Brazil Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Brazil’s main exports to the EU in 2021 were bran, soybean oil, coffee, iron ore, cellulose and soybeans.

In 2021, the BFR mainly imported human and veterinary medicines, automobile parts, tractors, insecticides, herbicides, fertilizers and chemical products from the EU.

  • Allcountrylist: Overview of major industries in Brazil, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 30,158.60 31,405.10 32,224.10 27,687.00 33,846.90
Imports into the EU (million EUR) 28,359.90 29,192.20 27,105.90 24,980.50 32,910.90
Balance with the EU (million EUR) -1,798.7 -2,212.9 -5 118.2 -2,706.5 -936

Source: European Commission

Trade relations with the Czech Republic

In 2021, the Czech Republic’s exports to the BFR increased by 19.7%. Brazil confirms that it is an interesting market for Czech companies.

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 5.6 7.5 8.3 7.4 8.8
Imports to the Czech Republic (billion CZK) 7 8.1 6.2 4.9 4.9
Balance with the Czech Republic (billion CZK) 0.9 0.6 -2.1 -2.5 3.9

Source: CZSO

The most important items of the Czech Republic’s exports to the BFR in 2021: 841330 Fuel pumps, lubricants for piston engines, Butadiene-styrene rubber (SBR), carbox (XSBR), Shovel loaders Parts, other parts of airplanes, helicopters, Ignition cable sets for cars, aircraft, Glass drinking cup on a leg, not made of glass-ceramic, body, Loading machine equipment, rotating superstructure, Parts of piston diesel engines with internal combustion, Equipment for automatic data processing, obs.CPU+ input/output unit, and combination, automatic electric circuit breakers.

Trade relations with countries outside the EU

Main recipients of BFR exports outside the EU:

China (31.28%), USA (11.09%), Argentina (4.24%), Chile (2.50%), Singapore (2.10%), Mexico (1.98%)

Main exporters to the BFR outside the EU:

China (21.72%), USA (17.95%), Argentina, India (3.07%), Russia (2.60%)

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 152,581.2 165,701.4 155,734.7 150 116.0 204,845.9
Imports to countries outside the EU (million EUR) 106,749.3 128,331.5 130,932.1 109,988.5 153,585.1
Balance with non-EU countries (million EUR) 45,831.9 37,369.9 24,802.7 40 127.6 51,260.8

Source: EIU, Eurostat

Foreign direct investment

FDI: In 2021, Brazil received 58 billion USD.

According to the Brazilian press and the Brazilian stock index IBOVESPA, in 2022 the BFR receives a record amount of foreign investment.

For the first quarter of 2022, foreign investors moved 71.06 billion reais ($15.45 billion) to Brazil.

According to the data of the Brazilian stock exchange, the aforementioned influx of foreign investments into Brazil is caused by the conflict in Ukraine and the rise in energy and commodity prices in Europe. Global investors fear the declining competitiveness of manufacturing in Europe and are shifting their investments to countries such as Brazil.

For example, the American bank Goldman Sachs recommends investing in Brazil, the Middle East and Africa now. The American company Franklin Templeton is also now recommending Brazil as a very suitable destination for foreign investments. In the case of Brazil, especially its commodities are now attractive.

Almost 35% of current foreign investments are directed to the mining industry, around 18% to agriculture and 12% to oil and gas extraction. According to Brazilian and foreign consulting companies, its low economic connection with markets such as Russia and Ukraine also speaks for investment in Brazil.

Czech companies could also benefit from suitable conditions for investments in Brazil. In this context, it is necessary to remind that for foreign companies that are not very capital strong, various cooperations and joint ventures in Brazil with the possibility of re-exports still remain attractive.

FTAs and treaties

Treaties with the EU

In June 2019, the EU and the MERCOSUR countries (Argentina, Brazil, Uruguay, Paraguay) reached a political agreement on a future trade agreement. Brazil was the protagonist in reaching this agreement after 20 years of negotiations. As of the date of drafting this STI, negotiations between the BFR government and the EU authorities on the details of the agreement are still ongoing. Some European countries are apparently not inclined to sign an FTA with the BFR due to concerns of cheaper agricultural imports to their countries. Therefore, it can be expected that the road to the implementation of the FTA will be long and complex.

Contracts with the Czech Republic

Basic agreement on scientific and technical cooperation between the government of the Czechoslovak Socialist Republic and the government of the Federative Republic of Brazil, Brasília, 07/02/1985. Entry into force: 26.01.1990

Treaty between the Government of the Czechoslovak Socialist Republic and the Government of the Federative Republic of Brazil on the prevention of double taxation and prevention of tax evasion in the field of income taxes and Protocol, Brasília, 26/08/1986. Entry into force: 14.11.1990

Agreement between the government of the Czech Republic and the government of the Federative Republic of Brazil on economic and industrial cooperation, Prague, 12 April 2008. Entry into force: 20.10.2009

Agreement between the Ministry of Education, Youth and Sports of the Czech Republic and the Ministry of Education of the Federative Republic of Brazil on cooperation in the field of higher education and science for the years 2009 – 2011, Brasília, 06.11.2008. Entry into force: 06.11.2008 (applies, Article 8 – automatic extension for 3 years, until one of the parties terminates in writing)

Memorandum of Understanding between the Ministry for Regional Development of the Czech Republic and the Ministry of Tourism of the Federative Republic of Brazil on cooperation in the field of tourism, Brasília, 27/03/2012. Entry into force: 27.03.2012

Memorandum on the accession of the Czech Republic to the Brazilian scholarship program Science without Borders, Brasília 25/11/2014

Agreement between the Government of the Czech Republic and the Government of the Federative Republic of Brazil on cooperation in defense matters, Prague, 13/09/2010

Contract on social security, 9/12/2020

Developmental cooperation

The Czech Republic does not provide any form of development aid to Brazil on a bilateral level. The Czech Republic indirectly participated in the development aid provided by the EU, which reached a total of EUR 61 million in the years 2007-2013 based on the Country Strategy Paper (CSP) for this period. In the current 2014-2020 financial period, due to the strength of its economy, Brazil is no longer eligible to participate in bilateral projects financed by EU development funds, however, the EU still participates in various regional and thematic programs.

As the only recommended method of possible development cooperation with a country of continental size and importance, which is the BFR, cases of the “Aid for Trade” type can be mentioned, where funds for development projects are effectively linked to future contracts of Czech companies.

Prospective fields of study (MOP)

Based on the size of its economy, Brazil is ranked between 7th and 9th in the world, according to the evaluation methodology. It is the 5th largest country in the world and its population of 21million represents a market with great potential for absorbing imports. In 2021, the BFR’s GDP grew by 4.6%, and for 2021, growth of around 2% of GDP is expected. From the point of view of evaluating the BFR as an export destination, it is significant that in 2021 its imports increased by 38.2%, while exports increased by 34%. The attractiveness of Brazil as a business partner and a place for investments, joint ventures and various cooperations with the possibility of exporting to other markets increased dramatically during the first quarter of 2022 and especially after the outbreak of the conflict in Ukraine. This caused an increase in the prices of energy, raw materials and overall production in Europe, and led to a rapid growth of commodities on world markets. Brazil, it is only minimally dependent on trade with Russia (0.65% of BFR foreign trade in 2021) and has significant commodity resources of its own. This has made the BFR now a very interesting country for various types of investment, including productive ones. According to the Brazilian stock market index IBOVESPA, the BFR receives a record amount of foreign investment in 2022. In the first quarter of 2022, foreign investors moved USD 15.45 billion to Brazil. This is more than the entire volume of foreign investments in the BFR for 2021. For example, the American company Franklin Templeton and also the bank Goldman Sachs now recommend Brazil as a very suitable destination for foreign investments. Almost 35% of current foreign investments in the BFR are directed to the mining industry, around 18% to agriculture and 12% to oil and gas extraction.

Perspective field 1

Automotive

Brazil is the 8th largest automobile producer in the world and has the 6th largest domestic market for automobile sales. In 2021, production in this field in the BFR grew by 11.6% and 2.24 million cars were produced. This volume of production offers opportunities for foreign parts suppliers as well as opportunities for foreign direct investment in production capacities in the BFR. Despite Brazil’s objective economic problems, the fact that the Brazilian market is not subject to most of the restrictive measures that will seriously threaten traditional European car production in the near future makes this field promising. This will further increase the importance of BFR as an outlet for automotive parts and investments.

Perspective field 2

Defense industry

The importance of the Brazilian defense industry rests on the strong position of the armed forces in the current Brazilian democracy, where they are perceived as an impartial guarantor of national security and sovereignty. The strong position of the armed forces corresponds to relatively large expenditures from the state budget for their equipment. Although the state budget of the BFR for 2022 was approved as economical, defense received the largest part of the funds from all departments in the amount of BRR 8.8 billion (CZK 2.26 billion). In 2019 and 2020, bilateral cooperation in the field of defense material gained new momentum, but was slowed down by the COVID-19 pandemic. It can be assumed that in 2022 it will be possible to follow up on the planned projects and increase not only the export of Czech companies to the BFR, but also to find investment opportunities and the localization of licensed production of our companies in the BFR.

Perspective field 3

Agriculture

The importance of agriculture for countries that are interested in exporting to the BFR naturally results from the increasing production of Brazilian agriculture and its increasing share in GDP. In 2020, the Agrokomplex contributed 26.6% to the GDP of the BFR, and according to estimates for 2021, this share will continue to increase. The share of the agro-complex in Brazilian exports is around 48%. However, this growing dependence of the BFR on agricultural performance also creates a growing need for imports. The opportunities are mainly in the field of agricultural machinery, technologies for the agro complex and also, for example, in the field of vaccines.

Perspective field 4

Aviation industry

Deliveries by Czech companies to the Brazilian aviation industry are among the three most important statistical items of our exports to the BFR. In recent years, and especially since the start of the COVID-19 pandemic, the competitiveness and production of Brazilian industry has steadily declined. The automotive and aviation industries can be separated from this negative trend. In the aviation industry, Brazil maintains a high level of development and quality. Opportunities for Czech companies in this field are not only in direct deliveries for the construction of larger aircraft, which are already successfully underway, but new possibilities are emerging, for example in the field of unmanned aircraft and drones. There are also opportunities for the export of smaller sport airplanes and gliders.

Perspective field 5

Food industry

In Brazil, the Czech food industry is mainly connected with the production of beer. Recently, it appears that there are opportunities to sell beer bottling and packaging technology for sale. The segment of Brazilian small breweries and microbreweries appears to be by far the most promising customer for Czech technologies. There are currently around 1,400 microbreweries in operation in Brazil, and this segment is growing dynamically and generating demand for new technologies.

Industries that have export opportunities in the Brazilian market include the food industry. From the point of view of how the Czech Republic is perceived in Brazil, it is possible to identify the comparative advantage of Czech producers of technology for the production and bottling of beer. The technology market for small breweries and mini-breweries will be the most promising, as this is the area where production has grown the most over the past 5 years. While it is difficult to compete with Brazilian industrial beer from large breweries in terms of price, microbreweries have clearly become a fashionable phenomenon. There are currently around 1,400 micro-breweries in operation in the BFR, and there is room for more to be created, as beer consumption is growing. This is a remarkable development compared to the fact that in 2015 there were only 332 microbreweries in the BFR. The demand structure is also changing, when there is an increase in customers interested in interesting beers with an original taste from micro breweries. Beer production in the BFR reached 1billion liters in 2020. 85.6% of mini breweries work in the South and Southeast of Brazil, where there is also the highest demand for these types of beer.

Brazil Trade