Reducing PHL’S trade deficit with Brazil

BRazil in recent years has become one of the top suppliers of various meat products, such as pork and chicken, to asian countries, including the Philippines. in august, the Brazilian animal Protein association (associação Brasileira de Proteína animal or abpa) announced its projection that Brazil will ship a record volume of meat products to the Philippines this year (See, “Brazil to export record level of chicken meat, pork to PHL,” in the Businessmirror, August 10, 2022). Because of the country’s need to beef up our pork supply, Philippine pork imports from Brazil more than tripled in the January to June period, according to abpa data.

Apart from pork, the Philippines is importing chicken, beef and mechanically deboned meat from the Latin American nation. The growth in the demand of the local meat processing sector for imported raw materials has created huge export opportunities for countries like Brazil that produce MDM, which is used as raw material for manufacturing affordable food items like hotdogs. Given the increasing buying power of Filipinos and the recovery of the economy from the devastation caused by the pandemic, purchases of these imported meat products would continue to rise in the coming years.

While shipments of Brazilian meat products are growing, exports of Philippine agricultural products to Brazil have declined last year, according to the Philippine Statistics Authority (PSA). The DA noted that desiccated coconuts, coconut water and concentrates, virgin coconut oil, and fractions of unrefined coconut oil are among the top 10 Philippine export products to Brazil.

Data from the PSA showed that the value of the Philippines’s total exports of coconut products to Brazil last year declined by 30 percent year-on-year to $5.041 million. In terms of volume, shipments of coconut products to Brazil plunged by 46.27 percent to 2.224 million kilograms from 4.14 million kilograms in 2020. This has contributed to the widening of the country’s trade deficit, which reached $43.22 billion in 2021, 75 percent higher than the $24.59 billion recorded in the previous year.

Given the expansion in the trade relations between the Philippines and Brazil, Manila is hoping that Brasilia would consider reducing tariffs on coconut products (See, “PHL asks Brazil to cut tariffs on coco products,” in the Businessmirror, December 12, 2022). According to the Department of Agriculture, Brasilia imposes a 55 percent tariff on Philippine coconut and coconut-related products. The tariff alone would discourage any local trader from considering Brazil as a possible market for coconut-related products.

Rising freight and production costs are making it more challenging for local coconut producers to compete in the international market. It would do well for Brasilia to consider the request of the Philippine government to reduce the high tariffs it continues to impose on Philippine coconut and coconut-related products. Apart from expanding bilateral trade between Brazil and the Philippines, lower duty on coconut products would encourage Philippine traders to increase their purchases of copra from the country’s more than three million coconut farmers.