It is common to analyze the insertion of the State of Rio Grande do Sul in the global economy by taking into account topics such as its exporting partners — Argentina, China and the United States, not necessarily in this order — and the traded goods — soybeans and its products, meat (beef, pork and chicken), tobacco and chemicals. Although an increase (or maintenance) in the economic flows to these destinations and in these sectors is desirable, it is convenient to explore the opportunities in countries with high potential of economic growth in the next decades: the developing or emerging markets, especially those in southern Asia and in Sub-Saharan Africa.
Currently, most exports of Rio Grande do Sul are already directed to developing and emerging countries, thus following the trend of Brazilian exports, as shown in Graph 1. According to data from the Economics and Statistics Foundation (FEE), exports to the other four BRICS members (China, India, Russia and South Africa) and to the remaining Latin American countries comprised, in 2014, more than half of the state’s total exports (the proportions were 27.2% and 23.8% respectively). If other developing countries in Africa, Asia and the Middle East are considered, this proportion will certainly increase. The developed world — North America (9.2%), Europe (16.8%) and Japan (1.22%) — remains relevant, but its share has reduced over the last two decades.
Characterizing the current trade with emerging countries in general lines is a complicated task, as we can observe differing patterns for each geographical area. While soybeans and its products predominate in the commerce with East Asian partners (China, India, South Korea and Vietnam), in Africa and in bordering countries of Brazil, the export basket is more diversified. In the case of Rio Grande do Sul’s exports to Argentina, for instance, in spite of recent fluctuations and restrictions, products of medium and high added value, such as agricultural machinery, transport vehicles, industrial inputs and chemicals, are still relevant. When it comes to African and Middle East nations, other sectors are more salient, as the case of meat products to Angola (roughly US$108 million in 2014, or almost 54% of exports to that country), tobacco to Indonesia (47% of the basket to the country), and rice to Cuba (45% of the basket), according to statistics from the Brazilian Ministry of Development, Industry and Foreign Trade (MDIC).
An observation of this recent trade dynamics should not undermine the considerable potential of intensifying the trade with most emerging countries. The expectations about the broadening of agricultural frontiers in Latin America and in Africa offer, at the same time, opportunities and challenges to the insertion of the state in the global economy. African and other Latin American markets are competitors of Rio Grande do Sul as producers and exporters of soybeans and corn and also partners as importers of agricultural machinery. This may be not only a very profitable niche for the local companies and entrepreneurs, but also a convenient solution for the risk of excessive commoditization of state exports in recent times.
Currently, African and Latin American countries purchase 92% of Rio Grande do Sul’s exports of agricultural machinery, as can be seen in Graph 2. This figure is even more significant when we bear in mind that it was only 72% in 2005. Such process is in line with a wider movement within the Brazilian commercial policy over recent years, focused on the expansion of economic activities in emerging markets. With respect to the agricultural machinery industry, such strategy provides an additional demand for the industrial sectors of Rio Grande do Sul which have been struggling to compete in foreign markets. As the primary sector is still predominant in most of Latin America and Africa, the state’s industry may restore its share within the state’s exports.
In Africa, Ethiopia, Chad, Mozambique and Rwanda are among the top ten countries in economic growth rates in the 21st century. Unlike Angola and Nigeria, they are not rich in mineral resources and have prospered thanks to agriculture. Placed in the earliest stages of development, these nations still need machinery to expand their rural production, which represents a significant room for the economy of Rio Grande do Sul. In fact, the Brazilian government signed an agreement in 2013 aimed at financing exports of agricultural machinery to Africa, through the Financing Program for Exports (Proex). Such measure is part of the international More Food Program, whose purpose is to promote the development of agriculture in Africa. Finally, the line of credit offered by the Brazilian National Bank for Economic and Social Development (BNDES) for exports-driven and non-agricultural products can be used by the state industry interested in exporting to Africa.
Furthermore, among Latin American countries, we highlight Bolivia and Paraguay, whose economic growth rates have been sound due to the expansion of family farming and to the advance of soybeans cultivation respectively. These processes have been influencing the state industry, which increased its sales to Bolivian and Paraguayan farmers. Concerning Paraguay, the strong presence of Brazilian-origin farmers (many of which, born in Rio Grande do Sul) strengthens the ties between the rural production in that country and the state’s industry of agricultural machinery. In addition, the increase in exports to Venezuela, despite its acute economic crisis, is probably a consequence of the accession of that country to the Southern Common Market (Mercosur), an initiative supported by many Brazilian industrial groups. Argentina has been an exception to the norm: its protectionist stance on trade, more visible after 2009, has induced a stark reduction of 56% on local sales from 2007 to 2013.
Economic and Trade promotion overseas, in contrast to the political and diplomatic relations, is not an exclusive competence of federal authorities. States and city authorities may — and are expected to — encourage local business beyond the borders of the nation. Actually, the activity of subnational governments in global economy has become more and more common, which operates, in most cases, as a complement to the national diplomatic bodies, or as a link between the latter and the business community. The forging of economic ties of Rio Grande do Sul with nations and regions traditionally underrated within the state trade outlook meets the interest of society and reinforces the current Brazilian foreign policy.
