Brazil Trade Liberalization and Exchange Rate Policy
This paper examines Brazil's evolving approach to trade liberalization and exchange rate policy from the early 1980s through the early 2010s. Beginning with the Cardoso regime's privatization efforts and dollar-pegged currency in the 1990s, it traces the country's transition to the Lula era's more socially conscious liberalization, participation in the WTO and Mercosur, and gradual reduction of import tariffs. The paper also analyzes Brazil's turbulent exchange rate history — including the collapse of the pegged real, the subsequent shift to a managed float, and the tensions between currency appreciation and export competitiveness — concluding with a brief assessment of how these policies have affected economic growth and trade.
- Introduction to Brazil's Trade Policy: Cardoso and Lula regimes shape trade liberalization
- WTO Membership and Tariff Reductions: Tariff cuts, WTO obligations, and remaining barriers
- Exchange Rate Policy and the Real: Pegged real collapses; managed float adopted
- Inflation, Growth, and Currency Pressures: Inflation trends linked to exchange rate regimes
- Assessment of Brazil's Trade and Currency Strategy: Evaluating policy outcomes and trade-offs
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What makes this paper effective
- Traces policy evolution chronologically, linking specific political regimes (Cardoso, Lula) to concrete economic outcomes, which gives the analysis clear cause-and-effect structure.
- Balances macro-level trade policy discussion (WTO obligations, tariff averages) with specific sectoral examples (automobiles, telecoms), grounding abstract claims in tangible evidence.
- Closes with a personal evaluative statement that distinguishes the student's own interpretation from the factual narrative, demonstrating analytical engagement rather than pure summary.
Key academic technique demonstrated
The paper demonstrates effective use of policy periodization — organizing economic analysis around distinct governmental regimes rather than arbitrary time spans. This technique allows the writer to attribute policy choices to identifiable actors and evaluate their consequences systematically, a common approach in international political economy writing.
Structure breakdown
The paper opens with a historical overview of Brazil's trade liberalization across successive regimes, moves into WTO membership and tariff data, then pivots to exchange rate history and the collapse of the pegged real. A brief section connects inflation trends to trade outcomes, and the paper concludes with the student's own evaluative judgment on the effectiveness of Brazil's currency and trade policies. Five focused sections cover roughly 600 words total.
Introduction to Brazil's Trade Policy
Since the early 1980s, Brazil has undergone a number of different political regimes and, consequently, a number of different approaches to trade. Under the Cardoso regime, Brazil began its first serious policy of trade liberalization in the 1990s. This involved privatization, a currency pegged to the dollar, and greater encouragement of foreign direct investment, bringing Brazil into the global economic system (Pereira, n.d.). When the Cardoso regime collapsed amid a currency crisis, the Lula regime continued the process of trade liberalization, but with tighter controls and greater emphasis on the distribution of wealth throughout the entire economy (Morais, 2005). The country is now an active participant in the World Trade Organization and in Mercosur.
WTO Membership and Tariff Reductions
As a member of the WTO, Brazil is obligated to reduce its trade barriers. Import duties, which in the late 1980s stood at around 50%, have since been reduced to an average of 14.2%. Non-tariff barriers have also been reduced dramatically in recent years (No author, 2011). High trade barriers remain in certain sectors, however, including automobiles (Pearson, 2011) and telecommunications (EurActiv, 2010). In the period covered by this paper, Brazil had also increased trade barriers in some areas to protect local industries from a sharp rise in the value of the real (Pearson, 2011).
Exchange Rate Policy and the Real
Over the past thirty years, Brazil has made significant changes to its exchange rate policy. Under the Cardoso regime, the real was fixed to the dollar in order to curb rampant inflation. This plan ultimately failed, and capital fled the country. The Central Bank was forced to raise interest rates to nearly 50% in an effort to defend the real — an effort that also ended in failure. Eventually, the real collapsed in steep devaluation (Gabriel, 1999).
The subsequent exchange rate policy proved more sustainable. While the real is nominally a floating currency, the central bank frequently intervenes to stabilize its value within a range acceptable to the government (Bristow & Soliani, 2011). Currency valuation is typically linked to trade policy: recent moves to curb the appreciation of the real have been designed to protect Brazil's exporters from the negative effects of a strengthening currency. For a broader overview of how exchange rate policy affects international trade, the dynamics at work in Brazil illustrate many of the classic tensions between export competitiveness and currency stability.
Works Cited
Bristow, M. & Soliani, A. (2011). Brazil signals no change in rate policy after cutting to 11%. Business Week. Retrieved December 3, 2011 from
EurActiv. (2010). Brazil urged to remove trade barriers in telecoms. EurActiv.com. Retrieved December 3, 2011 from
Gabriel, S. (1999). Briefing on Brazil's economic crisis. Mt. Holyoke. Retrieved December 3, 2011 from
Morais, R. (2005). Interview with Brazilian President Lula. Forbes. Retrieved December 3, 2011 from http://www.forbes.com/forbes/2005/0725/080sidebar4.html
No author. (2011). Brazil — foreign trade. Encyclopedia of the Nations. Retrieved December 3, 2011 from http://www.nationsencyclopedia.com/Americas/Brazil-FOREIGN-TRADE.html
Pearson, S. (2011). China in talks with Brazil over trade barriers. Financial Times. Retrieved December 3, 2011 from http://www.ft.com/international/cms/s/0/39b6f18a-862b-11e0-9e2c-00144feabdc0.html#axzz1fVCNvoCa
Pereira, L. (no date). Brazil trade liberalization program. UNCTAD. Retrieved December 3, 2011 from www.unctad.info/upload/TAB/docs/.../brazil_study.pdf
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