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Pablo Villa Ramón

Brazil in the Global Economy

INTERNATIONAL POLITICAL ECONOMY
Project

BRAZIL IN THE GLOBAL ECONOMY
Measuring the gains of trade

Pablo Villa Ramón 103641-6

Pablo Villa Ramón

Brazil in the Global Economy

ABSTRACT
My chosen topic is number nineteen from the list of topics, the gains of free trade. The main purpose of this project is to show how much a freetrade policy can benefit a country by explaining the specific case of Brazil. Nowadays Brazil has an important role in the world’s economy as one of the most relevant emerging countries with Russia, India and China. But how could Brazil become a potential economic superpower? The answer lies on trade policies. Since 1990 Brazil had become a much more open economy than it had ever been. But there isstill a lot of work to be done.

Pablo Villa Ramón

Brazil in the Global Economy

INTRODUCTION
In the early 1990’s Brazil opened its trade regime after a half century of being a closed economy. Although it was one of the last countries to turn into an open economy in Latin America Brazil has become the leader in setting trade agendas in this region. In almost five years Brazil’s tradeliberation program slashed tariffs and removed non tariffs barriers to trade. But at the initial momentum in 1990 hostile macroeconomic and international environment did not permit Brazil to fully enjoy the benefits of free trade. Despite the fact of an unwelcoming starting, there was plenty evidence that proved that greater exposure to import competition increased productivity growth inmanufacturing, the most protected sector of the population, causing a drastic reduction in the cost of investment. After that, the right macroeconomic policies were put in place at the beginning of the twenty first century Brazil started to benefit from free trade. Brazil has a modern, diversified economy in which services account for 53% of GDP, followed by industry and manufacturing at 37%, and agricultureat 9%. Agribusiness (commodity and processed goods) account for some 30% of GDP, explaining Brazil’s emphasis on agricultural policies in trade negotiations. Brazil is the world’s largest producer of sugar cane, oranges, and coffee, and the second largest of soybean, beef, poultry, and corn. It is also a major producer of steel, aircraft, automobiles, and auto parts, yet surprisingly, a relativelysmall trader by world standards. The United States is Brazil’s largest single-country trading partner. This paper is divided in five sections including this introduction and a section that summarizes the conclusions. The next section analyzes the political economies of Brazil since the liberation undertaken in 1990s. After that, this paper analyzes Brazilian trade with the world explaining therole of this country in organizations like the World Trade Organization (WTO), Mercosul and the Free Trade Area of the Americas (FTAA). The fourth section will cover the U.S.-Brazil trade relations since the U.S. is Brazil’s largest single-country trading partner as I said before. Finally the last section includes the conclusions about this topic and what Brazil should do now.

Pablo Villa RamónBrazil in the Global Economy

TRADE POLICIES SINCE 1990
A major feature of Brazil’s trade policy implemented after the liberalization episode as compared to the preliberalization period—has been continuity. In the early 1990 Brazil developed mechanisms to promote and finance exports but there was still a protectionism structure that applied nontariff barriers to imports such as antidumpingduties. This system was known as the import substitution regime. Its main goal was to neutralize external factors that might make vulnerable national economic development and the consolidation of domestic industrial supply. Since 1960 Brazil has adopted an active policy of fostering and diversifying its imports. However, incentives to export were gradually removed throughout the 1980s as the...
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