Brazil no longer taking China’s place in the U.S.

Mexico exported $274.95 billion to the U.S. from January through July, followed by Canada with $243.7 billion, according to U.S. government data. Canadian shipments were down from the same period last year by 6.4 %, far less than the decline in Chinese exports. China, the leader until last year, fell to third place with $239.07 billion.

“The United States, Europe, and Japan have created several similar programs. The country that has benefited the most from this move by the United States has been Mexico, with American companies moving production from China to its neighbor. There are also effects in Colombia and Costa Rica, but nothing compared to Mexico,” said Mr. Barral.

The United States-Mexico-Canada Agreement (USMCA) also helps explain the current picture of major foreign suppliers to the U.S., but there are other trade facilitators for the Mexicans, said Mr. Barral, such as a logistical advantage and some technological and certification standardization. “Brazil is hampered by the industry’s low productivity, the lack of trade agreements, and the difficulty of integrating the global value chain.”

According to U.S. government data, Brazil exported $21.76 billion to the United States from January to July 2022. This year, in the same months, exported amounted to $21.47 billion. Brazil has remained almost stationary in the ranking of the largest exporters to the U.S., falling to 18th place this year from 17th place in 2022.

Brazil was overtaken this year by Singapore, which increased its shipments to the United States to $23.29 billion in 2023 from $18.36 billion last year, considering the first seven months of the year, U.S. data show.

Lia Valls, a researcher at the Brazilian Economic Institute of Fundação Getulio Vargas (FGV Ibre), said that Brazilian exports to the U.S. used to be more representative. Since the early 2000s, she said, Brazilian shipments have been affected by the displacement resulting from the expansion of Chinese exports. “In this current relocation of global chains, there is still hope for us now.”

Data from the Secretariat of Foreign Trade also show a slight decline in Brazilian exports to the U.S. this year. From January to August, Brazil shipped $23.64 billion to the Americans, 3.5% less than the $24.48 billion sold in the same months of 2022. Brazil’s total shipments fell by 0.1% in the same period. The value of exports this year has exceeded by 19.1% the $19.85 billion shipped in 2019, before the Covid-19 pandemic. However, the increase in exports was lower than the growth rate of Brazil’s total shipments, which increased by 52.8%. As a result, the U.S. share of Brazilian exports fell to 10.5 % over the four years from 13.5 %, considering January to August.

The main Brazilian products currently sold to the U.S. are manufactured products of iron and non-alloy steel, crude oil, and excavators, among other construction equipment. These three items currently account for 27.4% of what Brazil sells to the United States.

José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), said that the picture reflects the long process of weakening Brazil’s exports of manufactured goods. With a lack of competitiveness and financing, the Brazilian industry is struggling to find new markets. “Brazil is just standing still while the world turns.”

In a statement, the American Chamber of Commerce President Abrão Neto said that the U.S. is the largest destination for higher value-added exports and is the destination for 50% of Brazil’s higher technology exports. He said exports of industrial goods from Brazil to the United States have grown, including in 2023, above the average of industrial exports to the world, according to data prepared by the entity.

In the first half of 2023, Mr. Abrão Neto said, Brazilian revenues from exports of industrial goods to the U.S. were at a record high, totaling $14.5 billion, $552 million more than in the first half of 2022. “This is an indicator that there is growth that can be leveraged with new bilateral initiatives on issues such as strengthening supply chains, renewable energy, green hydrogen, wind, and biofuels.” This sector, he added, was the second largest in terms of U.S. investment in Brazil in 2022. Brazil, he said, can benefit from the U.S.’s “nearshoring” movement, depending on the sector and also on the convergency between the countries. “There are also opportunities in critical minerals and any health sector.”

Brazil, said Mr. Abrão Neto, has recently expanded its agreement with the U.S. on trade facilitation and good regulatory practices, which has yielded good results. “It’s difficult to think about a free trade agreement in the short term, but there is room to expand the ATEC [economic cooperation agreement] between Brazil and the United States on more fields, such as the digital economy, regulatory convergence between sectors, among others.”

The United States, he said, has specific agreements in supply chains in various sectors and not only with North America but also with Europe, Japan, India, and South Korea, among others. “Therefore, this is a type of agreement that the American Chamber of Commerce understands that Brazil and the United States should pursue as they map opportunities and instruments for the so-called friendshoring, that is, they can actually boost Brazil-U.S. trade.”

Source: Valor Econômico

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