| Abstract: |
Brazil’s trade with China has expanded at a tremendous pace over the past few
years. Between 1999 and 2004, its exports to China have grown by 800 percent
in value terms while the value of its imports from China has more than
tripled. China is now Brazil’s third most important export destination and its
fourth most important import source. While the Brazilian government actively
pursues closer trade and investment links with China, critics fear that
potential resulting shifts in specialization patterns towards low-value-added
activities with low human capital and technology intensity may adversely
affect Brazil’s long-run growth prospects, given that Brazilian exports to
China consist primarily of primary commodities, while imports from China
increasingly compete with domestic manufacturing output in home and
third-country markets. To which extent are fears that China’s emergence as a
global player in international trade pushes Brazil back into raw material
corner warranted? This paper aims to provide a partial answer to this question
by focusing on the impact of China’s growth in demand for Brazilian exports
from 2001 to 2006 on the sectoral structure of the Brazilian economy. The
analytical framework is a 34-sector computable general equilibrium model. The
model is calibrated to a 2001 dataset and shocked with the growth in Brazilian
exports to China by sector over the period 2001 to 2006. The simulation
results provide an indication of the strength of the resource pull effects due
to this shock in isolation from all other exogenous influences on the
Brazilian economy. |