Brazil's Conundrum with China

With China being one of Brazil’s most important trading partners, the two have created a whole lot of business and money-making opportunities for both countries. No person knows this more than Eike Batista, a Brazilian minerals tycoon that is now the eighth richest man in the world, with a wealth of $27 billion. He’s gotten there quickly, thanks in large part to China.

Eike’s latest project, a large super-port north of Rio, has been named “the highway to China". Mr. Batista's companies control enormous reserves of iron ore and oil which the Chinese economy relies on. Because of this, Chinese demand for the raw materials has pushed prices to record highs and, as a result, the Brazilian economy is booming. But there’s quite an interesting issue for Brazil.

There are few products as symbolic of Brazil as the bikini, but Brazil's bikini industry is in trouble. Currently it is fighting off stiff competition from, of course, China. As the raw material export industry is booming, the manufacturing industry, which employs 80% of the workforce, is suffering. Before, most of Brazil’s biggest competitors came from within Brazil itself (especially in the bikini industry) but now the biggest competitors come from China. That is because both countries share a similar competitive advantage with their cheap sources of labor, and therefore compete in similar industries. A recent study found that more than 80% of Brazil's manufactured exports are being adversely affected by competition from China.

I believe that even though now it seems like Brazil is in trouble, this international competition and relationship with China will ultimately be the best for their future development. Brazil has room to grow, but it is an evolving economy. Soon Brazil can slowly move from a manufacturing economy to a service economy. With its wealth of natural resources, it will be a strong economy for years to come.