The new moment of the world economy

Companies seek to adapt to the trend of “deglobalization” of production chains

By Sérgio Siscaro

Two years of the Covid-19 pandemic and three months of the Russian invasion of Ukraine have short-circuited corporate planning in all sectors around the world. The process of economic globalization, with the creation of supply chains spanning the five continents, lowering production costs and increasing the profitability of companies, has been challenged by the need for countries to secure access to goods and raw materials, reducing their dependence on external suppliers. Trends such as reshoring and netshoring are gaining space in a scenario of nationalization or regionalization of production.

Given the relevance of the subject, it was discussed at the meeting that the Financial Affairs Committee (CAF) of the Chamber of Commerce Brazil-Canada (CCBC) promoted at the end of April. With the theme The structural paradox in business activities with the trend of increasing global nationalism, the online meeting allowed those present to contribute with their perceptions on the trends of the economic scenario, and its impacts on business.

“The Brexit [the process of the United Kingdom leaving the European Union, initiated in 2016] was the first sign. Then, the election of Donald Trump in the United States and the arrival of the pandemic served as catalysts, exposing the fragilities of the system,” said the coordinator of the committee, Rodrigo Garros Zorzetto, partner at Conexão BR Investimentos, an XP Investimentos accredited firm.

Local Production

Also present at the meeting, Lucalex’s founder and managing director, Marcelo Andrade, presented an example from Canada, the country where it concentrates its activities. “Covid opened the floodgates of renationalization [production], producing locally respirators, personal protective equipment (PPE) and other items – Moderna’s own vaccine will be produced in Montreal. He says this trend has strengthened the sense of community, which could lead to a trend of doing more and more business locally. “It’s going to be increasingly necessary for outside companies to have a more robust presence here, so that people feel they can trust us,” he said.

He added that even international financial flows may suffer from this trend of “deglobalization”, with the application of stricter control measures – which is becoming more common in the environment of sanctions on Russia because of the invasion of Ukraine.

CCBC’s vice-president of Finance, Alexandre Caldas, pointed out that with such rapid changes in the way companies operate in the global market, access to raw materials and inputs has become difficult – and this has been a major obstacle to meeting demand. In Zorzetto’s understanding, this factor may compromise the companies’ ability to plan the development of new products, for example.

Archaic structure

The CAF meeting also addressed how Brazil’s role in this scenario is hindered by several factors, such as the country’s tax structure – which makes a more competitive insertion in the global market impossible. “Our structure is byzantine – which generates the feeling that it is not worth planning here in Brazil. This creates two types of businesses: those who feel comfortable in the domestic market; and a minority that looks a little further afield, to more sophisticated markets,” evaluated Andrade, from Lucalex.

The committee coordinator also added that a possible entry of Brazil into the Organization for Economic Cooperation and Development (OECD) could serve as a catalyst for changes in the tax system, due to the external pressures that the country would suffer.

One possible course of action to discuss this issue, raised at the meeting, is to bring some representative of public authorities to the next meeting, which would have the format of a workshop, and even integrate participants from other CCBC committees, in order to provide a clearer and more comprehensive view on the subject to members. Another possibility, raised by the president of the IHN and member of the Chamber’s board, Hilton Nascimento, is for entities such as CCBC to establish working groups that allow access to organizations such as the OECD.

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