In 2020, China consolidated position as top source of Brazil’s imports

The main source of Brazilian imports since 2019, China continued to make progress in Brazilian foreign trade in 2020. According to a study released by the National Confederation of Industry (CNI), the Asian country accounted for 21.9 percent of Brazil’s external purchases last year, with major strides in technological products.

In addition to increasing exports to Brazil, China started selling more and more sophisticated goods, moving ever further away from its image as an exporter of industrialized goods with low complexity levels.

In the last 15 years, China boasted a considerable evolution in foreign commerce. In 2006, the country held 8.6 percent of Brazilian imports. Traditionally viewed as the main supplier of products for Brazil, the European Union (EU) saw its percentage sink from 20.3 percent in 2006 to 19.1 percent last year. In the same period, the US kept a relatively steady proportion in Brazilian imports, with a slight uptick from 15.7 to 17.6 percent, snatching third place.

The chief loser among the sources of Brazilian exports was South America. Ranking second in 2006, with 17.6 percent of the country’s external purchases, the continent dropped to fourth place in 2020, with 11.4 percent.

Industry

While surveying 15 sectors of the Brazilian industry, CNI found that imports from China grew in 11, were kept steady in three, and decreased in one.

Among the sectors with the highest progress made by China from 2006 through 2020 are machinery and equipment (ten to 23 percent), chemical goods (ten to 29 percent), and electrical materials (24 to 50 percent). Even in segments where the Asian country had little tradition snatched significant slices of the market: vehicles and automobiles (from two to 11 percent) and fine chemicals (one to 14 percent).

Conversely, Brazilian industry started purchasing less and less from other regions and other countries. Of the 15 sectors researched, 11 imported less from the EU and Japan, and 13 started buying less from South America and the US.

Proposals

In the view of Fabrizio Sardelli Panzini, manager for CNI’s National Integration Policy, the growth in the trade with China has brought about a harmful dependency for the more well-developed sectors of the Brazilian economy. With 75 percent of exports to the Asian country concentrated on soybeans, iron ore, and oil, and by importing more and more complex goods, Brazil has faced a deterioration in the quality of foreign commerce.

“We’ve been waiting for a diversification in the trade with China, but it just won’t come. Most of the room for commercial expansion with China lies in agribusiness, with more meat exports and some market gains,” he said.

The CNI manager argues for the quick approval and implementation of a trade deal between Mercosur and the EU so that the Brazilian industry regains room for exports. Unlike China, Brazil makes more balanced business with European countries, exporting both basic and industrialized goods. The agreement brings great potential gains as it comprises a quicker reduction in tariffs and trade barriers for Mercosur products in the European market than the European countries here.

“The European Union is a traditionally crucial partner of Brazil, with complementary trade and a significant participation in industry both ways. When the European Union loses market, Brazil loses commercial quality. There are a lot of European companies investing here and generating exports for Europe. With China, this growth in the exports of Brazilian industrialized goods simply does not come in return,” Panzini argues.

Latin America

To Panzini’s judgment, signing a Mercosur–EU pact is also key to restablishing trade in Latin America. He pointed out that Brazil has deep trade pacts with a number of Latin American countries, but exchanges within the continent are weakening as trade with China advances.

“Latin American countries are selling more and more commodities to Asian countries and less to each other, […] hence the importance of making European investments viable here, with an improvement in the business environment, so that Brazil may export to Latin America,” he declared.

Panzini also recommends further internal improvements in Brazil, including the approval of economic reforms—above all a tax overhaul, reducing the Brazil cost and bringing taxes in line with those of the Organization for Economic Cooperation and Development (OECD). “If Brazil does its homework, it should improve competitiveness and take more advantage of the gains stemming from deals with the EU,” he added.