Export subsidies, a currency devaluation, and a fall in imports resulting from lower oil prices and demand combine to create a trade surplus. The policy of import substitution begins to give way to a more export-oriented policy. A number of direct import controls are cut back, and the list of prohibited imports is reduced. By 1984, exports are double imports.
The trade balance fluctuates as successive stabilization plans decrease the value of Brazil's exports but fail to bring economic stability. Accelerated inflation further erodes Brazil's price competitiveness. A trade agreement with Argentina forms the nucleus of the Southern Cone Common Market (Mercosul) and brings limited trade liberalization. Tariff and import restrictions are gradually reduced.
President Collor advocates trade liberalization and announces a series of tariff reductions to be phased in over three years until they reach a third of their current average of 35 percent. Collor also sets up a Technical Coordinating Office for Trade, a reporting and registration agency with little discretionary power. Brazil negotiates with Uruguay, Paraguay, and Argentina to form Mercosul.
Brazil is a founding member of the World Trade Organization (WTO). Brazil begins to run a trade deficit as a result of President Cardoso's stabilization policies. The deficit gradually increases to a record US$6.8 billion in 1997. Brazil implements a large hydroelectric program, in part to reduce imports of oil.
The trade imbalance widens in 2000, then recedes, and in 2002 Brazil achieves its largest trade surplus in nine years, mainly because of the currency's loss of value. Lula's election raises doubts that Brazil will support rapid establishment of the Free Trade Area of the Americas (FTAA). The government still employs import taxes to protect many agricultural products from international competition.
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