What is the situation of foreign trade and international agreements for Brazil at this moment?

A few years ago, we observed some changes in global foreign trade, which is natural, but driven much more by political issues than by other factors. Now, in addition to all those previous factors, we have the pandemic putting a brake on the conventional flow of the system. The whole world used to produce in China—of course, this is a figure of speech, but the reality is not that different—a country that was the epicenter of the emergence and spread of this new virus which, even though invisible, made the planet hit pause. There, nothing was produced or exported, as efforts were redirected to contain COVID-19. It was then that many markets and sectors felt firsthand how difficult it is to outsource their industries and production outside their territories and, even more so, into the hands of a single producer.

You are already familiar with the progression of the virus’s spread; but turning to the present moment, the question is: what is the situation of Brazilian foreign trade and international agreements in the textile and apparel sectors? This is a difficult question to answer, since the problem is not only local, but global. What is certain is that nothing will be exactly as it was before the pandemic; however, the situation will bring many lessons. According to the president of Abit, Fernando Pimentel, the discussion about how the world will behave regarding supply chains and the relocation of production revolves around the question of “with security or without security,” because the virus does not have an “after”—we will have to live with it until a vaccine is available.

“I think the world is reassessing itself, but I do not believe in a radical transformation, especially since such changes cannot happen overnight,” says Pimentel. “However, I do see Brazil gaining opportunities, particularly in the textile and apparel industry, once this more critical period we are experiencing has passed.”

New Opportunities

It is still too early to assess how the world will behave, since the storm has not completely passed. But needs create opportunities (just be careful with opportunism). Arthur Martinho, vice president of the Brazilian Institute for the Development of International Business Relations (Ibrei), believes there is a great opportunity for Brazil to perform very well in the international market now, especially with the dollar on the rise. However, he raises the following questions first: are we prepared for this? Do companies understand that the world has undergone a change? Do they realize that the consumer profile has shifted? That the markets in which they operate will change? And how does the digital sphere fit into this story?

“These are questions that I find important to raise because they will make all the difference in foreign trade in any market that companies wish to enter,” Arthur evaluates. He also highlights that, as markets have changed and consumers are reassessing their habits, in order to enter the international market more safely and effectively, we will also need to reassess our products—whether they align with this new agenda that values the social and environmental aspects of our country, and how to communicate these changes to the world. “Those who do not have a good product suited to these behavioral changes will face difficulties,” he notes.

Alberto Hiar, president of the Brazilian Association of Fashion Designers (Abest), explains that brands associated with the entity currently export to 70 countries, but unfortunately, for high value-added Brazilian fashion, the main foreign markets have been the most affected by the pandemic, such as Europe and the United States.

“In addition to being the main markets for promoting Brazilian fashion, it is also through them that we reach the rest of the world. However, we believe there will be a gradual recovery in business, since they are economically strong markets that will recover more quickly,” says Hiar. It is worth noting that, like Texbrasil—a program for international promotion by Abit in partnership with Apex-Brasil—Abest also plays a strong role in this area with its members through Fashion Label Brasil.

Arthur Martinho, from Ibrei, suggests that an alternative to these hegemonic markets in relation to Brazilian international trade is to pay close attention to new markets, exploring new opportunities and making better use of the international agreements Brazil already has. “Here at Ibrei, we believe that not only the Mercosur bloc, but also the entire surrounding region will be strengthened. In this initial recovery phase, nothing is better than boosting nearby regions, as it is much more worthwhile to conduct transactions with neighbors than to take risks in unknown markets. But the path is not to be afraid, but rather to observe carefully and explore new opportunities, stepping out of the comfort zone with planning.”

International Agreements and Neoprotectionism

International agreements and other initiatives to integrate the textile and apparel sectors into the external market are on standby due to the difficulties in holding meetings imposed by the pandemic. Despite this, Fernando Pimentel, president of Abit, believes this is not the time for large-scale moves, as it is unclear how the world will respond. However, he emphasizes that already established agreements, such as those of Mercosur with the European Union and EFTA, remain solid.

“We cannot turn our backs on the world, but this is a time for caution, as all countries are assessing what will happen after we get through this very dramatic phase of our lives, in addition to tensions between the United States and China creating further noise in international relations,” he stresses.

For Martinho, this entire crisis is generating a wave of “neoprotectionism,” meaning each country turning inward to value its own industry and products. However, in his view, this neoprotectionism will be different from anything we have imagined.

“I do not see this movement becoming xenophobic for a simple reason: in the past, we had devastating examples, but today the world is much more prepared, aware that there are other countries and alternatives—we cannot forget that. I see this protectionism mainly as a way of valuing domestic products, something that does not happen in Brazil. On the contrary, I do not see any incentive to encourage production and consumption to take place here, creating jobs and helping the national economy to prosper. Strengthening industry also depends on our consumption choices.”

Production Relocation and Supply Chains

Another side effect of the coronavirus has been countries rethinking their production, bringing it back home, as it is not possible to risk once again being dependent on a single country or supplier. There must be alternatives—plans B, C, and D.

In Fernando Pimentel’s view, Asia, especially China, will continue to be a major industrial hub, but there are undoubtedly important opportunities opening up for the “relocation” of industries in other countries using technology, with Industry 4.0 advancing leaner production, circular economy practices, and the broader sustainability agenda, so that we can recover and reindustrialize.

“But without artificial measures or any type of protectionism that has already pushed us to the back of the global line due to past mistakes, but rather with a competitiveness agenda and legitimate trade defense that prevents predatory competition from countries that provide many subsidies and operate under different regulatory and compliance frameworks, invading our market, our businesses, taking jobs, and destroying economic activities,” evaluates the president of Abit.

Alberto Hiar, from Abest, adds that although China is a threat to our textile and apparel market, he strongly believes in the power of Brazilian design as a differentiating factor. In this way, higher value-added products that combine design and production in Brazil would have a better chance of emerging successfully from the crisis.

Interview given to Costura Perfeita magazine by IBREI International Vice President Arthur Martinho and Abit President Fernando Pimentel.