São Paulo – São Paulo, Espírito Santo, Rio Grande do Sul, Paraná and Minas Gerais are the five Brazilian states that export the most to the Arab countries. From January until April 2009, they sold the equivalent to US$ 1.9 billion, i.e. 74% of total sales from Brazil to the region. During the period, there was growth in sales of products such as sugar, aircraft, iron ore, soybean, soy oil, tobacco, tractors, rebars, maize, live cattle, soy chaff and electric engines.
In the first four months of the year, shipments from the states mentioned above to the Middle East and North Africa grew 1% over the same period of last year, a rate lower than the 7% increase recorded in total exports from Brazil to the Arab world. This occurred as a result of the expansion of sales from other Brazilian states, such as Goiás, Santa Catarina and Tocantins.
According to data supplied by the Foreign Trade Secretariat (Secex) and compiled by the Arab Brazilian Chamber of Commerce, sugar was the product for which exports grew the most in three out of the five leading exporting states. Shipments of sugar from the state of São Paulo rose by 61.8% and totalled US$ 424 million in the first four months of the year. In the state of Minas, foreign sales grew 67.2% and, in Paraná, 31.3%.
“India, which has always been a global mega-producer and large exporter, had a serious domestic production problem and dropped out of the international market, and even went so far as to import sugar from Brazil,” said Eduardo Sampaio Marques, director of the International Promotion Department at the Brazilian Ministry of Agriculture, Livestock and Supply, to whom the dropping out of a competitor allowed Brazil to improve its international market position even further.
The technical advisor to the market management department of the Organization of Brazilian Cooperatives (OCB), Marcos Mattos, also underscores the increase in domestic income and consumption in Arab countries as a contributing factor to the expansion of exports. “In spite of the crisis, the Arab market ended up consolidating itself with new and increasing shares in the cooperatives’ sugar export basket,” he stated.
Out of total exports from Brazil to the Arab countries, sugar answers to 17% and comes mainly from the state of São Paulo. Açúcar Guarani, a company from the state, for instance, exports to nearly all of the Arab countries in the Middle East, the highlights being the United Arab Emirates, Jordan, Kuwait, Syria and Yemen. “Presently, 40% of Guarani’s output (500,000 tonnes per crop) is destined to the foreign market, with the Middle East accounting for 30% of total exports (150,000 tonnes),” said the commercial director of the company, Paulo José Mendes Passos.
Also in the agricultural field, shipments of grain, such as wheat and maize, also grew, especially in Paraná. Saudi Arabia alone imported 226,500 tonnes of maize. Next came Morocco, which imported 214,000 tonnes. “Brazil is becoming an important exporter of maize. Up until the last decade it was not, but now the country is on another level. The Arab countries are not important clients yet, but over the last two years, maize exports to the region have grown a lot,” explained Marques, of the Ministry of Agriculture, Livestock and Supply.
Meat is the main export product of the state of Rio Grande do Sul, answering to almost 50% of sales from the state to the Arab countries, but sales decreased by 29.5% from January to April 2009. Second comes tobacco, for which sales grew by 12.4%, having totalled US$ 30.8 million. “Currently, the Arab countries are important, strategic markets for the sector and answer to approximately 6% of the state’s tobacco exports,” says the president of tobacco producers union SindiTabaco, Iro Schünke.
Dairy products
The milk and dairy sector was seriously affected in most of the five leading exporting states. In São Paulo, the rate of reduction was 64.8%, in Espírito Santo, 100%, in Rio Grande do Sul, 63.54%, in Paraná, 94%, and in Minas Gerais, 22%.
In the opinion of producers and exporters, the reduction was driven by domestic and foreign factors. “The price of milk fell sharply in the international market in recent months. The Arab countries are the largest market in the world for dairy products, but they also reduced their purchases, not only of dairies but also of other agribusiness products, such as meats,” explained Leonardo Bonaparte, of Tangará, a dairy exporting company. “But the market is already recovering, and offers have already started being made,” he added.
“In times of crisis, consumers end up using substitute products and cheaper sources of protein, such as chicken and soy. Besides, banks restricted credit starting in October 2008, and importers were left with no funds to buy higher value added products,” said Eduardo Moraes, managing partner at Latinex, a company from the city of Curitiba that sells foodstuffs.
According to him, from the financial point of view, the Arabs were less affected and had more reserves. “We are living in an extremely difficult period for Brazilian dairies, because production has decreased a lot due to the drought, prices have rocketed and demand has remained stable. The outlook should remain bad until September. Products of animal origin depend a lot on climate-related factors,” he said.
Moraes also stated, however, that there is a growing demand in non-traditional markets, such as Syria, Libya, Yemen and Algeria. “In new emerging markets, where consumption is rising, Brazil has great chances of establishing itself as a supplier,” he bets.
For Otávio Farias, the foreign market consultant to Alliance Commodities, milk production grew in several regions of the world during the market euphoria and price peaks from 2006 to 2008. Coupled with the world crisis, there was a reduction of demand. “As a consequence, prices dropped by 50% on average since the price peak, and Brazil lost its competitiveness in the global market,” he explains. “Domestically, we have the Brazilian economy, which was less affected that those of other countries. Certain sectors were more impacted than others and had more dismissals than others. Overall purchasing power, however, was maintained,” he adds.
According to the consultant, Arab countries may be regarded as potential markets for Brazilian dairy exports. “The Arab countries are not capable of large-scale milk production, therefore milk and its derivatives are important family consumption items. They are structural milk importers. Furthermore, many Arab countries have purchasing power, due to their oil income.”
Other products
Aside from agribusiness, some important items in the basket are aircraft, iron ore and steel products. The state of São Paulo recorded growth in aircraft exports to the Arabs. Sales went from US$ 86.3 million from January to April 2008, to US$ 129 million in the same period of 2009, representing growth of 49.2%. Aircraft manufactured by the Brazilian state-owned company Embraer, headquartered in the city of São José dos Campos, in the interior of São Paulo, are enjoying success in the region.
Exports of ores from the state of Espírito Santo grew by 56.6%, having risen from US$ 160 million from January to April 2008, to US$ 251 million in the same period of 2009. Foreign sales of melted iron from the state grew by 100% during the period, having amounted to zero in the first four months of last year, and to US$ 1.9 million in the same period of 2009. In the state of Minas Gerais, exports of melted iron decreased by 33%, from US$ 77.5 million to US$ 51.9 million.
According to foreign business consultant Alexandre Brito, of the Federation of Industries of the State of Minas Gerais (Fiemg), the reduction in exports of melted iron happened as a result of the international crisis. “It is a direct consequence of the slowdown in civil construction worldwide. Dubai, for example, is going through a serious crisis in the segment. Replacement with cheaper products might have occurred as well,” he stated.
*Translated by Gabriel Pomerancblum
