Published On: Thu, May 19th, 2022

Brazil – United States The Promising Trade Relations even in the Midst of the Pandemic

Rodrigo Fonseca

When talking about Brazil’s foreign trade, the first country that stands out is China. China has effectively overtaken the US as Brazil’s main international trade partner since 2009. This is why little emphasis has been given to the phenomenon that occurred in international trade between Brazil and the United States in recent months.

It is worth mentioning that this resurgence in bilateral trade between Brazil and the United States is becoming more promising every day.

The trade flow, the sum of exports and imports, between Brazil and the United States registered a record movement in the first quarter of 2022. The consolidated amount over 2021 has also been the highest in history. It can be said that the trade relationship between the two countries last year set a triple record: the highest value exported to the United States, the highest value imported from that country and the highest volume of foreign trade.

Exports to the United States from January to March 2022 grew 35.3%, second only to the entire European Union block, which grew 42.8%, according to SECEX – Foreign Trade Secretariat of the Ministry of Development, Industry and Foreign Trade.

In 2021, exports to the United States reached an all-time high of US$31.1 billion, representing a 45% increase over 2020.

Imports reached a record high of US$39.4 billion, corresponding to an increase of 41.3% compared to the previous period. The sum of the two values makes up the trade flow of US$70.5 billion, an increase of 42.9% over 2020.

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Source: Brazil – United States Trade Monitor. AmCham, dec-2021

Industry is a key factor in increasing the trade flow between these two countries. 

Industrial products are the main items of trade with the United States. The three largest in financial volume were:

  • Semi-finished iron and steel products (US$4.5 billion)
  • Crude oil (US$3.1 billion)
  • Aircraft and parts (US$1.5 billion)

Imports from the United States in this sector grew 40.8% in the first quarter of this year, representing the largest proportional growth compared to the same period last year. Secondly, purchases from China increased by 39.2%.

On the import side, the pandemic and the water crisis last year caused unusual effects, with the equivalent of US$3.3 billion worth of natural gas and US$2.3 billion worth of vaccines being purchased from the United States. 

Unexpected factors, but they confirm the good diplomatic and trade relations between the two nations. 

The main products purchased from the United States in 2021 were:

  • Petroleum fuels (US$7.4 billion)
  • Non-electric motors (US$3 billion)
  • Aircraft and parts (US$1.2 billion)

The United States remains Brazil’s second-largest trading partner by a wide margin. In third place, Argentina moves approximately one-third of what Brazil has with the Americans. 

What differentiates the commercial relationship, its importance and, if Brazil is interested, a solid foundation for our country’s competitiveness, in the face of continuing uncertainty in the global economic and political scenarios. 

The condition of being the second-largest trading partner in no way diminishes the prospects of business opportunities: greater economic and political stability, geographical and cultural proximity and other factors that feed a relevant potential for expansion between the two countries.

Although Brazil is the powerhouse in the production of commodities and food in general, the demand from the United States helps to reinforce investments in Brazilian industrial manufacturing.

The graphics below help ilustrate the evolution of products from different sectors.

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Source: Brazil – United States Trade Monitor. AmCham, dec-2021

The variations in trade volumes between the two countries are derived from individual and global economic conditions. However, there are factors to highlight that can explain the increase in the trade flow with the United States since 2016 and that can be taken as indicators for a continuity of the movement in the future. 

One of them is the entry into effect of the Protocol on Trade Rules and Transparency, negotiated under the Trade and Economic Cooperation Agreement (ATEC), which streamlines policies that facilitate trade, regulatory practices, and anti-corruption measures. The instrument was signed by the Brazilian and American governments in October 2020.

Another promising initiative is the approval of the mutual recognition of Authorized Economic Operators (OEA) between the Brazilian Internal Revenue Service and the United States Customs and Border Protection Authority. The OEA certificate is the recognition by the country’s official authority of the foreign trade agent’s ability to manage risks concerning the physical security of cargo and compliance with tax and customs rules.

Secex estimates that the trade flow in 2022 will reach US$586 billion in total, with exports of approximately US$348 billion and imports of US$237 billion. If approved, the numbers will generate a trade surplus for Brazil of US$111 billion.

The expectation is high for both US and Brazilian companies, these encouraging numbers that shows a growing trend in trade relations, As the United States occupies the critical position of Brazil’s second-largest partner it is important to keep an eye on this warming relations especially considering the current uncertain international scenario, trade relations that favor democratic, geographically, and politically partners, as occurs in the relationship with the United States, accelerate several segments of our economy. 

By Rodrigo Fonseca

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