Country Trade Profile Brazil
Brazil is the 9th largest economy in the world and has a population of 215 million.
It is a well-developed middle-income country that seems forever poised to reach a level of high development yet has not quite been able to reach it. The political system is polarised between populist left and right political movements. And according to Transparency International, Brazil scores poorly in terms of public sector corruption and has high levels of poverty amongst its population.
However, there are encouraging signs. South America’s largest economy is currently experiencing a period of healthy economic growth, having undergone an expansion in GDP of 2.9% in 2023, and has seen its poverty rate fall from 23.5% in 2022 to 21.3% in 2023. This is largely thanks to the government’s flagship conditional cash transfer programme, Bolsa Familia, which has helped lift many families above the poverty line. Thus far, Luiz Inacio “Lula” da Silva’s government has presided over great advances in the reduction of illegal deforestation – with plans to eradicate it completely by 2030 – and is also known for clashes with the national bank over double-digit inflation figures, stating that: “Brazilian retailers, businesspeople, workers can no longer stand this interest rate.’’
Brazil’s trade profile
Brazil’s export market was valued at $341 billion in 2022, ranked 25th in the world in value, with its primary exports being soybeans, crude petroleum, iron ore, refined petroleum and coffee. Its import market at the same time was valued at $270 billion, with the most being spent on refined petroleum, crude petroleum, motor vehicles, parts and accessories and fertilisers. Its biggest trade partner is China (worth $154.1 billion in 2022), followed by the United States (worth $86 billion), as well as Argentina, Germany, India, The Netherlands and Spain. The main trading hubs within Brazil are São Paolo, Minas Gerais and Río de Janeiro, and, as of February 2024, Brazil has seen a rise in trade, especially with China. The inflation rate of the Brazilian Real stands at 13.75%, and the unemployment rate is 7.4%.
Brazil is part of the BRICS trading organisation, a trading block of influential developing economies that was initially made up of Brazil, Russia, India, China and South Africa (and has recently expanded to include other nations such as Saudi Arabia) which Lula is a large proponent of. The Financial Times reported on the flood of Chinese industrial surplus exports to Brazil, and how this is disrupting the domestic market with masses of cheap, low quality raw materials. Yet China remains Brazil’s largest trading partner, exporting $104 billion worth of goods to China and importing $53 billion in 2023. China’s “dumping” of exports to Brazil has made Brazilian steelmakers call for government tariffs between 9.6-25% on imported steel products. It has taken a neutral stance on the Ukraine War and seeks to economically empower the Global South against the perceived economic dominance of major Western powers.
As of late, Lula has been pursuing some aggressive market intervention measures – especially against the CEO of the state-owned oil firm Petrobras, Jean Paul Prates, to try and bring down fuel prices and fund job-creating investments.
Brazil-UK trade
Total trade in goods and services between the UK and Brazil was valued at £10.4 billion in the four quarters to the end of Q3 2023 – with £5.6 billion in exports from the UK to Brazil and £4.8 billion in imports into the UK from Brazil. This was an increase of 28.2% (£2.3 billion) in total trade between the two countries since Q3 2022. Top exports from the UK included medical and pharmaceutical products (11.8%), mechanical power generators (10.8%) and cars (7%), while top imports from Brazil included beverages and tobacco (15.4%), mechanical power generators (10.1%) and meat and meat preparations (9.3%). In terms of services, both use the other predominantly for “other business services” (34.4% of UK exports to Brazil, 55.3% of UK imports from Brazil), and travel (17.2% and 23.5% respectively).
The large trade in pharmaceuticals from the UK is because of Brazil’s enormous healthcare market – the largest in Latin America, representing 10.2% of the GDP. As of November 2022, the UK and Brazil signed a Double Taxation Agreement, preventing double taxation on transactions and investments between both jurisdictions whilst also preventing tax evasion and avoidance. It was a clear indicator of a wish for increased trade between the two nations.
After a trip to Colombia, Chile and Brazil in May 2023, then foreign secretary James Cleverly concluded that trade levels with Brazil were “not as high as they should be” due to a lack of mutual understanding, and that “we should be ambitious for our future relationship”. That said, there are tensions in the region with Argentina, which have reignited over the issue of the Falkland Islands. There is cause for optimism, however, as Minister for Exports Lord Offord plans to visit Latin America soon (as of April 10th, 2024) to promote British business in the region, having signed a £2 billion deal with the Dominican Republic for British-backed infrastructure projects, alongside plans to seek opportunities for pharmaceutical trade in Colombia and renewable energy in Bolivia. With efforts to join the Comprehensive and Progressive Trans-Pacific Partnership underway (which has some Latin American members such as Mexico and Chile), it’s not unlikely that, as part of a scheme of post-Brexit opportunities, the UK may make a greater effort to find a stronger financial foothold in South America.
Useful links
Brazil Overview: Development news, research, data | World Bank
Brazil’s second-quarter growth beats estimates in boost for Lula (ft.com)
Brazil launches China anti-dumping probes after imports soar
Luiz Inácio Lula da Silva steps up interventions in Brazil’s largest companies (ft.com)
UK seeks to revive post-Brexit trade links with Latin America (ft.com)
UK signs double tax treaty with Brazil – KPMG UK
Brazil’s Lula scraps meeting on future of Petrobras CEO, sources say (msn.com)
Join a thriving community of skilled directors and leaders
Ask us about membership
