Sep 24, 2010
Commodity Exports From Brazil Surging, Iron Ore Leads the Way
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Thanks to stronger commodity prices and increased volumes, the value of Brazil's raw material exports during the first eight months of 2010 totaled 44% of all of Brazil's exports compared to 39% for manufactured goods. The last time that raw materials led Brazilian exports was in 1978 when raw materials accounted for 47% of Brazil's exports and manufactured goods accounted for 40%.
During the first eight months of this year, iron ore was the number one raw material exported from Brazil accounting for 12.6% of Brazil's exports followed by petroleum at 7.9% and soybeans at 7.5%. The number one manufactured item was automobiles accounting for 2.2% of Brazil's exports, but automobiles were only the ninth most valuable export from Brazil. Brazil is the world's largest exporter of iron ore and China is the largest importer of iron ore.
The surge in raw material exports has government officials concerned that Brazilian industries are losing out to manufactures in Asia, especially China. According to Welber Barral, Minister of Exterior Commerce, Brazilian industries are less competitive than their Asian counterparts due to expensive transportation, inadequate infrastructure, and a strong currency. He also feels that high interest rates and a heavy tax burden are also helping to price Brazilian manufactured goods out of the global market.
Recent news articles and opinion pieces in the Brazilian press are questioning the ever increasing role of China in Brazil's economy. Purchases of Brazilian farmland and mineral deposits by the Chinese government are fueling suspicions that the Chinese are taking advantage of Brazil's openness to outside investors. Due to the volatile nature of commodity prices, many are also questioning Brazil's heavy dependence on raw materials for the majority of Brazil's exports.