In 2024, Brazil's trade balance reached US$74.6 billion, below the record result of 2023 only, in current dollars. This figure hides strong asymmetries that do not seem to be heading for a reduction —both from a sectoral perspective as well as in terms of the technology intensity of the most important goods we export and import.

From a sectoral point of view, although manufacturing accounted for 54% of our total exports in 2024, as the country is a major importer of industrial goods, the sector had a US$56.9 billion trade deficit. The balance of other goods —agricultural, mineral and fishing— was positive at US$131.4 billion, thus ensuring a surplus in total trade.

Much of this, as Letters IEDI n. 1297 “The China effect on Brazilian imports' rise”, n. 1294 “Complexity of Brazilian exports and competition from China” and n. 1292 “Brazil-China trade and the loss of Brazilian economic complexity” help to understand, is due to the nature of our trade with China, for whom we practically only export primary goods while importing manufacturing goods.

The sectoral asymmetry is also seen when the balance is analyzed considering the technological intensity of the products. As industrial goods are more technology-intensive, high and medium-high technology groups were in the red with a deficit of US$123.8 billion. Low and medium-low intensity goods, which include industrial products and commodities, havd a surplus of US$192.2 billion. The medium technology group tends to be close to stability and in 2024 had a positive balance of US$5.5 billion.

Today's Letter IEDI analyzes foreign trade flows by technology intensity, with an emphasis on manufacturing products. It should be remembered that, according to the OECD methodology, manufacturing goods are classified into four groups: high, medium-high, medium and medium-low technology intensity. Extractive industry’s goods are classified as medium-low, and the low-intensity group includes goods from agriculture, forestry, fishing and aquaculture.

Thus, in 2024, while total manufacturing exports grew 2.7%, two of its groups by intensity advanced more strongly, with an emphasis on high technology, which registered an increase of 11.4%, driven by the aviation sector. Then, medium-low goods grew 7.6%, due to paper and cellulose, food and petroleum products.

Despite this, only the medium-low group managed to expand exports ahead of imports (+7.6% against +1.1%), reinforcing its surplus from US$54.5 billion to US$61.4 billion between 2023 and 2024. 

The group of high technology industrial goods did not achieve a similar result. Its imports rose 14.0% while there was a 11.4% increase in its foreign sales. Thus, its deficit grew from US$40.0 billion to US$45.8 billion between 2023 and 2024. Aviation accounted for 39% of the worsening, while pharmaceuticals and pharma-chemicals, and electronics accounted for 28% and 33% of this loss, respectively.

The other two groups in which manufacturing goods are present suffered a clear deterioration in 2024, with a drop in their exports and an increase in imports. The disparity was greater in the medium-high range, whose foreign sales fell 4.8% while their purchases rose 10.5%.

On the side of exports, still considering medium-high goods, the most significant setbacks in absolute terms came from vehicles, machinery and equipment, and chemicals. Taking the increase in imports, these same segments stood out, joined by electrical machines and appliances, too. As a result, the deficit of the medium-high category grew 20.6% between 2023 and 2024.

Not far from the medium-high, the medium technology intensity group saw its exports shrink by 4.2% and its imports increase by 9.7% in 2024. Metallurgy was the main factor in the drop in exports and shared with rubber and plastic the responsibility of pulling imports up. The balance of the medium-tech industry, usually positive, shrank 38% between 2023 and 2024.

Thus, in 2024, high and medium-high technology industrial goods together represented 26.7% of total manufacturing exports, continuing a trajectory of loss of share. In 2000, they represented 42.9% of the sector's basket.

If we take their weight in the country's total exports, high and medium-high technology goods account for an even smaller portion, 14.4% in 2024, compared to a 21.6% share of low technology goods.

It was during the intensification of the US-China trade conflict, in 2018–2019, and the deepening of macroeconomic imbalances in Argentina that low technology goods surpassed high and medium-high technology goods in our export basket. Chinese competitive pressure and the redirection of international trade flows played a role in this change, which may worsen over the years of the Trump administration.

The full text is available in Portuguese