Product Space Analysis of the Exports of Brazil

This paper applies several of the product space tools of Hausmann, Klinger, and Hidalgo to explain and predict the pattern of Brazil’s exports. First, we calculate an annual measure of distance between moderately disaggregated products. Then we fit an econometric model that predicts the next products in which each country will gain comparative advantage, based on this distance measure, domestic resource constraints, and the extent of international competition. We evaluate the model’s success in explaining the changes in the pattern of Brazil’s exports between 1998 and 2008. Then we use the model to predict the products in which Brazil will gain a comparative advantage over the next decade. These products are concentrated in primary commodities like agricultural and mineral products rather than manufactures like machinery and equipment. Finally, we find that the model’s predictions change significantly when we refocus the analysis on Brazil’s exports to the United States rather than its exports to the entire world.