Brazil's exports to China have fallen sharply because of corona virus and prospects for the economy have been cut as a result.
With almost a third of Brazil's exports destined for China - a much higher proportion than that for key commodities such as iron ore, soya beans and crude oil, Brazil is being seriously affected by the slow down of the Chinese economy, following the outbreak of corona virus there.
Since early February, the Brazilian currency, the Real, has lost 16% of its value, falling to its lowest level ever, while the prospects for growth yhis year have fallen from the hoped for 2.5%, to less than 1.5%. The value of the shares of many leading exporting companies, notably Vale, Petrobras, the Suzano pulp and paper company, as well as several steel companies, have fallen sharply. The total losses on Brazil's stock exchange amounted to US $12 billions in the first two months of the year.
Brazil depends on the import of components for many of the motor vehicles assembled there, as well as electronic and electrical goods. Some factories in Brazil have been forced to halt production because of the interruption of supply. The drastic measures taken to halt the spread of the virus by the Chinese government, which no other country seems able to repeat, caused many ports, as well as mills and factories in that country, to virtually close. Huge quantities of goods remained stuck, either aboard ships, or in storage, at least until early March, when the first efforts to get the economy moving again began to be taken by the Chinese authorities.
The fact so many containers, particularly refrigerated ones, vital for the export of Brazilian meats, notably beef, poultry and pork, remain unloaded in China, let alone flowing back to countries such as Brazil, is a serious obstacle to the return to normality in trade. In 2019, China was the destination for 220 million tonnes of iron ore, 50 million tonnes of soya beans and meal and five million tonnes of crude oil. About two thirds of Brazil's exports of crude oil have been sold to China in each of the past two years, but since the outbreak of the corona virus, consumption of oil in China has fallen by about a third, or four million barrels a day. In addition, 4.6 million tonnes of market pulp went to China in 2019, but it is noted that despite the recent losses of the value of the Suzano company, demand remains high.
Most of the pulp going to China, is converted into tissue there, and this is greatly sought during the outbreak of the virus. 2.4 million tonnes of food, the great majority of that meat, was also sold to China in 2019. Demand for pork was particularly strong, following the outbreak of swine fever in China, which has forced a major reduction in the size of the Chinese herd, by far the world's highest. This outbreak, and the consequent need for less feed, had caused the world price of soya to fall slightly. But this has been ameliorated by the fact the the US soya crop has been below average.
More grain than usual is needed in Brazil itself, where the output of pork has been ramped up to meet the increased demand from China. More than a million tonnes of wood and the same amount of sugar was exported to China in 2019, as well as 600,000 tonnes of both animal feeds, mostly soya meal and vegetable oil.
Oil giant Petrobras, two thirds of whose fast growing exports of crude has been going to China in recent years, is looking round for other customers. Petrobras has also been hurt by the sharp fall in the price of crude, caused mainly by the slowdown in demand in China, something which has been so significant as to cause a measureable reduction in air pollution in China's cities. Petrobras depends on stability in three Asian countries hit by the outbreak of the virus, Japan and Singapore as well as China, because several very large production platforms are under construction there.
Each platform has the capacity to produce 150,000 barrels of oil a day, and if they are not ready on time, Petrobras will suffer financially. A relatively small number of individuals have been affected by the virus in Brazil, whose population, it must be remembered, is formed of descendants from several parts of the world, as well as "mother" country Portugal. Sao Paulo, whose population exceeds 15 millions, reputedly contains the second largest number of people of Japanese descent in the world, and there are many thousands of Chinese, and South Koreans as well.
Millions of migrants travelled from Italy to Brazil in the last century, as well as many from countries in the Middle East, and Eastern Europe. Regular flights connect the country's major citites with most cities in Europe, so keeping the virus out is proving difficult.
Source: Patrick Knight - Correspondent