Brazil is largely missing out on improving global growth prospects as Latin America’s largest economy remains one of the most insular in the world.
Brazil’s exports have risen 20 percent year to date versus the same period in 2016, and the government last month increased its forecast trade surplus to between $65 billion and $70 billion in 2017, up from previously $60 billion. Still, exports account for about 12.5 percent of gross domestic product, a ratio that has barely budged in recent years and that is about half that of countries such as Russia and Chile, and one-third of Mexico’s, according to the World Bank.
Missing Out
The International Monetary Fund boosted its global growth forecasts for this year and next, driven in part by a brighter outlook in the U.S. and China, Brazil’s top two trade partners. On the other hand, the IMF expects Brazil to grow at less than half the global pace this year and next.
Brazil’s trade ministry says that, aside from seeking new trade deals, it is providing assistance to small and medium-sized firms looking to expand sales abroad and centralizing export authorizations through an electronic portal. Data showing the number of companies exporting from Brazil reached a record in September is proof that the strategy is working, Foreign Trade Secretary Abrao Neto said in an interview.
“This increase has contributed in a fundamental way to the recovery of the country’s economic growth, and should continue next year,” he said. “The effects of the government initiatives will certainly allow Brazil to better take advantage of any increase in global trade and economic growth.”
Meanwhile, trade talks between Mercosur and the EU, which started in 1999, are running into new roadblocks such as food safety standards raised by the French, a Brazilian government official with knowledge of the discussions told Bloomberg.
Brazil’s traditional focus on its gigantic domestic market will continue to be a barrier to exports, said Welber Barral, a former secretary of foreign trade. Economists expect GDP growth to more than triple next year, and rising demand at home may discourage local companies from seeking new sales opportunities abroad.
“Exporting is only a choice when local consumption is in crisis,” Barral said in an interview. “When that consumption bounces back, exporters prefer local markets.”
