Letter IEDI n. 1058—Exports of manufacturing goods: Brazil on a declining route
Brazilian industry continues to lose ground in world trade, largely due to the obstacles that the country created for the sector's competitiveness, such as the complex and costly tax system, whose reform should be one of the main priorities after the pandemic. The low dynamism of global trade flows, by increasing competition, makes our competitiveness gaps evident.
According to the most recent WTO data, Brazil has fallen from the 32nd place in the world ranking of the largest exporters of manufactures to 34th, from 2018 to 2019. Last year’s amount of US$ 70.6 billion implied a drop of no less than 14% compared to 2018 and represented only 0.55% of the world total.
Based on data from the Ministry of Economy, this movement may have continued in 2020 with the COVID-19 crisis. The share of manufacturing industry exports in Brazil’s total foreign sales has been going through a new phase of decline and has never reached such a low level since the 1990s. From 67% in Dec/16 it fell to 55% in Dec/20.
In the WTO 2019 ranking of the largest exporters of manufacturing goods, China was the leader, accounting for 18.2% of the world total, followed by Germany with 10.2%, and the USA with 8.1%. It is not by chance that these countries are leading the new industrial revolution, adopting modernization and innovation strategies around the so-called 4.0 technologies.
The list goes on with many countries also very engaged in this process of industrial strengthening, such as Japan (4.8% of the world total manufacturing exports), Hong Kong (3.9%), South Korea (3.7% ), France (3.6%) and Italy (3.4%), among others.
That is, although Brazil has accumulated many industrial skills throughout its history, its position in international manufacturing trade is marginal, has been systematically reduced in recent years, and may shrink even further if we do not correct our competitiveness problems and give industry 4.0 the same importance that our competitors do.
In contrast, in the ranking of world imports of manufactures, Brazil occupies a higher position, ranking 28th in 2019, and, compared to our share in exports, accounts for a greater participation in the total of world flows: 0.93%. In this case, we did not lose places in relation to 2018. Such a global insertion, more on the side of imports than of exports, may become worse if the current challenges are not properly addressed.
The leading positions in the WTO ranking of the largest importers of manufactures in the world are occupied by the USA, in 1st place with 14.5%, China in 2nd with 9% and Germany in 3rd place with 6.8% of the total. Next are Hong Kong, France and the United Kingdom. The Netherlands went from 8th to 7th and Mexico fell from 9th to 10th between 2018 and 2019.
In the last decade, it was not only in manufacturing trade that Brazil lost ground in world rankings. Considering total transactions in goods, we moved from 22nd to 27th between 2010 and 2019. Our participation in the period went from 1.32% to 1.19% of the total. An even more pronounced loss marked imports, in which our share declined from 1.23% to 0.91% and we went from the 20th place to the 28th in the same period.
This is a sign that we have taken a path of isolation, either because we have been left out of important trade agreements in recent years or because, especially on the export side, we specialize in products with less dynamism and more subject to commodity price cycles.
In the WTO annual report (World Trade Statistical Review 2020), Brazil is highlighted as one of the largest exporters of food and agricultural products. In food, our exports were in the order of US$ 76 billion in 2019 (-5% compared to 2018), maintaining the 3rd position in the world ranking after the European Union and the USA.
In agricultural products, Brazilian exports totaled US$ 89 billion, which also gave us the 3rd place in the ranking of global exporters of these goods, behind the European Union and the USA. Another sector in which we also occupy a prominent place is iron and steel, in which we appear as the 8th largest exporter in the world.