beyondbrics

It’s no secret that over the last decade Brazil has benefited from a boom in demand for commodities, most notably from China. More recently, robust trade with Asia has helped allow Brazil to bounce back quickly from recession, while other countries, more closely linked to the troubled economies of the developed world, have lagged behind.

But some are beginning to wonder if the country is becoming too dependent on exporting basic goods. In the first half of this year, sales of raw materials ($38.69bn) accounted for 43.4 per cent of total exports, up from 22.8 per cent ($5.96bn) in the same period in 2000. Conversely, sales of industrial goods (including semi-manufactured goods) of $48.51bn were just 54.4 per cent of the total, while they formed 74.4 per cent ($19.46bn) ten years ago.

China is the largest importer of Brazilian goods, and the two most popular Brazilian offerings worldwide are iron ore and soy. In June, sales of these two commodities alone totalled more than 25 per cent of the country’s exports.

This is all well and good, as long as manufacturing exports continue to grow in absolute terms, and Asian countries continue to need more and more inputs to build up infrastructure and feed their populations, says Sherban Leonardo Cretoiu, professor at the Fundação Dom Cabral, a business school.

At the moment, “Brazil has the privilege of producing what the most dynamic part of the world, Asia, wants to buy,” said Octavio de Barros, director of economic research at Bradesco bank.

But, says Júlio Gomes de Almeida, economist at the Institute for Industrial Development Studies, “there has been a growing concentration on a small number of primary products.”

Nor has the market for manufactured Brazilian goods been helped by the rapid appreciation of the real. According to one joke, if the recent pace continues, by the time the country hosts the Olympics, the currency will be so strong Brazil won’t be exporting any of these products at all.

If other growing emerging market economies falter – or if they reach a stage of development which prompts them to move away from importing basic goods – the joke might be less funny for Brazilians.