3 key Brazil exports facing shortfalls due to Ukraine crisis

Russia’s invasion of Ukraine in late February quickly turned into a humanitarian crisis, with thousands of civilian casualties within the first month. The conflict also rocked the economies of both countries, disrupting supply lines for a wide range of goods. A number of those facing shortfalls are key Brazil exports, with Brazilian exporters saying they are able to fill the voids.

Brazil is famed for its natural abundance, with the country a major exporter of both agricultural goods and natural resources. So it is perhaps not surprising that the key Brazil exports facing increased demand are a mixture of such goods.

Brazil is both Latin America’s largest country by area and its most populous, with the nation home to more than 210 million people, and its sheer size has earned it the nickname of ‘The Giant of South America.’ 

The opportunities on offer in this massive economy draw significant levels of foreign direct investment (FDI) into Brazil, with inflows reaching $69.2 billion in 2020 (all figures in USD) – making the country the fourth-most popular investment destination in the world.

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Brazil’s geographic domination of South America is highlighted by the fact that the only two countries on the continent to not border it are Chile and Ecuador. Meanwhile, its economic preponderance can be seen in the fact that the $1.44 trillion GDP Brazil registered in 2020 was roughly equal to the combined GDPs of all other South American nations.

In investment terms, the country is most famous for its resources, with major deposits of precious gems and metals, as well as large reserves of petroleum oil. Meanwhile, the clout of its massive agricultural sector has grown in recent years thanks to major improvements in efficiency.

According to USDA figures quoted by the Brazilian Ministry of Agriculture, between 2000 and 2019, Brazil saw the highest rate of growth in the world in terms of agricultural productivity, and only came second to China when that period was extended back to the 1960s.

Brazil’s export economy is bolstered by its status as a founding member of the Southern Common Market (Mercosur) — a 30-year-old economic integration initiative that also includes Argentina, Paraguay, and Uruguay, and to which Bolivia is awaiting formal acceptance as a member. 

As well as facilitating smooth trade between its members, Mercosur has a range of free trade agreements (FTAs) in place with key economies around the globe, and the bloc is currently in negotiations to establish an FTA with the European Union, which has been particularly affected by supply line disruptions caused by the conflict in Ukraine.

3 Brazil exports in high demand due to the Ukraine crisis

Depending on how the Ukraine crisis develops, and how long production and supply lines are interrupted both there and in Russia, the following three Brazil exports could increase significantly, if the South American powerhouse manages to fill some of the void in the international market.

1. Petroleum

While Brazil’s oil reserves are dwarfed by those of Venezuela, which has the largest reserves in the world, the country still has the second-highest reserves of crude oil among Latin American nations – including more than double the reserves of renowned oil exporter Mexico.

Brazil’s oil reserves are managed by the country’s semi-public oil company Petrobras, which according to recent press reports has outlined the possibility of replacing Russian energy exports to Europe disrupted due to the conflict.

With the backlash against the Russian invasion of its neighbor drawing many European countries to seek to move away from dependency on Russian imports, this gap in the market created by the conflict appears likely not to be filled even if hostilities end.

According to that report, just 15% of Brazil exports of petroleum oil are destined for Europe, while 38% go to China and 23% to the rest of Latin America. With many European countries cutting off Russian oil supplies or committing to massively reduce consumption of Russian gas, the situation provides considerable opportunity for an increase in Brazilian exports to the region.

2. Meat

Brazil is the world’s second-largest producer of both beef and chicken, as well as being the fourth-largest producer of pork, ahead of Russia. The more than 10.1 million metric tons of beef that Brazil exported in 2020 made it the second-largest exporter, behind only the United States, and represented almost 17% of global supply.

According to Ricardo Santin, president of Brazilian meat lobby ABPA, the scale of Brazil’s meat industry means it is capable of filling a significant part of the shortfall caused by the conflict in Ukraine.

“The industry is prepared to cover gaps and support the food security of nations that may be short-supplied by the likely suspension or decrease in exports of chicken and pork from Russia and Ukraine,” he told Reuters.

Russian and Ukrainian meat producers compete with Brazilian producers in Asia, Europe, and the Middle East, and Russia has upped its meat exports significantly in recent years, particularly to China. 

3. Corn & wheat

Brazil is a major corn producer, sat third in the world after only the United States and China. Ukraine and Russia are also among the top ten producers in the world. In terms of wheat production, Brazil sits significantly below Russia and Ukraine, but is still among the top 20 producers.

However, for both crops, industry representatives say Brazil has seen increased demand and could meet more of the shortfall caused by the conflict. That is in part thanks to the fact that a record wheat harvest in 2021 saw the country export more of the crop than ever before. 

For corn, meanwhile, significant demand in combination with a favorable exchange rate has encouraged producers to increase exports, with the scale of Brazil’s corn industry making it well-placed to fill the gap caused by disruptions to supply lines in Ukraine and Russia.

With major doubts hanging over the viability of harvests in Ukraine due to the conflict, while sanctions on Russia place pressure on supplies of goods from that country, Brazil has the capacity to step into the void.

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