As investors flee Brazil, will the United States or China emerge as the country’s economic savior?
Brazil posted a record trade surplus of $ 61 billion in 2021, according to data released Monday by the Economy Ministry, the country having exported more than $ 280 billion in exports and captured just under $ 220 billion. of dollars in imports.
For the world’s 12th largest economy, the surplus represents a moment of growth. However, Ryan Berg, a Latin American trade expert at the Center for Strategic and International Studies, said News week the moment could be short lived.
Brazil has spent “liberally” during the pandemic as it sought to avoid a major economic downturn like the one experienced by its Latin American peers, Berg said. Right now, the country faces major inflation of nearly 11%, and Berg says investors are getting nervous.
Investors withdrew about $ 2.2 billion from the country’s domestic hedge funds in October amid rising interest rates, Bloomberg reported. Berg said businesses see the country cannot maintain its current level of spending and fear that the main 2022 presidential candidate and former president Luiz Inacio Lula da Silva will further promote state economic intervention.
As the country heads into economic uncertainty, the country’s largest trading partner, China, and its second largest trading partner, the United States, may be on the verge of expanding their economic ties and influence within of South America’s largest economy.
While China remains Brazil’s largest trading partner, Brazil’s exports to China jumped 28% in 2021, compared to 45% of exports to the United States during the same period. Berg said this momentum could go even further in America’s favor as Brazil seeks to re-energize economic growth by investing in more valuable business assets.
âThe United States really has a lot of this value-added trade with Brazil, a lot more manufacturing-oriented trade,â Berg said. “We call it added value because it tends to have ripple effects in terms of the number of jobs it produces or the level of income that tends to lead to it.”
While much of Brazil’s trade with China focuses on raw materials, such as soybeans and iron, Berg said the United States has focused its attention on a few industries, including telecommunications and of technology. This concentration has allowed the United States to take a lead in the race with China in advanced areas of the Brazilian economy, such as its deployment of 5G.
After Brazil said it would introduce two separate 5G frequency bands – one for the government and one for everyone – it said Chinese telecommunications leader Huawei would not be involved in the government plan, which , according to Berg, has enabled Western European and American countries to progress. in securing contracts for the deployment of 5G. If America maintains this practice, it could further strengthen its importance in the Brazilian economy.
â(The United States) has been pretty successful, quite frankly, in keeping China out of some of these industries,â Berg said. News week. “In terms of added value, the kind of skilled jobs you want to create as a leader of a developing country (like Brazil), the United States, I think, has a much bigger role.”