Brazilian exports lose ground among largest economies

Despite achieving record Brazilian exports and a surplus in 2023, Brazil remains a relatively minor supplier to the world’s 10 largest importers. Among these countries, only China includes Brazil in its top 10 sources of imports, while Brazil ranks 14th among the others. In 2023, only three of the world’s top 10 importers listed Brazil as their largest exporter: China, Japan, and the United Kingdom. Brazil’s position improved in China, moving from ninth to seventh place. However, Brazilian products lost ground in four of the 10 destinations, namely the United States (the world’s largest importer), South Korea, India, and Italy.

The data on Brazil’s position in the destinations comes from the government or statistical agencies of the respective countries. The ranking of the largest importers in 2022 was considered. According to the Chinese government, the Asian country bought a total of $122.4 billion from Brazil in 2023, 11.8% more than in 2022. China’s total imports fell by 5.9% in the same period. As a result, Brazil’s share of China’s total shipments increased to 4.8% from 4%. China is the second largest importer in the world. Ten years ago, Brazil’s share of Chinese shipments was 2.8%.

In terms of sales to the U.S., Brazil lost one position and fell to 18th place in the list of largest suppliers. The share of Brazilian products in U.S. imports remained stable at 1.2%.

José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), said that the situation is due to the concentration of Brazilian exports, whose main destination is China. Last year, the Chinese absorbed 30.7% of everything Brazil exported, according to the Foreign Trade Secretariat (Secex). The United States, the second largest destination for Brazilian shipments, was way behind with 10.9%.

Last year’s surplus, Mr. Castro added, was largely the result of a drop in Brazilian imports, which happened not only in the overall balance but also in China-Brazil trade. In terms of trade balances, he said that China played an important role. According to Secex, trade with the Chinese generated a surplus of $51.2 billion in 2023, which contributed to the record positive trade balance in Brazil’s overall balance of $98.9 billion. Brazil saw a deficit of $1 billion with the United States.

U.S. government data show that in 2023, China will lose to Mexico its position as the largest supplier to the United States. For Livio Ribeiro, a partner at consultancy BRCG and a researcher at the Brazilian Institute of Economics at the Getulio Vargas Foundation (FGV Ibre), this was the result of the U.S.’s nearshoring move and may offer little chance for Brazil to make further inroads into the American market. “The space left by China is more likely to be filled by Mexico and Canada, the more traditional partners of the U.S. We’re just going to take up the remains of it.”

“The picture of Brazil’s position in different markets basically reflects Brazil’s comparative advantages,” said Silvio Campos Neto, an economist at consultancy Tendências. “We don’t have much growth in imports from other countries because they demand products in which we are not competitive. Brazil’s imports from the Chinese are growing because they demand products in which we are very competitive, such as iron ore, oil, grains, and meat.” According to Secex, in 2023 the Chinese will buy 73% of all soybeans exported by Brazil, as well as 64% of iron ore and 47% of crude oil. The three items account for 75% of the value Brazil sells to China.

Mr. Ribeiro said that Brazil’s total exports are concentrated, not just in what is sold to China. The trio of products that Brazil ships the most—soy, crude oil, and iron ore—accounted for 37.2% of Brazilian exports in 2023, according to Secex data. When the list is expanded to include the five most exported products, including sugar and corn, the share rises to 45.9%. “So, our exports tend to be concentrated everywhere. I don’t see that as a problem. It’s a feature of our exports.”

The chart below shows the volume of soybeans exported through Brazilian ports to China every month between January 2020 and December 2023. The data is from DataLiner.

Soybean Exports from Brazil to China | Jan 2020 – Dec 2023 | WTMT

Source: DataLiner (click here to request a demo)

Rafael Cagnin, an economist at the Institute for Industrial Development Studies (IEDI), said that the several shocks since 2021 have led to a rise in commodity prices, which may also have favored Brazil’s market share gain in China in 2021 and 2022, although there was some price adjustment last year.

“In other countries, there is a growing demand for manufactured products and high-tech services, but this export is not our reality, although we have some islands, such as in aircraft manufacturing,” said Mr. Campos Neto. Exports to the U.S., for example, are more diversified than those to China. “The U.S. is a major producer of grains, meat, and oil, and actually competes with Brazil in supplying these products to the world.”

The concentration of exports brings a bit of volatility at first, Mr. Ribeiro said. “However, pursuing an agenda that isn’t ours is costly and takes us away from our comparative advantages. The vast majority of what we produce well are commodities. A policy of diversifying the agenda will have beneficiaries who will certainly be happy, but I don’t know if the country as a whole will gain in the overall balance.”

“To gain a larger share of economically dynamic markets at the technological frontier, such as the United States, South Korea, and some European countries, we need a more export-oriented industry with a more diversified product portfolio that allows the country to fit into the intermediate links of global production chains,” Mr. Cagnin said. The international literature shows that the integrating agent in global trade is the industry, due to having longer production chains, he said.

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