In 2021, Brazil maintained its record level of trade dependence on China, which could have negative consequences if the worrying signs of loss of breath and deceleration of the Asian power are confirmed.
Last year, China was the destination of almost a third (31.3%) of national exports, totaling US$ 87.751 billion – a level similar to the record of 32% registered in 2020, according to data from the Special Secretariat for Foreign Trade and International Affairs. .
In second place as main buyers are the United States (11.1%), Argentina (4.2%), the Netherlands or Holland (3.3%) and Chile (2.5%).
On the import side, the Chinese also dominate, but in a more discreet way: 21.7% of the products that Brazil bought from abroad came from there. Next are the United States (18%), Argentina (5.5%), Germany (5.2%) and India (3.1%).
China was the main driver of the commodities supercycle — primary products, without processing — of the early 2000s, which was reflected in economic prosperity and better indicators for Brazilians.
From the international crisis of 2008 and throughout the 2010s, commodity prices fell, and Brazil suffered periods of crises and recessions, until a new cycle seemed to be taking shape in recent years.
The weight of the Chinese in Brazilian foreign trade has intensified since 2009, when they surpassed the North Americans as the main destination for Brazilian exports. What worries analysts is the reflection of this on the trade balance, in case signs of a slowdown in the Chinese economy intensify.
The chief economist at Iedi (Instituto de Estudos para o Desenvolvimento Industrial), Rafael Cagnin, points out that the Chinese end up being the main destination for national products, due to the high degree of concentration of exports in three major items: iron ore, oil and Soy.
Last year, basic products, with low added value, sold to the Chinese continued to lead the list of exports, while manufactured products were concentrated in closer buyer markets, such as Argentina.
On Monday (17), the Chinese government released the country’s 2021 GDP (Gross Domestic Product) results. Asians grew 8.1% in the year – the highest level in a decade, but a good part of this result took place in the first half of the year.
The yellow light came from the fourth quarter data, when China grew 4%, above analysts’ expectations, but short of the positive result of 4.9% in the third quarter of 2021 and 6.5% in the same period of last year. 2020
According to Ning Jizhe, director of the NBS (National Bureau of Statistics of China), “the Chinese economy is under triple pressure: contracting demand, supply shock and weakening expectations”.
The Chinese will not have a smooth 2022. There are signs that the weakness of the housing market is likely to persist and the country is feeling the effects of the local spread of the omicron variant of the new coronavirus.
To stop the slowdown and stabilize the economy, the Chinese government began to take a series of measures, such as relaxing credit and lowering interest rates. If this movement takes effect, it could cushion the impacts on Brazilian foreign trade.
“It’s a matter of common sense, depending on a few partners increases vulnerability. The ideal to diversify risks is to expand the number of buyers and products. But relationships are becoming more and more concentrated”, says Cagnin.
He also highlights the difficulty of expanding exports by the manufacturing industry, which would bring a wider universe of buyers and greater dynamism, if Brazilian products became more competitive abroad.
It would certainly be good for Brazil if its trade flows depended less on China, says Professor Felippe Serigati, from EESP/FGV (São Paulo School of Economics, from Fundação Getulio Vargas), coordinator of the Professional Master’s in Agribusiness.
“However, it is important to emphasize that this strong subjection increases the exposure of both Brazil and China. In a broader context, we saw the effects of this happening with the world economy itself and its strong dependence on global supply chains concentrated in a few suppliers. “
The president of the AEB (Association of Foreign Trade of Brazil), José Augusto de Castro, agrees that Brazil is in a very high dependency situation.
“We may have problems in the next few years, just see that the United States is making an effort to remove companies from China. Our fragility is much greater.”
He points out that the diversification of the export agenda is a problem that should have been a concern for Brazil for years, regardless of the performance of the Chinese economy.
“Not only is China’s weight in our trade balance worrying, but the type of dependence is also bad. Basing our sales on commodities is unjustifiable, given Brazil’s potential,” he says.
METALLIC COMMODITIES FEEL SLOWDOWN
Signs of a slowdown in the Chinese economy, with the prospect of greater instability in the country’s real estate market, are also reflected in forecasts for one of the main Brazilian commodities: iron ore.
According to AEB projections, the product should register a price drop of 34.1% in the international quotation this year. Projections indicate that a ton of the commodity should be sold for US$ 85 in 2022, coming from US$ 129 last year.
“A slowdown in the Chinese economy, driven by the construction sector, will dampen demand for this commodity. As for agriculture, in the short and medium term, Brazil is expected to have relatively stable demand on the Chinese side”, says Serigati, from FGV. .
Former Brazilian ambassador to Beijing Marcos Caramuru ponders criticism of the supposedly excessive weight of the Chinese in the Brazilian balance.
“Strategically, it would be interesting to divert demand, but to which place? Who could buy from Brazil in this magnitude? Without this response, we will have a policy that aims not to sell our products, and this reasoning leads nowhere.”
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