The Role of Brazilian Regions in the Global Value Chain

In the last couple of decades, production processes have been characterized by their fragmentation, which crosses the borders of countries more and more. This coincides with the common viewpoint that products and services are now made in global value chains and that ‘trade in value added’ might be a better approach for the measurement for international trade. The same applies at the regional level, and perhaps even to a larger extent. The present paper analyzes the role of Brazilian states in the global value chain. Since fragmentation of production processes leads to an interdependent structure which has to be accounted for, the input-output methodology seems especially suitable. Therefore, in its empirical application, the paper combines a world input-output table covering 40 countries (and the rest of the world as a 41st country) with an inter-regional input-output table covering each of the Brazilian states, for the year 2008. Our results show that the average country trades approximately twice as much in value added (as a share of country’s value added) than Brazil: the participation of Brazil in the global value chain is somewhat limited. We notice, however, important differences among states, both in terms of trade volume and of relevant industries that account for the generation of value added. The paper also further analyzes the Brazilian value chain and the trade relations of Brazilian states with China and USA, exploring the regional heterogeneities involving such relations.