax residues on Brazilian products competing in international markets.
Fiesp emphasizes the importance of further progress in regulatory cooperation between countries, with a focus on prioritizing essential product quality and safety requirements.
This approach would expedite the removal of technical barriers rather than engaging in time-consuming negotiations for specific regulations.
Addressing these challenges would enable Brazil to regain its competitiveness and strengthen its trade relationships with neighboring countries in South America, ultimately benefiting its export sector.