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The challenge of obtaining promising yet little-known international markets

The results of the Brazilian trade balance, released by the Ministry of Industry, Foreign Trade and Services in early May, were positive for the country. In the accumulated of the year, the surplus was 6.1 billion USD and can still be faced with optimism, despite the fact that it is lower than in the same period of 2017.

 

In the first quarter of 2017, the record soybean crop and more adjusted conditions of supply and demand of sugar had favored the performance, scenario that has not been observed this year. Indeed, domestic or international trade shocks for agricultural and livestock products have enough weight to affect results of the total Brazilian trade balance. Considering major agroindustrial products sold in the international market (soybean complex, meat, ethanol, fruits, juices, coffee, paper and pulp, tobacco, fish, honey, milk and dairy products), the agribusiness accounted for roughly 33.5% of exportations in that year.

 

Statistics released recently indicate optimism. A statistical report by WTO (World Trade Organization), released in April, says that Brazilian exportations increased above the global average in 2017: 4.7% in the year, in real terms, and 10.6%, in monetary value. Considering the same unity, international sales from Brazil increased, in the same period, 17.5%, after registering five consecutive years of drops. The same report indicates that, in spite of the fact that Brazil is a great exporter of agricultural and mineral commodities, the Brazilian participation in the world amount is still low, of 1.23% in total shipments. This is not sufficiently representative when taking into account the role that Brazil has as food supplier, as one major exporter of beef, pork, broiler, soybean, sugar, coffee and corn. However, it is a result of a timid performance in the market of industrialized products, of high added value. 

 

The report by WTO highlights that the record agricultural season in 2017 and results of automotive agreements settled by Brazil influenced the country to present an increase rate of exportations above the global average, mainly when considering the 30 biggest international players. Among countries with variation of higher exportation revenue than the Brazilian, some important commercial partners of Brazil are highlighted: Russia (25.8%), Vietnam (21.4%), United Arab Emirates (20.4%) and Saudi Arabia (18.8%).

 

The monitoring of trade statistics, along with other types of knowledge, is relevant in strategic planning in the scenario of an industrial policy and, consequently, in the design of international relationships policy. Examining a longer period of the evolution of exportations, since 2001, for instance, when China joined the WTO, establishing itself as one of the major commercial partners of many central countries, there are interesting aspects in the Brazilian performance. Even during and after the financial crisis in 2008, worsened by internal political crisis over the last years, Brazil’s trade performance kept its ascending trend. Over the last 16 years, the growth rate of total exportations from Brazil was 8.6% per year, in FOB values. Undoubtedly, the maintenance of this growth rate is attributed to sales of commodities to China. These sales, along with those to Hong Kong and Macao, increased 21% per year, during 16 years. This result is not a surprise.

 

On the other hand, some surprises emerge from the comparison of the growth rate of exportations from Brazil to traditional trade partners vis-à-vis other countries that are, in general, less targeted by analysts. Considering the period from 2001 to 2017, the growth rate for exportations from Brazil to traditional markets of the European Union, the United States, Japan and Mercosur were 5.2%, 4.1%, 6.3% and 8.2% per year, respectively. Rates for less targeted markets, some of them have been increasing for years, were higher. The increase of Brazilian exportations to countries of the Arab League, whose rate reached 11.9% per year in the period, and for Andean Community members, 10.6% per year, are examples that can be highlighted.

 

Although the size of its importations is not equivalent to the current size of traditional markets to Brazil, it still necessary that future strategies of the government and companies focus on the knowledge of these markets, on the prospection of opportunities and on the dismantling of barriers to trade. In other words, the European Union accounted for 16% of exportations from Brazil, the USA, for 12.3% and countries of the Arab League, only 6.2%. In absolute terms, the weaken growth in traditional trade partners may represent a more significant exchange income for Brazil. On the other hand, it seems that there are wide opportunities for less traditional markets.

 

Information from Apex-Brasil (Brazilian Trade and Investment Promotion Agency) about potential and strategic markets for exportations indicate that, even in countries where the Brazilian products are already present, there is still a potential for insertion and/or inclusion of agroindustrial products and products of the transportation industry.

 

For some years, the Brazilian government has adopted strategies to increase the inclusion of new companies as exporters (and importers), aiming to facilitate processes and reduce the asymmetry of information, improving bases of data and information, highlighting prospection concerns. As a whole, this is a sign of preoccupations with the change of the trade culture in Brazil.

 

On the other hand, at the same time that these potentials are identified and private players are encouraged, the trade of commercial and cooperation agreements still advances slowly. The private sector also depends on direct management of the government in negotiating agreements to access the markets. In this sense, when searching for the number of existing bilateral agreements and in negotiation, the performance is still timid in this area.

 

According to information from the Ministry of Foreign Affairs, since its creation, Mercosur has concluded commercial agreements with India (2004), Israel (2007), Southern African Customs Union (SACU – 2009), Egypt (2010) and Palestine (2011, in ratification process); besides framework agreements, a stage before the negotiation of a trade agreement, with Tunisia, Lebanon and Morocco.

 

There are studies in process to expand the agreement Mercosur – India, Mercosur – Canada, which interest would be a free trade agreement; Mercosur – Japan, in discussion of studies to release a trade agreement; Mercosur – European Free Trade Association (EFTA) and Mercosur – South Korea: in 2016 some negotiating positions were launched. These initiatives are a result of economic and commercial dialogues, which have mechanisms to examine the mutual interest and the possibility to negotiate free trade agreements.

 

The countries mentioned in the agreements, existing or under negotiation, have been identified as strategic partners and many of them present growth rates as importers from Brazil more promising than those registered in traditional markets. However, there are still a lot to know about these countries, their food habits, organization of the companies, producing structures and commercial culture, for example. This type of information is essential to define sustainable strategies to keep the Brazilian competitiveness in the international market, advancing more in trades involving high added value products and high value products of the agribusiness.

 

This article is limited to exportations; however, it is certain that it limits a wide strategic analysis of these subjects. Brazil acquires relevant amounts of high technology goods, capital goods, energy resources and inputs for agriculture and livestock, essential to keep yield in competitive sectors and Brazilian exporters. In this scenario, it is important that the choice of priority partners focuses on the two-way relationship, exportation-importation of balance between partners and treats the need to have cheaper access to fuels, technologies and high quality consumer durables.

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