Exports from Brazil to neighbors in South America soar in post-pandemic resumption

Aug, 01, 2022 Posted by Gabriel Malheiros

Week 202231

With the recovery of the global economy after being hit by covid-19, Brazil’s trade balance with neighboring countries in South America increased by 64.7% in 2021 to US$ 7.3 billion and is expected to have a new high this year.

In the first half, the trade with South American neighbors showed a surplus of US$ 6.2 billion, close to the value of the entire last year, according to a survey by the Brazilian Foreign Trade Association (AEB) based on data from the federal government. Moreover, the surplus is expected to rise this year.

Last year, Brazil exported US$ 33.9 billion to South American countries, and AEB projects that sales could reach US$ 41 billion in 2022. If the value is confirmed, it will represent a growth of 21% compared to 2021. In the first half, it was US$ 20.3 billion.

The executive president of AEB, José Augusto de Castro, sees the trade surplus growth with neighbors in South America as an opportunity for the national industry. This issue will be one of the topics of debate at the 41st edition of the National Meeting on Foreign Trade (Enaex), organized by the entity and planned for November in virtual format.

“Brazil imports roughly 85% of the processing industry items in its market. On the other hand, in terms of exports, it ships mostly commodities, although it has a more diversified export basket to its South American neighbors,” comments Castro.

Exports to South America are mainly manufactured goods – automobiles, machinery and equipment, and food. In addition, imports are concentrated in raw materials – wheat from Argentina, copper from Chile, electricity from Paraguay (because of the binational hydroelectric plant of Itaipu), and natural gas from Bolivia.

See below one chart displaying the export trends, in TEUs, of Brazilian shipments to South American countries, followed by another chart showing the TEUs nationalized by Brazil from its neighbors. The data is from DataLiner.

Brazilian exports in containers to South America | Jan 2021 – Jun 2022 | TEUS

Source: DataLiner (click here to request a demo)

Global recession

According to Castro, the surplus is likely to be larger than in 2021 because of the projected stabilization, if not reduction, in the prices of raw commodities such as wheat and copper due to the likelihood of a worldwide recession.

So far, the global economic climate, despite the imbalances produced by the pandemic and exacerbated by the Ukraine crisis, has benefited commerce with South America. Like Brazil, surrounding nations are predominantly exporters of raw commodities, which saw prices rising amid volatility since mid-2020. As a result, these neighboring nations to Brazil could purchase more manufactured items as they had more foreign exchange generated by higher export prices.

At the same time, logistical bottlenecks in international trade have raised freight costs worldwide. As a result, the geographic proximity increased the Brazilian industry’s competitive advantage as a manufactured goods supplier to the South American markets. “Brazil may be more present in South America in economic terms due to geographical closeness, cheaper logistics, and the ability to export by road and, in some cases, rail to select nations,” says Castro.

However, the favorable situation cannot be taken for granted, ponders the president of the AEB. “We must not forget that other nations are also mobilizing themselves,” Castro argues. “China has already surpassed Brazil as Argentina’s primary supplier. The same thing happens in Chile. China is considerably more present in Chile than Brazil, and this has long been Brazil’s captive market,” he argues.

Source: O Estado de S. Paulo

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