Question

8. In regards to Brazil - how did the country end up with their import/export structure and how they detected their comparative advantage; mention how their terms of trade changed over time.

Answer 1

Solution:

In the present world of globalization we find international trade prevalent in almost every corner of the world. Countries engage in import and export of goods and services with each other. Now the import export structure of a country develops on the basis of opportunity costs and relative abundance of factor of production. Comparative advantage is detected on the basis of opportunity costs. The lesser time and lesser resources a country takes with respect to another makes it the exporter of that good and importer of the other.

Brazil's TOT changed after the decentralized and open economy policies adopted by the country. The country is an active user of contingency methods, like anti-dumping, and has been enhanced by intellectual property rights, exercised tariff measures in the past. Liberalization in financial and service sector, changed TOT drastically. Brazil had trade relations with Canada. Now not only crude oil and coffee beans but Brazil is also an exporter of aircraft, chemicals, semi manufactured goods.

As of 2016 Brazil had a positive trade balance of $46.4B in net exports. As compared to their trade balance in 1995 when they had a negative trade balance of $4.26B in net imports.

Brazil’s population of 207 million is the fifth largest in the world, representing nearly 3 percent of global consumers.

Brazil is also a traditional leader among emerging markets. A BRICS member, many multi-national companies consider it as an essential market for truly global businesses.

Brazil has a natural affinity for the United States and a high regard for U.S. made products, brands and technology.

The Brazilian Government is actively cultivating relationships with international and U.S. businesses and prioritizing macroeconomic stability.