The Covid-19 pandemic has caused a global economic crisis, destabilizing world economies and affecting several areas, such as agriculture and the automobile and food sectors. The results proved the vulnerability of foreign trade to the oscillations of the international market that interfere in the relations of the countries and in the trade balance.
In this article, we’re going to bring you the pre- and post-pandemic scenarios. In addition, we will understand its main impacts and what are the expectations for the future of the Brazilian economy in foreign trade.
Global economic situation
The global economic situation is likely to worsen according to projections by the United Nations (UN) in early January, which indicated the world production rate for 2023 at 1.9%. This forecast generated shock in the market, since this growth rate is one of the lowest in recent decades.
Some of the factors that have influenced the UN forecasts are the post-pandemic crisis, the war between Russia and Ukraine, and the food and energy crisis. These scenarios have resulted in rising inflation, debt spending and the climate emergency, impacting growth in 2022.
So, to contextualize the pre- and post-pandemic periods, let’s draw the historical panorama for you, the readers, to understand the main aspects involved in each stage.
Pre-pandemic economic scenario
The pre-pandemic scenario was one of slowdown, considering the capitalist system in which large parts of the world’s economies are embedded. This fact is common and has a direct link between demand and market supply. In other words, it is when companies need to reduce production to balance prices against the international market.
In Brazil, in addition to the global economic crisis that the population had been suffering, there was a strong political and social oscillation, which contributed to the increase in unemployment, as well as the devaluation of the real, political instability vis-à-vis other nations and polarization.
In contrast, China and the United States have made a greater rapprochement with Brazil, becoming prominent trading partners in 2019. Consequently, commercial transactions between Brazil and China increased: US$ 62,871,652,107 were exported and imports presented US$ 35,270,400,750 (FOB values).
On the other hand, with the United States, the trade balance remained stable, with Brazil exporting US$ 29,560,580,499 and importing US$ 30,086,105,189 (FOB values).
It is worth mentioning that the success of a country’s trade balance depends on many factors, that is, it is not only interconnected with economic indicators. On the contrary, this index also varies as trade agreements are signed and other political communications are carried out between countries.
One example was the economic war in 2019 initiated by China and the United States. In this scenario, the United States has suspended imports of agricultural equipment and products to China. Thus, through the crisis unleashed, Brazil benefited, by being able to enter the dispute to become the main supplier of grain to the Chinese. However, this conflict was resolved just before the outbreak of the pandemic in 2020.
Post-pandemic economic scenario
The post-pandemic scenario is one of economic and political instability. The countries gradually returned to their activities. However, the decrease in world production is notorious, in addition to the maintenance of restrictions on foreign trade.
Thus, it is expected that the recovery of economies will be slower, considering that we have gone through the humanitarian crisis of Covid-19 and that we still have impacts of the war between Ukraine and Russia, which have caused very high swings in fuel prices.
Given this, the market’s response to a global economic crisis could not be different. With a retraction of purchasing power, there was a fall in consumption, and consequently, in production. Thus, the alert to the increase in inequality and the loss of social cohesion grew, with a greater impact on unemployment, especially for women and workers with a lower level of education.
At the moment, Brazil is facing greater difficulty in combating unemployment, poverty and the closure of companies. The unpredictability generated by the pandemic and the social isolation measures decreed by local governments and Anvisa impacted many businesses, which ended up having great losses and could not go through a process of economic restructuring.
Unfortunately, the effects of the pandemic have had a devastating effect, decreasing the production of domestic industry, and generating loss of jobs and growth of social problems. On the other hand, some companies take advantage of the moment and have put into practice the home office as an alternative to continue operating, investing in the digitalization of processes, personalized services and the use of artificial intelligence.
Brazilian GDP
The Gross Domestic Product (GDP) is an economic index of national, state and municipal production, which sums up all the final goods and services produced.
Therefore, it is valid to say that GDP will only indicate the new goods and services produced in a given period.
Thus, there are two lines of reasoning that the average citizen can interpret from this data. One is that when GDP is high, the country does well because it is growing. On the other hand, when GDP is bad, it means that growth is slowing.
According to the World Economic Forum, climate change has a direct impact on the world’s GDP growth, with a risk share margin of 4% of economic output. By virtue of this, it is safe to say that economic growth must be carried out intelligently and sustainably, with the central objective of preserving the environment.
An example of an economic sector with considerable impact on the environment is agriculture, known as one of the main emitters of greenhouse gases. Their activities accelerate climate change and harm, generating a ripple effect. Climate consequences can be divided into extreme events (such as gales, heavy rainfall, and temperature swings) and cumulative events (prolonged droughts and limiting temperatures for long periods).
Unfortunately, over the years, this situation worsens further, harming the development of countries and the environment. According to the World Economic Forum, these climate changes could cause the loss of 4% of the world’s economic output by 2050, with impacts on sea level rise, heat waves, droughts and regular temperatures.
How does the global economic crisis interfere in Brazilian foreign trade?
As is well known, since globalization, countries have started to carry out more and more commercial transactions among themselves, to meet their internal demands. So, with the global logistics chains interconnected, we can say that any crisis, be it economic, energy or in the supply chain, felt in any country will certainly impact the Brazilian and global economy.
Therefore, below we will mention the main problems caused by a global economic crisis in Brazilian foreign trade.
Inflation in the price of food and energy
A growth in food and energy prices is estimated. Considering that, last year, inflation was around 5.8%, according to the IBGE, it is possible that consumers feel impacts on the national economy, especially in food and beverages.
This fact proves that the instability in basic needs, such as food and energy, is directly related to the economic recession, devaluation of the real and internal instability of the country.
Armed conflicts
The crisis between Ukraine and Russia seems to have no deadline to end. Meanwhile, the market continues to suffer the effects of these armed conflicts, with the volatility of gasoline and natural gas prices.
It is noteworthy that before the beginning of the conflict, Russia had a 40% share of representation in the distribution of natural gas to Europe, when it decided to cut off supply, to weaken support for Ukraine.
In contrast, Europe has sought liquefied natural gas (LNG) as an alternative. The climate and the efforts made have helped the European population to get through the winter without major crises. However, with China’s recovery, LNG supply will become more difficult and priced.
Situation of extreme poverty in many places of the world
A global economic crisis affects the most varied economies around the world. However, it gains more strength and hits the poorest countries hard, making the balance more unbalanced.
According to the World Bank study, the current crisis has brought harsh reality to the world, communicating that extreme poverty will hardly be eradicated by 2030, if there is no economic growth that drastically alters the history of this last decade.
Through this study, it became clear that the Covid-19 pandemic has undone much of the countries’ efforts to fight poverty. Moreover, with the war in Ukraine and Russia, this situation has gotten even worse.
The Poverty and Shared Prosperity report provided the first analysis of the scenario after the effects of the pandemic. It estimated that around 70 million people were driven into extreme poverty during the pandemic in 2020. This was higher than any other year of research conducted since 1990. Thus, approximately 719 million people survived on less than $2.12 per day in the year 2020.
In short, it will take hard work from all countries in the coming years, increasing investments in the health, education, public services and industrial sectors. Considering the difficulties faced during the pandemic, governments must choose to use their resources more effectively and efficiently.
Climate problems
The year 2023 has shown that countries are seeking to focus more on combating climate problems. At the annual meeting of the Conferences of the Parties (COP), the main efforts on the agenda were the reduction of coal use by South Africa and Indonesia and the reduction of methane emissions.
These actions imply that countries seek other sustainable business alternatives and for the production and marketing of their products, since the old tactics can no longer be employed if the objective is the preservation of natural resources and the environment.
Cheap2ship follows the movements of the global market
The changes suffered in recent years in foreign trade have directly impacted the trade balances of countries. Consequently, the market has noticed large swings, both in high freight prices and lack of space on ships and equipment, as well as in the weakening of the logistics chain, with the constant closures of China’s major cities and ports.
Thinking about the scenarios of global economic crisis, we at Cheap2ship are always seeking to make the processes more agile and computerized, because the soul of the business is excellence in service and veracity of information.
To customize this idea, we have a fully online, easy-to-handle platform that can bring great savings to your business. Contact us and get to know the solutions we can offer for your company.
