Behaviour of Brazilian export firms: Implications for the Free Trade Area of the Americas

The influence of capital origin on Brazilian foreign trade patterns

“…This aspect deserves to be analyzed more fully, since it has important implications for the debate on the consequences of the integration agreements currently being negotiated by Brazil. As noted by Baumann and Carneiro (2002), taking into account the capital origin and impact of transnational firms can have important implications for studies which seek to analyze the effects of integration processes but assume that transactions only take place between totally independent agents. The study by Laplane and others (2001), which was based on a sample of 100 large foreign-owned firms in 1997, finds that these firms concentrated nearly 40% of their external sales in the countries of MERCOSUR and the Latin American Integration Association (ALADI), while their sales to more developed regions were considerably smaller: 16.6% to the North American Free Trade Area (NAFTA) and 18.5% to the European Union.…”

“…The study by Baumann and Carneiro (2002) aims to make a more explicit analysis of the influence of intra-firm trade and to find out to what extent the geographical concentration of exports is related with the country of origin of the transnational firms operating in Brazil. In view of the lack of detailed information on the level of intra-firm trade in that country, the authors resort to the hypothesis proposed by Baumann (1993) that, for a given transnational firm with a given country of origin, the transactions carried out with that country will be mainly with the parent firm or through marketing channels organized by that firm.…”

“…The evidence assembled in Baumann and Carneiro (2002) would appear to indicate that an evaluation of the effects of regional accords based exclusively on considerations of trade diversion and creation would be distorted because it does not take account of the influence of transnational corporations on trade flows. The summary made by Castilho (2002) of several studies which seek to analyze the possible effects of FTAA and the MERCOSUR-European Union agreement shows that in spite of the variety of methodologies used, none of these studies takes account of the weight of transnationals and intra-firm trade.…”

“…The second inference concerns the simultaneous trade negotiations which are taking place on the FTAA and the accord between MERCOSUR and the European Union. As Baumann and Carneiro (2002) and Coutinho and others (2003) observed, the studies being made to evaluate the effects of regional agreements are limited because they do not take account of the effects of intra-firm trade or the strategies of the transnational corporations. They must therefore be complemented with studies which recognize that an important part of the trade with those regions does not follow the traditional trading pattern because it is no longer carried out between independent firms.…”