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Brazilian Economy Grows as Trade With China Increases

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Unlike many other nations that saw their economies shrink during the global recession, Brazil emerged relatively unscathed.  And according to government figures there, Brazil will see a seven percent increase this year.  Some analysts say this growth has been fueled by increased exports to China, now Brazil's largest trading partner.  But other observers say the current exports will not empower Brazil in the long run.  

Brazil made it through the global economic crisis relatively unaffected for two reasons, says Sergio Amaral, a long time official in Brazil's foreign ministry. He says one is because of government loans that kept domestic production levels up.

"And the second point is that I think China played an important role because China is now our first trading partner and China has been expanding its imports from Brazil," Amaral said.

Trading partnership

In 2009, China replaced the United States as Brazil's top trading partner.

But Amaral, who is also the president of the China Brazil Business Council, says China took the top spot due to the damage caused by the global recession on the U.S. economy.

"The exports to the US declined not because of China, but because of decline in demand from the US," Amaral explained. "I think as soon as the US economy recovers we'll increase our exports to the US too, because these are different types of products that we sell to the United States and China."

Amaral explains that markets in North America and Europe import more expensive, industrialized goods, including steel and airplane parts.  Whereas trade with China revolves mainly around the export of raw materials, like iron ore and agricultural products such as soybeans.    

Will boost last?

But some analysts say while Brazil's reliance on exporting these primary commodities to China has given a boost to the economy in recent years, it will not sustain growth in the long run.

Gilmar Masiero lectures in economics at the University of Sao Paulo. He says exporting soybeans and iron ore does not create enough jobs to really impact Brazil's economy. Masiero says if trade with China is to provide Brazil with continued economic growth and create jobs for Brazilians, then it must broaden beyond commodities.

"If we build more technological partnerships with countries who are more or less in the same level of development that we are then we can grow together and we can be competitive in specific sectors that must be new emerging technological sectors and not put our efforts in old industries," Masiero said.

Sergio Amaral at the China Brazil Business Council agrees the type of exports must change.  But he says he sees a change in Sino-Brazilian relations taking place already.

"I think there is an evolution, recently, I think this year, the outstanding point is not trade, its investment," Amaral said.  "Chinese companies are expected to invest $10 billion in Brazil this year and this year China will be the largest investor in Brazil."

Amaral says Chinese companies will invest in telecommunications and infrastructure projects.  And that includes a bid to construct a high-speed train line between Sao Paulo and Rio de Janeiro ahead of Brazil's hosting of the 2014 World Cup.

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