This paper will discuss Brazils export and import trade. It will also support the facts by adopting trade theories that align

BRAZIL EXPORT AND IMPORT TRADE

Introduction

This paper will discuss Brazil’s export and import trade. It will also support the facts by adopting trade theories that align with the country’s trade levels.

Trade in Goods

Brazilian Export and Import Trade in Goods

Based on the information collected between 2006 and 2013, Brazil’s total trade has grown significantly. This is evidence that the country has a nominal annual average rate of 30.3 percent, indicating a strong economic development/growth as well as external demand for Brazilian products in the international Market. During this time export grew at an annual rate of 25 percent, partially showing an increase in community prices and imports at an annual rate of 27.2 percent (Rong, 2010). The value of all the exports grew at a significant rate of 56 percent higher than the import goods during the same year (2006-2013). However, the trade surplus has been constrained due to a faster increase of import goods to the country (Hurrell & Narlikar, 2006).

In terms of the value of the exports it is deduced that it increased by about 105 percent from 2006 to 2013 reaching US$150. 2 billion. It is noted that exports of primary product such as agricultural goods amid other like human labour doubled, reaching US$50bn by 2013. Specifically, agricultural exports doubled, reaching to at least US$40bn. It should be noted that most Export sales of agricultural products were from coffee and cereals (Hurrell & Narlikar, 2006). Export of mining goods also tripled to an extent of reaching US$35bn in 2013, this was because of the high demand of minerals from other emerging nations or countries. The other export goods that indicated a higher growth was manufactured goods that totalled to about US$100 billion. Despite the fact that the Brazils export structure had been stable for a while, the value of primary export goods folded two times as the major export earner because of high demand as well as high commodity price of the goods in the external market.

On the contrast due to the better export performance of the primary goods, the total share of the manufacturing export decreased from 60 percent to 47.4 percent by 2013 despite the fact that it had doubled in value by USD40bn more (Hurrell & Narlikar, 2006). In addition, to the agricultural, mining and manufacturing products exports, transport and machinery Subsector also made a step ahead as minor export goods. Automotive chemicals and products were among the goods that made Brazil improve its Gross Domestics product between 2006 and 2013 (Gonzaga da Silva, 2012).

The total number of the imports was able to reach US$ 100.3bn by 2013; this means that there was a 3 times increase as compared to the value of the 2012 financial year. It was evident that the importance of primary goods increased much faster as compared to that of manufacturing good during between 2010 and 2013 with an average growth rate of 24.2 percent annually (Gonzaga da Silva, 2012). However, Brazil had to import more of manufacturing goods such as electronics accounting to 60 percent of the important in 2013 compared to 45 percent in 2012. Among the most significant import category was the transport and machinery equipment’s with a 32 percent share of the imports in 2013 (Goedhuys & Veugelers, 2012). The total share of the primary goods increased by almost 5 percent over a period of 3 years (2010-2013) (Gonzaga da Silva, 2012). Other mining products and fuel are considered to be the second largest imports that Brazil had; this accounted to 21 percent of the total imports. The value of agricultural imports reduced by 6 percent over a three year period, standing at 9 percent in 2013. In 2013, the total number of agricultural goods accounted to US$ 167bn while the imports accounted to US$150bn (Goedhuys & Veugelers, 2012). Therefore, based on the export information the leading export was agriculture, followed mu manufacturing goods, mining, transport equipment, and machinery and the reverse is true for the import goods.

Brazilian Export and Import Trade in Services

Brazil is known to have a deficit in services, however, this trend is decreasing over time due to the increase or the growth in imports. In 2013, it is noted that the exports of services accounted for US$21. 56bn, while that of imports (payments) was at US$32.4bn. At a period between 2010 and 2013, the largest deficit was noted in transportation, equipment leasing and travel of key political officials amid other leaders in government. The deficit was largest in transporting while the payments doubled in 2013 as compared to 2012 (Goedhuys & Veugelers, 2012). This deficit translated to a reduction in participation of the Brazilian Airlines because there was an increase in the balance of payments made by the country travels abroad. This impacted services account of the country in great extent. Despite the fact that the country has made all ways possible to reduce the deficit in the service trade sector, it cannot survive without them.

Explanation of the Trade Theories

The Product Life-Cycle Theory

The theory clearly states that if a country is producing a new product and the demand of the product increase externally yet other countries have opened the same production line, it is the obligation of the country to open plants in these countries to avoid export duties and taxation as this will reduced production cost (Hurrell & Narlikar, 2006). As in the case of Brazil, it has a high number of manufacturing export, however, other countries in the developing nations are not left behind as they have opened companies that produce the same, therefore Brazil should ensure opening the manufacturing companies in the countries that they make most export sales. This will reduce the cost of production as well as the reduced balance of payments.

Mercantilism

The theory states that we should sell more to the strangers that we consume theirs. This means that Brazil should export more than Import. Brazil is known for increased exports of agricultural goods to the international market amid other exports such as mining, transport and machinery equipment (Hurrell & Narlikar, 2006). However, it’s also important more about transport and machinery equipment. In addition, it spends more on travel payments; government officials more to gain investment provisions from developing nations. With respect to the above difference in the export and import value, the imports are almost closing in to the exports hence risking the countries trade. Based on the theory the country should ensure it develops companies in the country that could manufacture the transport and machinery goods rather than importing them. This will reduce the surplus deficit that the country is currently facing (Gonzaga da Silva, 2012).

Absolute Advantage Theory

A country as an absolute advantage in the production of a service or product as efficiently as compared to other nations. Based on the above assumption, it is clear that Brazil is efficient in agricultural production as well as labour. The country should take advantage of the two to ensure that its value of export is higher than that of the import (Gonzaga da Silva, 2012). The country should increase the production of agricultural goods and services as well as export surplus labour to other nations to make sure it maximizes its potentials at a great extent. This will force Brazil to reduce import of agricultural goods from other countries, thereby, increasing their balance of trade. This will also increase the country’s Gross Domestic Product and ultimately the entire economy.

Comparative Advantage

Since Brazil is able to produce all the export goods at ease it should make sure to improve the production of the most efficient product that it is best in. This theory states that the production of the two absolute advantages is not enough if the country had to specialize more on one of the products. Brazil has enough laboured source, therefore, it should ensure that it introduces the manufacturing sector at a great extent (Rong, 2010). It is clear that Brazil exports manufactured goods, but at limited amount. It should take this advantage to produce more of manufactured products as it has an absolute advantage over it. This will translate to an increased balance of payment hence improved GDP.

It is evident that the Brazil’s absolute advantage is in the agricultural goods. Being the leader of coffee production in the world, the country exports more than 57 billion tonnes of crude and refined coffee around the world. Despite the fact that the country is leading in this, it has other agricultural imports. Therefore, the country’s balance of payments cancels the export value. In order to improve its balance of payments, Brazil should make sure it a priority to invest more on other agricultural goods. Although, facts indicate that Brazil absolute advantage is on Agriculture, it has other developed products such as transport and manufacturing goods (Rong, 2010).

The competitive advantage that Brazil is facing is that it is able to produce and trade on different goods and services such as labour, agriculture, transport, mining and other with other countries trading on the same (Gonzaga da Silva, 2012). Much of the attention that contributes to competitive advantage is that Brazil is able to trade with other countries, yet it produces agricultural products with more emphasis. The country places this emphasis as well as assigns more resources because it can efficiently produce these goods.

Conclusion

It is clear that Brazil is among the 1st group of developing nations as its imports are less that the exports. However, it should ensure reduced the exports even further by adopting the above theories in their trade.

References

Goedhuys, M., & Veugelers, R. (2012). Innovation strategies, process and product innovations and growth: Firm-level evidence from Brazil. Structural Change and Economic Dynamics, 23(4), 516-529.

Gonzaga da Silva, E. C. (2012). Legal Strategies for Reproduction of Environmental Inequalities in Waste Trade. The Brazil–Retreaded Tyres Case.

Hurrell, A., & Narlikar, A. (2006). A New Politics of Confrontation? Brazil and India in Multilateral Trade Negotiations∗. Global Society, 20(4), 415-433.

Rong, F. (2010). Understanding developing country stances on post-2012 climate change negotiations: Comparative analysis of Brazil, China, India, Mexico, and South Africa. Energy policy, 38(8), 4582-4591.