Brazil Defies Recession as Trade with China Increases
Brazil’s government is to forecast a 7.34 percent rise in their economy this year, a figure that defeats the trend of many other nations that suffered shrinking economies during the global recession. Growth surpassed most expectations, but some economists debate that the government should start to lower spending and raise interest rates to avoid a backlash next year.
Reasons for the expanding economy according to Sergio Amaral, an official in Brazil’s foreign ministry and president of the China Brazil Business Council, is because government loans kept domestic production levels on a high, and as a result “I think China played an important role because China is now our first trading partner and China has been expanding its imports from Brazil.
After a decade of growing economic ties, China is now Brazil’s largest trading partner replacing the United States as Brazil’s top trading partner in 2009. Exports to the U.S. declined reflecting economy, but as soon as that recovers demand should naturally increase as markets differ in North America and Europe. China relies on trading raw materials such as soybeans and agricultural goods, as opposed to exporting more expensive and industrialised products.
Some analysts believe that exporting such commodities will only offer Brazil a temporary boost to the economy, one that is not sustainable in the long-term.
Gilmar Masiero lectures in economics at the University of Sao Paulo, says exporting soybeans and iron ore does not create enough jobs to really impact Brazil’s economy. 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”
As a result, there is already a shift in Sino-Brazilian export relations. “I think there is an evolution, recently, 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.
Chinese companies will continue to invest in their Brazilian relations by building telecommunications and infrastructure projects, which include 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 and 2016 Olympic Games.
For now, China continues to fuel Brazil’s economic growth even when the developed world is still struggling with sluggish recoveries as the world emerges from the financial crisis and economic slowdown. One can say that economic slowdown has helped pushed two countries closer together
