Trump or Biden: How Trade Between Brazil and the United States May Be Affected by the Result of the US Elections | economy

Analysts heard by G1 They point out that the US has remained the second largest trading partner of Brazil and that, regardless of the outcome of the elections, an increase in the flow of bilateral business depends more on the dynamics of economic recovery and greater diversification and competitiveness of the export basket. that necessarily the policy of the next government or of greater alignment between countries.

The data of the Brazilian trade balance show that the trade flow (sum of exports and imports) between Brazil and the United States, has been historically stable over the last decade, at a level of between US $ 50 and 60 billion per year. In 2019, it was R $ 59.8 billion. The best result in recent years was recorded in 2014, when it totaled R $ 62 billion.

“It is a very mature relationship. We should not have an exponential growth in trade, regardless of the president, nor will there be a steep decline,” says Welber Barral, foreign trade strategist at Banco Ourinvest and former national secretary of Foreign Trade.

However, there is consensus among analysts that in the event of Biden’s eventual victory, the environmental agenda should become a priority issue bilateral relationship and trade negotiations.

“If Biden wins, issues like environmental protection, the Amazon, minority rights will become more relevant in the way the United States relates to the world and will certainly move to the main stage of discussions, including commercial ones. between Brazil and United States ”, says the Executive Vice President of Amcham Brazil, Abrão Neto.

The United States is the second most important trading partner of Brazil

the The United States is the destination for 9.7% of Brazil’s total exports and is also the second main source of Brazilian imports, representing 16% of the total purchases made by the country..

Despite the fact that China surpasses the US as Brazil’s main trading partner, the United States has maintained its level of participation in the country’s total trade. In the first nine months of 2020, however, the share fell to 12.3% of the total, while China saw its share rise to 28.8%, amid strong appetite for Brazilian raw materials, such as mineral from iron, soy and animal protein. See the chart below:

Trade between the US and Brazil falls in 2020

The biggest challenge in bilateral trade between the two countries at the moment is to regain the pre-pandemic level. A survey by the American Chamber of Commerce (Amcham Brasil) shows that the trade flow between Brazil and the United States collapsed in 2020 to the lowest level since the 2009 international crisis. See the chart below:

The sum of exports and imports between Brazil and the United States from January to September fell 25.1% in the same period of 2019, to US $ 33.4 billion, the worst result for the period of the last 11 years.

In the first nine months of the year, Brazilian imports of US products amounted to $ 18.3 billion, a decrease of 18.8% compared to the same interval in 2019. Brazilian exports to the United States fell 31.5%, at $ 15.2 billion. In the part of the year, the trade deficit with the US is US $ 3.1 billion. Maintaining the current scenario, Brazil should close 2020 with the largest bilateral deficit in the last 6 years.

It is worth mentioning, however, that it is not only with the United States that Brazil’s trade flow has been reduced. In 2019 both exports and purchases abroad fell, but sales abroad fell more. By 2020, the Ministry of the Economy estimates that the sum of Brazilian imports and exports should fall by 9%. The forecast is that imports will amount to 155.7 billion dollars – 12.2% less – and exports to 210.7 billion dollars, 6.5% less.

Although Brazilian exports have been affected by the trade restrictions imposed by the Trump administration in sectors such as the steel industry, the sharp contraction in the flow of business between the two countries is mainly explained by the economic crisis caused by the coronavirus pandemic and the drop in the international price of oil amid lower demand for fuel.

Amcham points out that the rate of fall in the commercial flow between Brazil and the United States was more pronounced due to the profile of the most commercialized products, with a heavy weight of oil, airplanes, inputs for the industry, in addition to the high number of intra-company operations – when a multinational has shared production and imports of itself.

“The bilateral agenda is made up of goods with higher added value, mainly goods from the manufacturing industry, which was one of the sectors most affected by international trade, unlike the food trade, which suffered a small shock and has already recovered” says Abrão Nieto.

Analysts downplay the impact of the after-effects of the US-China trade war, as well as the Bolsonaro government’s rapprochement with the Trump administration. They point out that if, on the one hand, restrictions were imposed on Brazilian steel and aluminum exports, there were also some gains, such as the reopening of fresh meat produced by Brazil and the agreement that opened the possibility of commercial exploitation of the center. launch of Alcântara, in Maranhão, or the recent memorandum of understanding that provides for the offer of up to US $ 1 billion in credit from the United States government to finance projects in Brazil.

“There have been interesting developments in the bilateral relationship, but none of these measures will have an immediate effect of creating trade. None of these agreements is also equivalent to the effect of a Mercosur-European Union agreement, for example,” says Barral.

See below the list of the main products exported to the US and bought there, and the variation in the last year:

Although the sectors may be more favored or disadvantaged, depending on the outcome of the elections, The general assessment is that the recent trade agreements between Brazil and the US tend to gain continuity even in the event of a change of government..

“These are issues that have strong support from the private sector in both countries. There is a large stock of investment from Brazil in the United States and vice versa. The companies will continue to do business with each other and will set the tone for the bilateral relationship,” assesses Neto .

Barral recalls that Democrats tend to be protectionist, but that business between Brazil and the United States should not be affected by potential disputes or trade disputes.

“Brazil also has several measures against the United States. This is common in trade. Biden would probably continue with some trade defense, anti-dumping and countervailing measures. But Brazil is not the main target of the United States, but of China,” he says. .

Need to diversify exports and increase competitiveness

For the executive president of the Brazilian Association for Foreign Trade (AEB), José Augusto de Castro, the volume of trade between Brazil and the United States continues to be limited mainly by the country’s “bad trade balance” and the loss of competitiveness of the industry Brazilian in recent decades.

In 2019, for the first time in forty years, Brazil exported more basic products than industrialized ones. Products classified as basic or commodities are those that do not have technology involved or finished, such as minerals, fruits, grains and meats.

“In 2000, of all that Brazil exported to the world, 59% were manufactured products. Today they represent only 24%. In other words, Brazil lost market share in the world. As we lost competitiveness, our manufactured exports to the United States have been declining, ”explains Castro.

It is this greater dependence on exports of agricultural and mineral products that also explains China’s progress in the Brazilian trade balance, while the United States has lost share.

“In order to increase trade with the United States, it would be necessary to have a free trade agreement, which is very unlikely with any government, or very specific actions for greater access to highly relevant products, which is not easy since Brazil and the United States compete. in several of the main commodities, ”says Barral, citing products such as soybeans, corn, cotton, ethanol and meat.

The AEB survey shows that Brazil’s share of world exports has remained practically stagnant in recent decades, from 0.99% in 1980 to 1.23% in 2018, while that of China jumped from 0.88% to 12.77% in the same range, and that of the US fell from 11.06% to 8.54%.

“The world moved and Brazil stopped. China moved faster than everyone else and the United States lost part of the market they had in the past,” Castro summarizes.

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