Volume 43, Number 168,
January-March 2012
Threats and Opportunities for Brazil's Trade
with China: Lessons for Brazil
Fernando Augusto Mansor de Mattos and Marcelo Dias Carcanholo
INTRODUCTION ( ...continuation )

It should also be noted that most of the diversification of the main products imported from China occurred at the same time as an increase in the share of products imported from China to Brazil, from the year 2000, when Chinese imports were merely 2.2% of the total, and 2010 when they rose to 14.5%.

In general, the data for 2010 shows a strengthening of the trend that began in 20084, alerting Brazilian economic authorities to the difficulty in sustaining the trade balance in surplus for much longer, in case the current exchange rate should continue to appreciate. Recent figures show that if it was not for the continued recovery of commodity prices, Brazil could have had a trade deficit in 2010, strengthening the currency account deficit further.5

In this recent context, China's presence was once again decisive. According to funcex6, trade terms improved nearly 16% in 2010, more than between 2004 and 2008 (when they only improved 13.9%). This is explained by favorable growth in commodity prices, in the context of significant growth of Chinese demand and vast international liquidity. To a great extend this is explained by the measures adopted by developed countries to combat the economic and financial crisis that we are still suffering from.

This considered, a more precise study is warranted of how Brazilian foreign trade has suffered as a result of strengthening trade relations with China. The consequences should be assessed through changes to the Brazilian export/import profile with China and through the consequences for Brazilian imports and exports, for trade flow with China is not only significant, it shows increasing rates of expansion.7

In order to study the impact of the expansion of Chinese foreign trade on Brazilian foreign trade, this article is divided into four parts in addition to the introduction. In the first part the recent evolution of Chinese foreign trade is discussed in general, and her growth in other regions is evaluated. The changes to her export/import profile by product category are also evaluated. In this first section China's growing trade relations with Latin America are also described. This leads to the interpretation in the second section of the effects of this major integration of Brazilian foreign trade with China's own and also other economic areas. In the second section, prospective Brazilian export/import profiles are analyzed from 1990 to 2008, comparing regional information according to destination/origin and product categories. In each case China's role is highlighted compared to other parts of the world. In the third part, the effects of Chinese foreign trade expansion on Brazilian industrial activity are analyzed, based on the presence of Chinese products in the structure of Brazil's imports, evaluated according to the intensity of factors involved in production.8 The fourth part presents evidence that the rise in Chinese exports has competed with Brazilian exports in other markets.

It is important to note that the various Chinese exports trends, compared to those of Brazil and other Latin American countries, are explained by the content and expansion of structural reforms that have taken place in the Chinese economy since the end of the 1970s. Significant among these reforms was the definition of State intervention measures9 to promote high-technology industry exports. In the 1990s the differences between China and the majority of Latin American countries strengthened, given that the latter adopted neoliberal insertion policies in the so-called process of globalization. In China, the reverse occurred and the process was strengthened by the expansion of public investment in the domestic market. Special zones were created directed at promoting technical progress for exports and there was increased public investment in infrastructure (particularly in the last two years, 2009 and 2010, after the slow-down of the global economy in the period following the subprime crisis)10. State companies considered key for industrial development and for maintaining the structure of agricultural activity were kept under State control.

4 The figures for 2008 show growth of nearly 44% in imports, compared with 2007 and merely 23% for exports. Trade surplus in 2007 was 40.032 trillion dollars and in 2008 had fallen to 24.8 billion dollars, maintaining this level in 2009 (25.3 billion dollars) as a result of the crisis, dropping again to 20.2 billion dollars in 2010.

5 Data from past figures at the Central Bank of Brazil (www.bcb.gov.br) show that in 2005 and 2006, the Brazilian currency account balance was around 13 billion dollars, decreasing by only 1.5 billion dollars in 2007. In 2008 it became increasingly negative (28 billion dollars) maintaining a slightly lower deficit in 2009 (24.3 billion dollars), probably in response to the crisis and the retraction of the Brazilian economy. The year 2010 ended with a deficit of nearly 47.5 billion dollars.

6 The Foundation Center for the Study of Foreign Trade is a private Brazilian institution whose objective is to promote studies for the development of the country's foreign trade. Cf. (www.funcex.com.br). The database of statistics is available at www.funcexdata.com.br.

7 In 2009, China became the main destination for Brazil's exports. In 2005, China was the third main destination for Brazilian exports and in 2000 barely twelfth. China also plays an increasing role in imports: in the year 2000 China occupied eleventh place, in 2005 rose to fourth place, and to second place in 2009.

8 Products are classified as natural-resource intensive, labor intensive, scale intensive, and technology intensive. This classification was used by Puga and Nascimiento (2010) based on data supplied by the Brazilian Ministry of Development, Industry and Foreign Trade.

9 This includes, among other factors, the institutionalization of special export zones (Oliveira, 2005; Felipe 2009), an exchange rate policy favorable to exports (Medeiros, 2006; 2010), the expansion of industrial integration and, therefore also trade to other important Asian countries (Medeiros, 2006; 2010; Pasin, 2008; Sawaya, 2011), the expansion of public investment in Science and Technology (Oliviera, 2005; Medeiros, 2006; Tepassê and Carvalho, 2010), the expansion of public investment in infrastructure (Medeiros, 2010) all the while promoting strategic sectors to achieve these investments, such as the iron and steel industry for example, which has experienced intense change in Chinese foreign trade owing to a significant increase in domestic production of iron and steel, and an increase in the import of iron, fundamental for the growing iron and steel industry as Pasin explains (2008).

10 According to Medeiros (2010) one of the principal measures taken by the Chinese government in response to the international crisis, with the objective of driving the domestic market, to compensate for the loss of demand for exports, was a package of public investment in infrastructure of nearly five hundred billion dollars.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
The opinions expressed by authors do not necessarily reflect those of the editor of the publication.
Permission to reproduce all or part of the published texts is granted provided the source is cited in full including the web address.
Credits | Contact

The online journal Problemas del Desarrollo. Revista Latinoamericana de Economía corresponds to the printed edition of the same title with ISSN 0301-7036