Brazil concerned with the concentration of its foreign trade: few products and volumes mostly to China

In the last ten years, up until 2021, Brazilian export to China grew at a greater rate that those to rest of the world. From 2012 to 2021, China’s importance as an export destination for the five regions in which Brazil is divided grew exponentially, and of the 27 federal states, 21 saw their sales to China grow above the expansion of their sales to the world. In the period, however, the export basket was negatively concentrated around a few primary products.

The conclusions are from the study “Exports from Brazilian States to China: Current Scenario and Prospects for Diversification”, by the Centro Empresarial Brasil China (CEBC), which shows that for 22 federative units, China’s participation as an export destination increased in the analyzed period. For 19 of them, the Asian country was the main destination for sales abroad in 2021.

Among the States that exported above the national average between 2012 and 2021 are: Rondônia (39.6%), Piauí (30.1%), Tocantins (26.2%), Amazonas (21.3%) and Acre (19 .8%).

“The last decade saw an extraordinary increase in Brazilian exports to China, which grew well above the average for Brazilian exports to the world. Our sales to China grew between 8% and 9% a year, while exports to the world reached 1.8%”, says Fabrizio Panzini, specialist in international trade and author of the study, noting that China grew from 17% to 31.3% in the list of trade partners with Brazil.

“This besides was accompanied by a strong concentration of products,” says Panzini. “The products in which the export basket hasintensified are: oil, iron ore and soybeans, which continue to dominate the export basket. Even when there was also more beef exports.”

According to Panzini, the ideal would be for Brazil to de-concentrate the export basket so that it becomes less dependent on prices on the international market and stimulates more production chains within the country. “When you depend on few products, you end up more affected by international price cycles and sanitary barriers. When you’re more unfocused, you’re a little more resilient,” he argues.

The study shows that the level of concentration of exports to China is higher than that of Brazil’s other main partners. The top ten Brazilian products sold to China represented, on average, 90.6% of everything Brazil sold to the country between 2012 and 2021.

Of the five regions of the country, only the South managed to de-concentrate its export basket. Among the States, only seven did so – Paraná, Santa Catarina, Rio Grande do Sul, Minas Gerais, Espírito Santo, Amazonas and Mato Grosso.

For Larissa Wachholz, senior at the Asia Desk of the Brazilian Center for International Relations (Cebri), the numbers in the report are good news. “They show that, at a time when the whole world was going through great economic turbulence, our exports to China helped us to continue working well”, she argues.

Ms Wachholz also points out that the inclusion of beef in the export basket has been an important achievement. “When animal protein was introduced, mainly beef, we had a great gain in terms of adding value and generating jobs and income in Brazil, as the sector is labor intensive”, she underlines, noting that the movement in Brazil as an exporter of animal protein is related to the growth of the Chinese middle class to diversify their diet and consume more animal protein.

“Our exports to China say a lot about Chinese development over the last four decades. They represent the need of a country with accelerated economic development, a large consumer of iron ore for steel and civil construction, oil for energy security and food for food security, she says.

The CEBC report also presents a list of 216 products with the potential to increase sales in the coming years, based on ApexBrasil’s Map of Opportunities, which listed 433 goods on which Brazil can start or expand exports to China.

“There is room for diversification. And these opportunities are found in all regions”, says Panzini.

While in the Southeast it would be products more related to the industrial sector, such as cast iron, iron and steel semi-manufactured products, medicines, leather and skins, in the Northeast it would be industrial products such as polyethylene, iron and steel derivatives, and copper derivatives. In the South it would be items like chicken meat, wood products and soybean oil. In the Midwest, meats and products close to the profile currently exported to China, such as copper ore. In the North, products such as ferronickel and manganese ore.

“If we take advantage of the opportunities, by 2030 we will export 76.2% more to China, according to calculations based on the average between 2017 and 2020”, she adds. This growth would mean going from the average of US$ 58.9 billion exported per year to China to US$ 103.4 billion.

In the near future, warns Larissa, Brazil will have to pay attention to changes in the pattern of consumption in the Chinese market in order to expand.

“That same middle class that diversified its diet, began to demand more of our soy and added meat [in its diet], following a consumption with more and more added value. We have to be aware of this movement, which can be beneficial for Brazil”, she argues.

“Today China is very demanding when it comes to food, trying to make healthier choices. And with all the energy transition that the world is experiencing, this represents an opportunity for low carbon products in different chains. For example, our agriculture would be a huge opportunity for us to insert these products in China. The same goes for mining.”

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