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Special report: BRIC breaking: Brazil's China syndrome
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Brazilian workers are seen during a shoe-making process at a factory in Novo Hamburgo, in the state of Rio Grande do Sul August 4, 2010.
Credit: Reuters/Nacho Doce
By Luciana Lopez
SORRISO/NOVO HAMBURGO, Brazil |
Fri Sep 24, 2010 9:29am EDT
SORRISO/NOVO HAMBURGO, Brazil (Reuters) - Even among emerging market powerhouses, Brazil and China stand out.
With enviably strong growth rates, the largest economies in Latin America and Asia have come to represent the shift in global clout from developed to developing economies. And as they've grown, the two countries have become more intertwined than ever.
But the relationship, while mutually beneficial, is hardly equal. The sheer size of the Chinese economy means its needs have begun altering Brazil's, in ways both salutary and worrisome. The lopsided relationship underscores the profound challenges that China's emergence as an industrial force poses for developing nations.
China, the world's second largest economy, is now Brazil's top trading partner, surpassing the United States for the first time last year. Brazilian imports from China jumped 12-fold from 2000 to 2009, and exports went up a whopping 18 times. China consumed almost 14 percent of Brazil's exports in 2009 -- and sent back almost 13 percent of Brazilian imports.
The Middle Kingdom has gone beyond merely influencing the Brazilian economy -- the world's eighth largest -- and has begun reshaping it, bringing bonanzas to some industries and burdens to others.
Consider two slices of Brazilian industry: soy and shoes.
In the state of Mato Grosso, the emerald green fields of soy stretch to the horizon. Farmers with thousands of hectares to their name drive late-model pickups and discuss foreign exchange policy, and trucks bearing tonnes of the grain trundle past on their way to port. Cities that comprised only handfuls of families decades ago are bustling, with farmers and city officials talking of ever-increasing crop sizes.
About 1,600 miles further south, the Vale dos Sinos area in the state of Rio Grande do Sul is struggling. The center of Brazil's footwear industry, the so-called Valley of the Bells has fought to hold on to jobs and factories, the industry that German and Italian immigrants brought over from the old country more than a century ago. Now, however, the companies headquartered here find themselves changing or dying.
What accounts for their vastly different fortunes? China. Its demand for commodities like soy is nearly insatiable. In recent years, China has steadily ramped up its imports of the grain. That's boosted Brazilian farmers, helping areas far from metropolitan centers that might otherwise have missed out on an economic boom, while helping with national concerns such as trade balances.
At the same time, China has devastated Brazilian shoemakers and its factory workers, building an Asian industry that is now the world's top shoe exporter, shipping out around 8 billion pairs last year alone.
China's influence caught Brazil by surprise. Even now, many worry that Brazil hasn't planned out the kind of deliberate relationship that will lead not just to pockets of prosperity but to a balanced relationship -- one that lets Brazil keep growing sustainably, and healthily, for decades to come.
BOOMING OPPORTUNITIES
Soy changed Carlos Favaro's life. His father owned a small farm in the state of Parana, less than 30 hectares (74 acres), when the family decided to pack up for Mato Grosso, which means "Thick Forest." Now, 24 years later, Favaro owns 2,300 hectares (5,680 acres) in the state.
"Mato Grosso was our new horizon," Favaro says. "It's a state of opportunity."
Brazil's soy exports have more than doubled in weight from 2000 to 2009, with prices and foreign exchange movements helping to boost the dollar value fourfold. Exports to China have rocketed up even more -- almost 18 more times by value.
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Sep 24, 2010 9:04am EDT
Another crappy article about this Brazil-China issue full with half-truths. So Brazilian economy is doing OK due to agriculture? Does the author realize agriculture corresponds to 6% of Brazilian economy and that the current percentage of food exports – about 25% of total exports – has remained practically the same during the 2000s and 1990s?
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