Vaivém: Paulo Guedes’s Chinese dare and the external dependence of agribusiness

Economy Minister Paulo Guedes chose exactly one agricultural event to attack the Chinese presence in Brazil. There was no worse place, since the sector is extremely dependent on that Asian country.

Since Paulo Guedes took office, exports of the main agribusiness products total US$ 444 billion. Of this amount, 62% were purchases from the Chinese. Exports to the United States, another important country in this trade relationship, stood at 26%.

The Minister of Economy tried to explain the need to reduce taxes in the country, mainly the IPI (Imposto sobre Produtos Industrializados), otherwise the “Chinese” could come here and break the national industry, according to him.

This nudge against the Chinese comes at a time when China is starting to remove some constraints on Brazilian agribusiness exports, putting products with higher added value on the shopping list.

The Chinese are about to release imports of soy-derived products, a market that is difficult, and even closed, for Brazilians. With these exports, Brazil increases sales of products with higher added value.

China has always prioritized the purchase of soybeans because the internal processing generates employment and income in the country.

Since the beginning of the government of Jair Bolsonaro (PL), soybean exports have totaled 305 million tons, with revenues of US$ 130 billion. The Chinese were responsible for 72% of these values.

The opening of the Chinese market for soy derivatives is good for both Brazil and China. Brazilians process more and more soy, and the volume is expected to increase even more when the government removes the shackles it has placed on biodiesel production.

The Chinese, on the other hand, are industrializing their protein production more, needing a greater volume of soy and corn derivatives.

The development of soy only occurs in the country due to the Chinese. In this 2022/23 crop, production is expected to exceed 150 million tons.

The production of soy leads to the production of corn. The estimated harvest of this cereal in 2023 is 125 million tons. The Chinese are also beginning to be interested in Brazilian cereal. This open door is good because imports from China are always in large volumes.

The Chinese are also responsible for the good performance of the Brazilian protein sector. Of the US$ 62.9 billion in revenues from exports, since Paulo Guedes took office, 37% came from China.

The Brazilian external meat market is quite dispersed, unlike the soybean market, which is concentrated in China, but the Chinese are still of great importance to the Brazilian sector.

The evolution of the Chinese economy has allowed several other products, in addition to soybeans, to enter the list of imports. In the current government, 43% of pulp exports went to China; 13% of sugar; and 7% of wooden ones.

The Chinese also allowed for a good evolution of Brazilian cotton production, which has totaled US$ 12 billion in exports since the beginning of 2019. Of this amount, 27% came from China.

This Brazilian dependence on the Asian country is not good, but the Chinese also see danger in it, so much so that they seek production alternatives in other regions, especially in Africa.

The current government occasionally has a relapse in relation to agribusiness trading partners. It started with Jair Bolsonaro stating that China wanted to buy Brazil; visit to Taiwan to annoy the Chinese; doubts about the vaccine against Covid.

Iran, a country on the list of main partners for Brazilian agribusiness, has already been harassed by the president’s family, while the Arabs have already felt left out by the president’s initial devotion to Israel.

The assessments of agribusiness trading partners made by the government, when out of the ordinary, are gradually undermining relations between countries.

Unless it is believed that these international trade relations are always easy to resolve. This is what one of Bolsonaro’s followers recommended when he suggested that soybeans should not be sold to China, but only to the United States.