Brazil is a commodity exporter – and even more so than official statistics suggest. The share of its exports taken by what are classified by the government as primary goods was just below 30 per cent for most of the past two decades, rising to nearly half of all exports in the last five years.
But if we include items such as raw and refined sugar, unsweetened cocoa powder, crude soybean oil, cocoa butter and other products that have a level of processing but are closely derived from commodities dug up or harvested in the country, the proportion rises to different levels. Chart of the week takes a look.
The revised picture shows the shrinking role in trade played by Brazilian manufacturers and the vulnerability of Brazilian exports to the shifting tides of the global economy.
Using our broader classification, Brazil’s commodity-based exports rise to half of the total during the past two decades and to more than two thirds in the last year. The share of manufactured goods therefore falls from about half to less than a third – showing that growth in Brazilian exports has been driven entirely by commodity-based goods.
An increase in the role of commodities is not the pattern you expect of a developing country. It looks more like the pattern of a country caught in a “middle income trap”, a country that might struggle to progress beyond exploiting cheap labour and resources. This dangerous scenario for Brazil is supported by some alarming signals, such as a decline in labour productivity over recent decades.
However, Brazil’s sector shift is largely driven by demand rather than by policy makers. Our second chart shows the contribution to Brazilian export growth made by its main trading partners. Exports to China were of marginal significance until 2007, with the eurozone and the US playing the dominant role. But the contribution of China grew rapidly and it accounted for more than 4 percentage points in an overall annual growth rate of nearly 30 per cent in the second half of 2008. China was the only country to contribute positively during the international crisis that caused a drop in Brazilian export across all its other main destinations in 2009. When exports rebounded in 2010, China accounted for about a quarter of the growth.
Our chart is based on IMF trade data that offer a comprehensive split by export destinations up to May of this year. National statistics show the overall value of Brazil’s exports further declining during middle of the year and contracting on an annual basis since September, a big drop from a previous growth rate of more than 30 per cent. Interestingly, they also show Brazilian exports to the US rising more than those to China in recent months.
China currently accounts for nearly 20 per cent of Brazilian exports, a big jump from just 1 per cent in 2000. With the international economy heading into trouble and Brazilian GDP slowing down from an annual rate of over 9 per cent in the first quarter of 2010 to just above zero in the second quarter of this year – although there have since been signs that it is quickening again – the appeal of a steady source of demand in China is clear. But the implication of that could be of a slow process of de-industrialization, lower productivity and ultimately of a failure to maintain steady and sustained growth.
The recent slowdown in the Chinese economy and the recovery of the US economy – and, consequently, of its demand for Brazilian products – could be a desirable way out of Brazil’s dangerous liaison with China.
Chart of the week: it’s the labour productivity, stupid, beyondbrics
Chart of the week: Brazil’s shifting export structure, beyondbrics
Chart of the week file, beyondbrics