Brazil Strengthens Trade Ties with South Korea and Paraguay Amidst Tariff Reductions Boosting Economy
Brazil's trade relations with South Korea and Paraguay are expanding, while reduced US tariffs and the informal economy amplify economic benefits from trade liberalization.
- • Brazil and South Korea have a $11 billion trade exchange, with partnership growth expected.
- • Brazil is the main beneficiary of reduced US import tariffs, with average tariffs falling from 23% to 13%.
- • ApexBrasil is promoting trade diversity and competitiveness with Paraguay through targeted events.
- • Trade liberalization could increase Brazil’s real income by 24%, boosted by its large informal economy.
Key details
Brazil is advancing its international trade relationships and benefiting economically from recent tariff changes and trade liberalization efforts. President Luiz Inácio Lula da Silva's recent visit to South Korea highlighted the growth potential in commercial ties between the two nations, which currently exchange $11 billion in trade annually. Lula emphasized Korea's technological sophistication as a learning opportunity for Brazil while sharing Brazil's expertise in energy transition and critical minerals. He participated in the Brazil–South Korea Business Forum and announced prospects for partnerships in agriculture, technology, and cultural exchange, alongside plans to renew stalled negotiations for a South Korea–Mercosul commercial agreement.
Meanwhile, Brazil is the primary beneficiary of reduced US import tariffs following the suspension of trade penalties that had previously applied tariffs up to 50% on goods like steel, aluminum, and vehicles. The average tariff for Brazilian exports dropped from 23% to 13%, significantly improving competitiveness despite the tariff impact constituting only around 0.7% of Brazil’s GDP. Economists suggest these changes could stabilize or improve further depending on US political developments this year.
In parallel, efforts to boost bilateral trade with Paraguay continue, with the Brazilian trade promotion agency ApexBrasil participating in events that focus on sectors like agroindustry, logistics, technology, and energy. These initiatives help Brazilian companies, notably micro and small enterprises, diversify markets and enhance international competitiveness within Mercosul.
Complementing these developments, a recent study reveals Brazil's informal economy amplifies the benefits of trade liberalization. A 33% reduction in trade costs could raise Brazil’s real income by 24%, more than double the gains estimated without informality. The study highlights how liberalization reallocates resources from less productive informal firms to more productive formal ones, increasing overall efficiency. However, it also notes transitional challenges, including potential short-term rises in inequality as informal jobs are displaced.
Together, these developments illustrate Brazil's strategic push to deepen trade alliances and harness policy changes for broad economic gains. President Lula's diplomatic engagements and domestic studies underscore the interplay of policy, international cooperation, and economic structure shaping Brazil’s expanding trade footprint.
This article was translated and synthesized from Brazilian sources, providing English-speaking readers with local perspectives.
