Letter IEDI n. 1099—The industry's export impetus by technology intensity
The performance of the Brazilian industry in the first half of 2021 was marked by greater export momentum, registered after very depressed bases of comparison due to the COVID-19 shock at the beginning of 2020. There were also record levels of foreign sales of its lower technology intensity branches, favored by the revival of world trade and rising commodity prices, as well as by primary activities.
In Jan–Jun'21, manufacturing exports increased 22.1% in relation to the same period of the previous year, with a large contribution from Q2’21, which registered 39.7% in the same comparison. As a result, the sector reached US$ 65.4 billion, the highest level since Jan–Jun 2013, accounting for about half of everything the country sold to the rest of the world.
This Letter IEDI analyzes the foreign trade results of the manufacturing industry in the 1st half of 2021, grouping its different branches into four technology intensity ranges, according to the methodology used by the OECD: high, medium-high, medium and medium-low. There are no manufacturing activities in the low-intensity segment, comprising agricultural products, forestry production, fishing and aquaculture.
The medium-low intensity category was the one with the smallest percentage variation (+16.9%) in the comparison of the 1st half 2021 versus the 1st half 2020, as it was less affected by the pandemic last year. Still, it posted a record level of exports in the historical series started in 1997. In total, it sold US$ 33.66 billion in Jan–Jun'21, due to advances in food, oil products and wood, paper and cellulose. The sector has already been on the rise for three quarters, with emphasis on Q2'21 (+31.0%).
The industry of medium technological intensity, in turn, also accumulated record exports for the series in the 1st half 2021, totaling of US$ 13.6 billion, equivalent to a 23.0% growth rate in relation to the same period last year. Much of this was due to the 21.5% advance of metallurgy, which accounts for 81% of this range, but other branches also greatly expanded their shipments, such as non-metallic minerals and rubber and plastic.
Regarding growth rates, the branches with the highest technology intensity were the ones that, for now, have done better in 2021. In these cases, however, it is necessary to take into account the strong losses recorded in previous periods, caused not only by COVID-19. High technology external sales increased by 24.5% in Jan–Jun'21 compared to the same period of the previous year, but this came after intense drops of -19.7% in the 1st half of 2019 and -50.2% in the 1st half 2020. We've gone from $5.3 billion in the first half of 2018 to just $2.7 billion now in 2021.
The reaction of high-tech exports is still very recent. After eleven consecutive quarters of decline, they registered their first increase in Q2'21: +57.9%, driven mainly by aircrafts (+101.5% compared to Q2'20), but also by the electronics (+32.8%) and to a lesser extent by the pharmaceutical industry (+13.1%).
The medium-high range was the one with the greatest growth rate in the first half of the year: 33.9%, under an important base effect, as it also registered noteworthy declines in the 1st half 2019 (-13.9%) and in the 1st half 2020 (-28.7%). As it accounted for 1/3 of the total US$ 15.5 billion exports of this range, the automobile industry was the main responsible for this performance, growing 51.5% compared to Jan–Jun/'0, with emphasis on Q2/21 (+132%). Other important increases came from chemical products (+22.7%) and machinery and equipment (+32.2%).
Although the export dynamism of the manufacturing industry has been strong and widespread across different branches, it has not been able to outpace the recovery of the sector's imports, which increased 25.7% to US$ 89.8 billion, deteriorating its trade balance. The industry's trade deficit reached US$ 24.4 billion, the highest since the first half of 2014.
The pace of expansion of imports across the four intensity categories was more homogeneous than exports' in the 1st half of 2021. The biggest advances were in the intermediate ranges: +28.4% in the medium technology industry, mainly due to metallurgy (+98%) and rubber and plastic (+43.9%), and +28.2% in the medium-high technology industry, stemming mainly from chemicals (+28.9%) and vehicles (+51.6%).
In addition to sectors with more recent reactions, such as vehicles, the presence of intermediate products among the strongest increases—such as metallurgy, rubber and plastic and chemical products—is related to the difficulties in obtaining inputs that have been seen for some months.
In medium-low technology, the high was of 26.6% compared to Jan–Jun/20, reaching all branches, but with emphasis on petroleum products (+40.1%). In high technology, the result was a little lower, +18.3%, due to the reduction in aircraft imports. Electronics, which accounts for 61% of imports in the range, registered 28.7%.