# **Firm-level dynamics of exports**

The recent public availability of microdata allows crucial evaluation of export performance, that is, the entry, exit, and survival dynamics of firms in global markets. Export survival sustainability—first addressed by the seminal work of Besedes and Prusa (2006)—is a key dimension to understanding export performance, and has become an important factor for policy makers to consider in the design of policy to promote exports.

The World Bank has recently assembled an Exporter Dynamics Database that includes exporter characteristics and exporter growth measures based on firm-level customs information from 38 developing and 7 developed countries, primarily for the period between 2003 and 2010.<sup>5</sup> The use of this database makes it possible to compare Brazilian exports with other middle-income economies in the world (results are shown in figures 11–13).

The survival rate of exporters in Brazil stood at very high levels during 2003–9 (figure 11), only lower than levels observed in Turkey. While this result can be considered positive, it reflects a small and decreasing entry rate of firms into foreign trade. The entry rate of exporters was already low in Brazil, and dropped further to 22 percent, much lower than the values observed in countries chosen for comparison (around 35 percent).<sup>6</sup> That result—a matter of concern—also confirms other indicators recently released by the Ministry of Development, Trade and Tourism for Brazil.<sup>7</sup> Several studies, such as Clerides, Lach, and Tybout (1998) for Colombia, Mexico and Morocco, or Bernard and Jensen (1999) for the United States, present convincing evidence that new exporters are on average more efficient than nonexporters. Low and decreasing entry rates can be associated with low productivity at the firm level and/or high costs to export. In any case, this is a point that requires more detailed diagnosis to guide policy actions.

Lack of integration into global value chains can possibly explain the low levels of dynamism in the export sector. The emergence of global production networks has changed the world trade landscape, and this has been a driving force behind emergent trade powerhouses, many of them located in Asia.

Latin America, especially the southern countries, has not been an active participant in this new trade arrangement. The extent to which Brazil is out of the global supply chain can be gauged, at least partially, by looking at trade in parts and components. Looking at trade in parts and components also helps distinguish between assembly activities and participation in value chains. It is likely that a country exporting finished product might have just assembled high-value intermediate inputs made elsewhere. As such, rising imports of parts and components indicate a country’s increased assembly activity, whereas a rise in their exports suggests its growing importance in the global supply chain.

> 5 See Cebeci and others (2012) for a full and detailed description of the database. 6 Cebeci and others (2012) argued that Brazil presents the lowest entry rate among 44 countries in the above-mentioned database.

> 7 _Estado de São Paulo_ , August 3, 2012 (editorial).

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