This study summarizes previous IEDI work on the subject of international trade competition between Brazil and China, analyzing the economic complexity of the products these countries export and also of those goods destined to the three main markets of Brazilian manufacturing foreign sales (Mercosur, LAIA and NAFTA). Previous studies were presented in the Letters n. 590: "Brazilian Exporting Dynamism and the Threat from Chinese Exports after the Crisis" (20/Sep/2013), n. 716: "Complexity of Brazilian Exports: From Bad to Worse" (26/Jan/2016), and n. 769: "Exports of manufactures: Brazil-China competition" (20/Jan/2017).

In the present Letter, the latest Atlas of Economic Complexity data available, referring to the year 2016, are compared with the results of 2012 (http://atlas.cid.harvard.edu/). The Atlas brings a number of complexity indicators of the goods exported by different countries. To get the data by product exported to Mercosur, LAIA and NAFTA countries, the information was cross-checked against the trade statistics by product presented at Trade Map, a database built by the UNCTAD/WTO International Trade Centre (ITC).

According to the economists responsible by the Atlas of Economic Complexity, Ricardo Hausmman and Cesar Hidalgo (Harvard University and Massachusetts Institute of technology-MIT, respectively), the complexity of exports is crucial for long-term economic growth. This is because some sets of products —at the core of the productive fabric— are more essential to boost other productive activities, which is a consequence of their linkage and spillover effects, that is: the fact that they establish more connections with the rest of the economic activities. The main elements of this group are electronics, machinery, building materials, chemicals and health-related products.

The data show that the Brazilian position in the ranking of economic complexity improved between 2012 and 2016, rising from 500th to 420th place. However, in addition to decreasing, Brazil’s Economic Complexity Index (ECI) became negative in the period. This means that other countries must have experienced a greater reduction in the ECI, causing a relative improvement of Brazil's position. Such result is in line with the country's evolution in the global ranking of manufactured exports, on which, although marginal, its position advanced from 31st to 30th between 2015 and 2016 (0.59% to 0.61% of the total). This was largely a result of the contraction of global manufacturing exports, as the expansion of Brazilian foreign sales of these goods was only 1.8% during the period.

The analysis of Brazilian and Chinese exports to the countries of Mercosur, LAIA and NAFTA, using the Product Complexity Index (PCI) to classify the type of good exported, helps understand the determinants of the interruption —in the 2012-2015 period— of the upward specialization trajectory of Brazilian exports of low dynamism products observed between 2008 and 2012.

Brazil has sought to adapt to the advance of Chinese competition in its main consumer markets, not only by exporting low complexity products, but also by selling more complex goods, such as machinery (especially automotive), benefiting from trade agreements with some countries of those regions. However, China stood out in products even more sophisticated (especially electronics), also associated with trade agreements between Latin American countries and nations outside the region.

In face of Chinese competition, Brazilian progress remains limited; the country must increase its exports of manufactured goods of greater complexity and expand its productive skills toward goods similar to those the country already produces. In addition, it is worth mentioning the importance of taking part in trade agreements involving products of greater complexity, notably with our close commercial partners in manufactured goods, such as those in Mercosur, LAIA and NAFTA.

The full text is available in Portuguese.