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2.5 Potential Trade Opportunities

Export Opportunities

After the economic and financial crisis during 2001-2003, the Brazilian economy, aided by the recent commodity boom, has largely regained momentum. Against this background, Hong Kong’s total exports to Brazil rose by 17% in 2006 and 14% in 2007. Sharing more than one-fifth of Hong Kong’s exports to Latin America, Brazil is Hong Kong’s second largest export market in Latin America, behind Mexico. The large pool of consumers in Brazil and the corresponding astonishing appetite for manufactured goods will offer abundant opportunities to Hong Kong traders.

In general, Brazilian companies are aware of the fact that most “made by Hong Kong” products are made in the Chinese mainland. But they perceive these Hong Kong products to be of better quality and trendier design. Against this backdrop, Hong Kong companies, although largely producing on an OEM basis, can capitalise on having the flexibility and capability to produce on an ODM basis superior to other competitors. On the other hand, Hong Kong companies should focus on the mid-to-high-end market to avoid the intense competition in the low-end market segment, especially in view of the sizable “informal” market in Brazil.

Despite the presence of a broad-based industrial sector, the country’s quest for better prices, greater variety and trendier design has caused a strong demand for a wide range of manufactured goods. Hong Kong and mainland products therefore become very attractive in the eyes of Brazilian consumers. Product-wise, Hong Kong companies look set to have the strongest competitive edge in consumer electronics, particularly computers and telecommunications products. Other electronics-related products, including household appliances, auto/motor parts and accessories, as well as security and safety products, are also well sought after. Electronics and electrical products aside, textiles, clothing, footwear, toys and games, jewellery, timepieces and spectacles are among other potential products.

Hong Kong as a Platform for Sino-Brazilian Trade

China was Brazil’s second largest source of imports in 2007, after only the US, sharing 10.5% of the total imports entering the Brazilian market. With growing interest and confidence in sourcing and consuming Chinese products, Sino-Brazilian trade recorded a compound annual growth rate (CAGR) of 39% between 2000 and 2007. Meanwhile, Hong Kong’s re-exports of China origin to Brazil grew by a CAGR of 9%, while its re-exports of Brazil origin to China recorded a CAGR of 13% during the same period. As China continues to share rosy prospects in bilateral trade and economic cooperation with Brazil, and China is expected to surpass the US and become Brazil’s largest trading partner by the end of 2010, Hong Kong’s role in facilitating Sino-Brazil trade will be strengthened.

 

Total Imports by Selected Countries in 2007

 

 

US$ Million

% Growth 06/07

% Share in 2007

1

US

18,887

 

+24.5

 

15.7

 

2

China

12,618

 

+57.9

 

10.5

 

3

Argentina

10,410

 

+29.3

 

8.6

 

4

Germany

8,675

 

+33.4

 

7.2

 

5

Nigeria

5,273

 

+34.6

 

4.4

 

6

Japan

4,610

 

+20.1

 

3.8

 

7

France

3,525

 

+24.2

 

2.9

 

8

Chile

3,483

 

+21.5

 

2.9

 

9

South Korea

3,391

 

+9.2

 

2.8

 

10

Italy

3,347

 

+30.2

 

2.8

 

Source: SECEX/MDIC

 

Total Exports by Selected Countries in 2007

 

 

US$ Million

% Growth 06/07

% Share in 2007

1

US

25,314

 

+2.2

 

15.8

 

2

Argentina

14,417

 

+22.8

 

9.0

 

3

China

10,749

 

+27.9

 

6.7

 

4

Netherlands

8,841

 

+53.8

 

5.5

 

5

Germany

7,211

 

+26.7

 

4.5

 

6

Venezuela

4,724

 

+32.5

 

2.9

 

7

Italy

4,464

 

+16.4

 

2.8

 

8

Japan

4,321

 

+11.0

 

2.7

 

9

Chile

4,264

 

+9.0

 

2.7

 

10

Mexico

4,260

 

-4.4

 

2.7

 

Source: SECEX/MDIC

Not surprisingly, Brazilian companies generally recognise the premium quality of Hong Kong products and services. They feel more comfortable and confident to trade with China via Hong Kong, and believe that Hong Kong can serve as their risk manager by providing better assurance on quality, delivery and payment. Quite a few of the Brazilian businesspeople appreciate Hong Kong traders’ English proficiency and their sense of international product trends and designs. On the other hand, most Brazilian companies are not familiar with China’s regulatory environment and business practices, and they may face challenges in doing business with China. With the edge in doing business on the mainland, Hong Kong companies can help Brazilian companies overcome these problems. Moreover, Hong Kong’s advantages in languages and proximity to the Pearl River Delta can certainly foster Brazilian business ties with China.

Apart from selling mainland products to Brazil, Hong Kong companies can increase their contacts with Brazilian companies interested in selling to China, with a view to acting as a partner to facilitate marketing and distribution. Among many others, agricultural and mineral products, meet and edible meat offal, and leather products, in which Brazil excels, are believed to have good potential in China, and cooperation with Brazilian companies can be sought.

Content provided by Hong Kong Trade Development Council
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