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2019 | OriginalPaper | Buchkapitel

3. The Competitiveness of Brazilian Manufacturing in Both Domestic and International Markets

verfasst von : Marta Castilho, Julia F. Torracca, Fabio N. P. de Freitas

Erschienen in: International Integration of the Brazilian Economy

Verlag: Palgrave Macmillan US

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Abstract

This chapter aims to analyze the competitiveness of Brazilian manufacturing both in the international and the domestic markets. In fact, the performance of Brazilian manufacturing in the period 2000–2013 has been comprehensively analyzed, especially in what concerns the composition of exports and their capacity to promote job creation and income increase. But a thorough analysis of trade and production data reveals that the competitiveness of Brazilian manufacturing in the domestic market is significantly different from that in the international market. In the international arena, it is worth mentioning the tendency toward primary goods exports and the weak insertion of Brazilian manufacturing into global value chains. Concerning the domestic market, primary goods are of less importance in total production, and their composition is considerably different from exports. The methodology for analyzing the competitiveness in the international market included estimates of structural indicators and indicators related to the country’s insertion into global value chains, based on data extracted from the World Input-Output Database (WIOD). The declining trend of manufacturing goods in global trade and the evolution of relative international prices are considered in our analysis. The methodology for analyzing the competitiveness in the domestic market includes the estimation of import penetration ratio and the share of import content in the intermediate and final production, based on data extracted from the Brazilian Input-Output Table. The study concludes that the participation of Brazil in global value chains is comparable, for manufacturing exports, to those of China and Mexico. Concerning the domestic market, imports penetration rose significantly in recent years and the country’s dependence on imported goods increased.

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Vorheriges Kapitel Domestic Demand and Foreign Trade: The Brazilian Growth Trajectory

Nächstes Kapitel Restructuring and Economic Performance of Large Industrial National Brazilian Groups in the Post-Privatization Period

Industrial production except oil was multiplied almost by 3 between 2000 and 2012 in nominal terms (according to our estimations). During this period, there was a negative growth rate only in 2009.

Kaplinsky and Morris (2002) suggest that the organizational changes promoted by the Japanese auto industry in the 1950s are in the origin of the process of international fragmentation of production.

In Jones and Kierzkowski (1990), the costs deriving from the physical separation of production stages are called service link costs and include costs of transportation, trade barriers, and various types of coordination.

According to Orefice and Rocha (2011), regional and multilateral investment agreements have grown significantly since the 2000s.

That view corresponds to the “global value chains”(GVCs) approach proposed by Gereffi and Fernandez-Stark (2011), among others. There are conceptual differences between the terms whose analysis, however, is beyond the scope of the present chapter; we have decided to employ the expression “international trading and production networks”, as employed by Milberg and Winkler (2011). The view of international trade from the perspective of production stages and activities is known in the literature as trade-in-tasks (for a comprehensive, updated literature on the subject, see Helpman 2011).

US and China trade data presented in value added (WTO).

Check Hummels et al. (2001, p. 80).

For example, some sub-products of soybean or coffee—such as “soybean oil cake or solid residues resulting from extraction of soybean oil”—are considered as a manufactured good in some classifications despite their low degree of processing.

See Castilho (2011).

For more details, visit UNCTAD website.

The average growth rate of exports of agricultural and mineral commodities was 18% p.y., and their market share in the international market reached 3.3% and 11.2% in 2012, respectively.

Other factors might contribute to the observed drop in world exports of manufacturing goods like the low growth in unit labor cost in dollars for those primary products due to the Asiatic competition, mainly China.

In 2013, 72% of Brazil’s exports to China were basically composed of two products: soybeans and iron ore (37% and 35%, respectively). The exports to China of those two products alone accounted for 13.7% of total Brazilian exports in 2013.

According to UNCTAD (2013), the upstream participation corresponds to the foreign value-added share of the country’s exports, while the downstream participation corresponds to the “exports that are incorporated in other products and re-exported” (p. 10). Most natural resource-based countries have an important upstream component. But note that countries, like Korea and China, that intensively export intermediate goods have also an important upstream component.

The many international agencies, leaded by WTO, have been trying to estimate the value added of exports. One of the reasons for that question has a macroeconomic motivation and seeks to minimize the growing trade deficit of the US and other developing countries with China. For example, according to estimates by Johnson and Noguera (2012), US-China trade deficit could have been 30–40% smaller if measured by value added.

From 2004 to 2010, according to our estimations based on WIOD data, the VAX corresponded to more than 90%. In 2011, it declined to 88%.

Import and export indicator is based on data sets expressed in US dollars provided by Foreign Trade Secretariat—Ministry of Development, Industry and Foreign Trade (SECEX/MDIC), while output value series are expressed in Brazilian Reais provided by IBGE/PIA-Empresa.

The accumulated growth rates of imports in years 2000 and 2012 are 295%, and 262.7%, respectively. Output value also increased (246.6%), but not as vigorously as the other focused variables.

In a recent study, Soares and Castilho (2016) analyzed the impact of Chinese competition in the Brazilian domestic economy using input-output analysis. Results suggest that five domestic industries have been mostly affected by the competition with China: Leather and Footwear, Rubber and Plastic, Other Manufacturing goods, Textiles and Clothing and Electrical Machinery and Optical Equipment.

The WIOD database provides a series of input-output matrices in the years 1995–2011. However, data sets are at current prices. Since input-output data at constant prices was needed to perform this analysis, the input-output matrices compiled by IBGE were preferred over WIOD’s.

For more details on that methodology, see Neves (2013).

It is worth to mention that the import content of output referred to in this study is the direct import content. The indicator is not able to capture the indirect import content of output, that is, the share of imported content embodied in inputs purchased from domestic suppliers. The effect of indirect import content of output can be estimated based on a Leontief matrix.

The import content series goes until 2009, which was the latest year available for the Resources and Used Table provided by IBGE at the time of the elaboration of this article.

The term consumption is understood as the sum of general government consumption and household consumption, which includes consumption by non-profit organizations.

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Titel: The Competitiveness of Brazilian Manufacturing in Both Domestic and International Markets
verfasst von: Marta Castilho
Julia F. Torracca
Fabio N. P. de Freitas
Verlag: Palgrave Macmillan US
Buch: International Integration of the Brazilian Economy
Print ISBN: 978-1-137-46295-4

Electronic ISBN: 978-1-137-46260-2

Copyright-Jahr: 2019
DOI: https://doi.org/10.1057/978-1-137-46260-2_3

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