MercoPress. South Atlantic News Agency

Brazilian industry loosing world market share to main trading partner, China

CNI economist Flavio Castelo Branco: one in five Brazilian companies import raw materials from China

Competition with top trading partner China is costing Brazilian industry valuable market share, the National Confederation of Industry (CNI) in South America's largest economy said on Thursday.

Half of Brazil's export firms battle against Chinese peers for business and 67% of them lost market share in international competition with the Asian powerhouse, according to a CNI-conducted survey.

Domestically, just under one third of Brazilian firms face direct competition from Chinese rivals, but about 45% of those companies have seen their market share in Brazil slip, said CNI economist Flavio Castelo Branco.

China became Brazil's number one trading partner two years ago, and the two economies have surged ahead of global growth averages. The countries are both members of the BRICS bloc of large emerging economies that also includes Russia and India as well as newest member South Africa.

China's impact is such that one in five Brazilian companies today import raw materials from China, twice the number of those in 2006, according to CNI.

“This reveals a strong penetration of Chinese products into the Brazilian production chain”, Castelo Branco said.

Brazilian industry is suffering from the appreciation of the Real against the dollar, which Castelo Branco said has led to a loss of competitiveness.

“The valuation process of the Brazilian Real makes imported products cheaper” he said, adding that Chinese goods are benefiting from lower wage costs and grander scales of production.

The hardest-hit industries are electronics, textiles, footwear and machinery and equipment.

Brazil's imports from China surged 60% cent in 2010, amounting to 25.5 billion US dollars, but it maintained a surplus thanks to a 46% rise in exports to 30.7 billion.

About 10% of Brazil's major manufacturers have now opened or are building factories in China. “If that continues it will have an impact on Brazil's industrial structure”, underlines CNI.