International Trade: On the Path to Recovery

The prediction that Brazil’s share in world trade in 2021 could drop below 1% due to the impact of the Coronavirus pandemic seems increasingly distant. In the latest report from the World Trade Organization (WTO) in 2020, as a result of the decrease in global trade flow, Brazil accounted for only 1% of global exports and imports, maintaining its position as 27th in the world trade ranking.

In the first six months of 2021, primarily due to the growth of exports in sectors such as agriculture, ferrous scrap, and iron ore, the trade balance recorded a surplus of $37.5 billion, an increase of $15.2 billion compared to the same period in 2020. However, this result should be viewed with caution because in the previous period, the coronavirus pandemic had a greater impact on Brazil than the global average, with a 8.2% decline in Brazil’s trade flow compared to a 7.6% global decline, according to data from the National Industry Confederation (CNI), resulting in a 7% drop in exports and a 10% drop in imports.

This year, the rise in international commodity prices, primary products with prices formed on foreign exchanges, and exchange rates have contributed to more significant numbers so far. In the first six months of 2021, iron ore and copper saw increases of 172.1% and 82.6% in exports, respectively. Coffee, soy complex products, sugar, oil, and steel also recorded significant numbers.

The growth rates of Brazilian foreign trade were even more significant in June when exports exceeded imports by $10.37 billion, the highest monthly surplus in 2021. In other words, exports of $28.1 billion in June were up 60.8% compared to the same month in 2020, while spending abroad, totaling $17.73 billion, increased by 61.5%.

As a result, the Ministry of Economy has already projected a surplus of $105.3 billion in 2021, an increase of 106% compared to 2020. It is worth remembering that the previous estimate was a surplus of $89.4 billion. For 2021, however, the WTO predicts a decline of 13% to 32% in global trade volume, ensuring it will be more pronounced than the one experienced during the 2008 and 2009 financial crisis. Last year, among G20 members, a group composed of finance ministers and central bank heads from the world’s 19 largest economies plus the European Union, global trade decreased by 8% compared to 2019.

In fact, only China recorded growth in trade flow in 2020, with a 4% increase in exports and a 1% increase in imports. This brought China’s trade flow to $4.6 trillion, increasing its share of global trade from 12% to 13%, securing its leadership in the ranking ahead of the United States, Germany, and Japan.

To improve the country’s position, it is clear that the Brazilian government has no choice but to advance structural reforms, especially in logistics infrastructure, as evidenced by the recent decision to increase the budget of the Ministry of Infrastructure by R$1 billion to meet the demand for the 17 projects initiated, resumed, or authorized in the first semester. At the same time, measures promoting simplification, tariff reduction, improved financing, and the closing of trade agreements to reduce barriers to Brazilian products abroad are necessary.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the manager of institutional relations for the Fiorde Group, composed of Fiorde International Logistics, FTA Transport and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: www.fiorde.com.br

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