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Prepared by Ugo Fasano.
Between 1980 and 1993 the trade surplus averaged almost 4 percent of GDP reaching a peak of over 6 percent of GDP in 1984 and 1988.
The main source of data for this study is the Trade Analysis and Report System (TARS), which is a trade database collected and maintained by the United Nations Statistical Office (UNSO). Exports are measured f.o.b. and imports c.i.f. The help of the STA country assistance team in obtaining the TARS data is acknowledged.
The exchange rate market was unified in 1964 and a crawling peg system was introduced in 1968, according to which the exchange rate was periodically devalued, in small amounts, following the difference between inflation at home and abroad.
The cruzado plan was adopted in February 1986, the Bresser plan in July 1987, the summer plan in January 1989, and the Collor administration plans in 1990–91.
Due to data limitation, this chapter analyzes mostly the period up through June 1997. For a general discussion of export rebound in the second half of 1997, see the Staff Report for the 1997 Article IV consultation (EBS/98/12).
Manufactured exports and imports include the Standard International Trade Classifications (SITC) categories: 5 (chemicals), 6 (basic manufactures), 7 (mechanical and transport equipment), and 8 (miscellaneous manufactured goods).
Mercosul was officially established in March 1991 with the signature of the Asuncion Treaty, by Argentina, Brazil, Paraguay, and Uruguay. A customs union has been in operation since January 1995.
For details of the measures taken see “Measures to Reduce the Brazil Cost”, Ministry of Finance, Secretariat of Economic Policy, Brasilia, April 1997. See also, “Ações Setoriais para o Aumento de Competitividade da Indústria Brasileira”, Documento Base, Ministério da Indúistria, do Comércio e do Turismo, Secretaria de Politica Industrial, 1997,
Consistent price deflators for the components of exports and imports of manufactured goods were not available under the SITC classification of goods followed in this study. Thus, these results should be interpreted with caution.
The relative export performance index is calculated as the ratio of the rate of growth of Brazil’s manufactured exports to the rate of growth of its export market. The latter is defined as a weighted average of the rate of growth of manufactured imports, in nominal terms, of Brazil’s main partner countries (the United States, Argentina, the Netherlands, Germany, and Japan).
Deflators for total exports and manufactured exports used were published by Fundação Centro de Estudos do Comércio Exterior (Funcex), see Guimarães (1997).
A real effective exchange rate index for Brazil vis-à-vis 11 developed trading partners was calculated on the basis of consumer price indices. Only those partners for which there was information on both consumer prices (CPI) and unit labor costs (ULC) were chosen in order to facilitate a subsequent comparison with a real effective exchange rate index calculated on the basis of ULC, The weights used in this index were the average trade shares of these countries in Brazil’s total trade in manufactured goods in the period 1993–95. An increase of the real exchange rate indicates an appreciation.
Changes in international price competitiveness during the second half of the 1980s, should be interpreted with caution because the presence of widespread price controls at that time may have introduced distortions in the indicators.
The traditional CPI-based real effective exchange rates calculated by the Fund’s Information Notice System vis-à-vis 20 developed and developing countries also showed a real appreciation of the real of about 20 percent by October 1997.
Prices of Brazil’s manufactured exports, expressed in U.S. dollars (taken from Guimarães (1997)), relative to the international prices of manufactured exports (taken from the World Economic Outlook database).
Import penetration is a measure of the share of the domestic market (defined as domestic production less exports plus imports), satisfied by imports. Export orientation is defined as the ratio of exports to domestic production.
The total import penetration coefficient jumped to almost 18 percent in the first half of 1997, according to preliminary information provided in Moreira (1997).
A reduction in import tariffs had already started in 1988 but a pre-announced schedule of tariff reductions only began in 1990. The average import tariff for all goods declined from 51 percent in 1987 to 35.5 percent by 1989 and further to 12.5 percent by 1995. However, the import tariff of capital goods has declined at a lower pace, from 50.7 percent to 40.7 percent and to about 20 percent over the same period.
Information obtained from the World Bank database indicates that only 43 percent of Brazilian children attended secondary school in 1992 compared to 91 percent in Korea, 77 percent in the Philippines, 72 percent in Argentina, and 58 percent in Mexico. Only 11.5 percent of school age population attended universities or other tertiary education institutions in Brazil in 1993 compared to 48.2 percent in Korea, 26.2 percent in the Philippines, 40.5 percent in Argentina, and 13.8 percent in Mexico.