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Brazil-China Trade Yet to Take Off

I saw this interesting article in the Financial Times earlier this week, and did not want to let it go by unmentioned.  The journalist reports from some excerpts of a new Standard & Poor’s report on trade relations and economic growth between Brazil and China, the bookends of the beloved BRIC grouping. The authors also give consideration to the Atlantic Council’s conclusions on US-Brazil FDI flows.  One expert quoted in the article says that Brazil has yet to decide what it wants to be – a high-cost, non-competitive exporter of raw materials, or make reforms in order to stimulate industrial production at lower costs.

 

But in spite of the recent rise in bilateral trade and investment, China is still a long way from fulfilling its potential as a driver of Brazilian growth.

As Sebastian Briozzo and Joydeep Mukherji of Standard & Poor’s, a credit-rating agency, point out in a paper published this month*, Brazil remains a relatively closed economy, with exports equal to only a little more than 10 per cent of gross domestic product.

Even the very fast recent growth of exports to China has had little impact on GDP growth – in fact, the authors point out, quite the opposite:

“In China … net exports still contribute significantly to GDP growth. Conversely, in Brazil, net exports only made a positive contribution to GDP until 2004. After that, investment growth (and its corresponding impact on imports) diminished the importance of the external sector. Net exports have actually had a negative contribution to GDP growth ever since.”