When will Brazil become a global power?

Brazil's current account lags the massive rise in its trade surplus, but that will change

There’s endless naysayers on Brazil. In fact, the worst are probably Brazilians themselves, with an almost pathological tendency to talk down their own country. Brazil is obviously far from perfect, but its transformation into a large trade surplus country over the past decade is without parallel. Today’s post looks at what’s been powering rising trade surpluses and why this hasn’t yet lifted the current account. I’m optimistic that it’s just temporary factors holding back the current account, so what’s coming is a structural shift into current account surpluses and - with that - the emergence of Brazil as a global power.

The two charts above break down the transformation of Brazil’s trade balance. Since monthly data are available for 2025 through October, I construct annual sums that go from January through October every year from 2000 to 2025. The left chart shows the geographic breakdown of the trade surplus. Brazil runs a deficit with Russia (green) and a surplus with China (red). The deficit with Russia is largely fertilizer that’s used for crops that are then exported to China. Brazil’s ambivalence on Ukraine is thus in part a matter of necessity. It’s sandwiched between Russia and China. The right chart shows the product breakdown of the trade surplus. The rise is driven primarily by agriculture (orange), but oil exports (red) are increasingly an additional driver.

The problem is that the emergence of massive trade surpluses has not yet translated into current account surpluses. The left chart above compares the trade balance (same data as in the top two charts) with data on the trade and current account balance from Brazil’s monthly balance of payments (BoP). Since the BoP is currently only available through September, this chart makes annual sums from 2000 to 2025 for the January to September period. It’s clear that the current account (black line) has failed to rise with the trade surplus, which is about the same in the BoP (red) and other (blue) measure.

There’s many reasons why the current account hasn’t improved, but the main one is that many of farms that are generating the massive rise in agricultural exports are owned by foreign companies. Those companies remit their profits to their parent companies abroad, which shows up in the current account chart above on the right as foreign direct investment (FDI) dividend and interest payment outflows (orange) and reinvested earnings (purple). Both of these mean that the benefits from Brazil’s transformation are currently mostly going abroad, but this will change over time as ownership of these farms transitions into Brazilian hands. At that point, Brazil will see a structural rise in the current account and emerge as a global power.