Partnership with Major Powers

SÃO PAULO – Everything indicates that the bilateral trade between Brazil and Russia will suffer a sharp negative impact in the coming months due to the war between Russia and Ukraine, which seems far from a peaceful solution. Although about 600,000 tons of Russian fertilizers are on their way to Brazilian ports – with at least 250,000 tons destined for the Port of Santos – a disruption in this supply is expected due to the sanctions being imposed on Russia, which are likely to persist for a long time in the post-war period, with unpredictable consequences for the next grain harvest in Brazil.

Obviously, this impact will not be limited to the purchase of fertilizers and the grain harvest, which directly depends on this imported input, but it will affect all products in the trade chain, even though Russia, with the world’s ninth-largest population, ranks only 36th among Brazil’s export destinations. In 2021, Brazil sold a total of US$1.7 billion in products to Russia, equivalent to 0.6% of total exports, the lowest share in twenty years. Russia was once the largest buyer of Brazilian meat, especially pork, but that title shifted to China starting in 2019.

Regardless, it is important for Brazil to increase its exchange with other countries and blocs to mitigate potential decreases in trade with Russia. Therefore, it is imperative to promote agreements that encourage business with the United States, China, and the European Union (EU).

In fact, there is already the Brazil-United States Trade and Economic Cooperation Agreement (Atec, in English), signed in 2011, which has just received an addendum. This agreement aims to facilitate trade and customs administration, establish good regulatory and anti-corruption practices, and reduce non-tariff barriers. At the same time, this document seeks to free Brazil from the constraints imposed by Mercosur, especially those rules that require the approval of measures by all bloc members. Since the creation of Mercosur in 1991, these rules have hindered the signing of agreements with other economic blocs or countries.

Although the United States is no longer Brazil’s main trading partner, a position now held by China, trade between the two nations has been growing since 2020 when it reached its worst result since 2011. In 2021, there was a 57% growth in trade, rising from US$45 billion in 2020 to US$70 billion. However, Brazil had a trade deficit of US$8 billion, the largest since 2013.

Also important is the increase in trade with China, which reached US$135 billion in 2021, the highest value ever. It was the fourth consecutive year of record values traded between the two countries. According to the Ministry of Economy, Brazilian companies sold US$87.9 billion worth of products to China, a 29% increase compared to 2020. They bought US$47.6 billion, 37% more than the previous year. From 2016 to last year, trade between the two countries grew by 130%, while trade with the United States increased by only 50%.

With the EU, after a decade of few deals, Mercosur signed a free trade agreement in June 2019 that has not yet fully come into effect due to resistance to concessions in the environmental area by the Brazilian government, worsening environmental degradation in Brazil, and internal crises within Mercosur. The agreement would provide access to various sectors and services and reduce the costs of import, export, and transit procedures.

With the crisis in Eastern Europe, the hope is that alternatives with other economic powers will be enabled and enhanced so that foreign trade, with more modern rules, continues to grow.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the manager of Environmental, Social, and Corporate Governance (ESG) at the Fiorde Group, composed of Fiorde International Logistics, FTA Transport, Warehouses, and Barter International Trade. Email: lianalourenco@fiorde.com.br. Website: fiorde.com.br.

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