Letter IEDI n. 1128—Industry's exports: insufficient progress, especially in high technology
In 2021, due to the positive performance of primary goods, Brazil's trade surplus reached US$61.2 billion, the largest value in current dollars ever recorded since 1997. In the case of manufacturing, which has presented a systematic deficit since 2008, the balance deteriorated significantly last year, going from US$ -32.1 billion in 2020 to US$ -53.5 billion in 2021, its third largest deficit in the historical series in current dollars.
In this Letter, the IEDI analyzes the evolution of foreign trade flows of the Brazilian industry in 2021, aggregating its different branches according to their technological intensity, following the OECD methodology. Thus, manufacturing was divided into four ranges: high, medium-high, medium and medium-low technology. In the low-intensity segment, there are no branches of the manufacturing industry; it includes only agricultural goods, forestry production, fishing and aquaculture.
The deepening of the industrial deficit in 2021 was due to a greater expansion in foreign purchases than in sales to the rest of the world. The sector as a whole imported US$197.4 billion last year, equivalent to an increase of 35.1%. Its exports, which totaled US$144.1 billion, grew less: 26.3%.
Although with a weaker result, the external sales of the industry did not fail to have a good reaction. Since 2012, there had not been such a positive evolution, which is partly due to the low basis of comparison, a consequence not only of the pandemic in 2020 (-9.7%), but also of the fall caused by the Argentine crisis and trade tensions between the US and China in 2019 (-5.2%).
By technology intensity, the reaction was stronger in the intermediate groups: +38.0% in the medium intensity range, mainly due to metallurgy and non-metallic minerals, and +32.7% in the medium-high tech industry, driven by machinery and equipment, electrical appliances and materials, and other ground transportation equipment.
Medium-low technology exports also expanded at a strong pace, albeit lower than the sector's aggregate. They grew 21.5%, under the positive influence of petroleum products; textiles, clothing and footwear; wood, paper and cellulose and also food products.
These three groups maintained their growth levels in the last quarter of 2021, suggesting a continuation of the positive trend at the start of 2022. Largely due to metallurgy, the medium-tech industry also registered an important acceleration: 56.2% compared to Q4'20. The medium-high and medium-low ranges, on the other hand, had a small slowdown compared to their 2020 results: 30.8% and 17.5%, respectively.
It is in the high-tech industry that recent performance has left something to be desired. In 2021, its exports rose only 2.7%, after a decrease of 37.2% in 2020. And this increase was only possible due to Q2'21, thanks to very low bases of comparison. In all other quarters, the performance was negative, including in Oct–Dec'21: -18.3%. The biggest obstacle in this area has been the aeronautical sector, which, as we know, remains harmed by the pandemic context.
In contrast, all ranges, without exception, greatly expanded their imports: +30% in high technology, +37.8% in medium-high, +28.1% in medium and +38.8% in medium-low. The most tech-intense categories, traditionally in the red, saw their deficits expand to historically high levels in 2021.
In the lower intensity branches, the balances were not only positive, as they usually are, but also had important rises. The surplus of the medium technology intensity range increased almost 70% compared to 2020, reaching US$9.1 billion, and the medium-low category's surplus was the largest in the series at current prices, reaching US$39.1 billion, due to food and to wood, paper and cellulose products.