China Over U.S. in Brazilian Exports

By Mark Beresford, Contributing Reporter

RIO DE JANEIRO – Brazilian exports to the US fell by 42 percent in 2009, to US$15.7 billion, with China replacing the US as Brazil’s top export market, with US$19.9 billion of exports, or more than 13 percent of all Brazil’s exports, according to figures released by the Ministry of Trade last week.

The development is largely a result of the strong economic growth in China in 2009, based on a massive central government stimulus, which has seen a surge in demand for Brazilian commodities such as iron ore and metals. Brazilian exports to China rose by 23.1 percent in 2009, to US$19.9 billion from US$16.4 billion.

In turn, Chinese exports to the US have also led to a decline in Brazilian market share in the US. Brazil’s total trade surplus in 2009 was US$25.3 billion, slightly higher than the US$24.9 billion recorded in 2008, reflecting a 22.2 percent drop in exports to US$153 billion and a 25.3 percent fall in imports to US$128 billion. Total Brazilian exports shrank under the combined effects of the rise of the Real, which rose by nearly 35 percent against the US Dollar in 2009, and the effect of the global economic crisis, which had a particular impact on the prices of the commodities that make up the bulk of Brazil’s exports.

However, the US remains the leading importer into Brazil, and Brazil’s number one trade partner, with imports and exports of US$35.9 billion, down from US$53.4 billion in 2008, but only a whisker ahead of China, which had total trade with Brazil of US$35.8 billion in 2009. US exports to Brazil were US$20.2 billion, ahead of Chinese exports of US$15.9 billion. In 2009, Brazil posted a US$4.5 billion trade deficit with the US, its first deficit since 1999.

“We have to strengthen our actions to retake the US market,” Trade Secretary Welber Barral said, “we export a lot of manufactured products to the US, and we are only going to manage to increase our industrial exports if we are able to win back our sales in such major markets as the US and Latin America.”

Total exports of manufactured products, which are of higher value and which are responsible for more job creation in Brazil, fell by 27.3 percent in 2009. According to the AEB, the Brazilian trade association, only 28 percent of Brazilian exports are now of manufactured products, compared to 72 percent for commodities, largely because of the appreciation of the Real.

Barral criticized the level of export taxes in Brazil, and said that in 2010 the Brazilian government will intensify its efforts to strengthen trade ties with these countries. After seven years of being in office, the Lula government has still not been on a single trade mission to the US.

Other important export markets for Brazil in 2009 included Argentina (US$12 billion), the Netherlands (US$8.2 billion), and Germany (US$6.2 billion). In addition to the US and China, Argentina (US$11.3 billion), Germany (US$9.9 billion) and Japan (US$5.4 billion), are major suppliers to Brazil.

The trade surplus is expected to narrow in 2010, reflecting strong domestic demand in Brazil and the continued weakness of the global economy. The central bank expects a trade surplus of just US$15 billion this year, as imports continue to rise faster than exports. For its part, the AEB expects a surplus of just US$12.2 billion in 2010, the result of a 12 percent rise in exports and a 28.7 percent surge in imports.