The president of the United States uses many elements of an economic policy that has always been typical of Brazil and which explains why few Brazilian companies are competitive on the world market. In various regions of the world, companies and governments are worried about the aggressive economic policy of American President Donald Trump. They are annoyed by arbitrary tariffs, by sanctions imposed if American demands are not met, by subsidies for sectors that are not competitive.
Here in Brazil some of these measures sound very familiar, even if they are not imposed as aggressively as Trump. The American president uses many elements of an economic policy that has been common in Brazil for decades.
Brazilian governments traditionally protect their domestic market with high tariffs on imported products. This applies to cutting-edge industrial products, such as cars and cell phones, as well as simpler items, such as furniture, shoes and clothing. The Brazilian economy is one of the most closed of the largest in the world.
For years, Brazil has maintained a policy of import substitution: everything should be produced here, including computers and cars. Officially this policy is no longer valid, but even so, Brazilian customs tariffs mean Brazilian consumers pay more for most – and generally lower quality – products.
Subsidies to non-competitive sectors are also common in Brazil. If Trump interfered on behalf of obsolete steel mills in the Rust Belt, Brazil would allow itself to have a free zone in Manaus, where electronic products are assembled from imported parts. Local participation in the value chain is limited and production only pays off thanks to tax exemptions paid by the state.
Lobby in Brasilia
In the United States, businessmen make a pilgrimage to Washington in the hope that Trump will listen to them. In Brazil, all the big companies have lobbying offices in Brasilia to try to convince deputies, senators and ministers of their positions. There are those who suggest adding another B to the list of the most influential lobbies of the National Congress, the so-called 3Bs (Bible, bullet and bull) due to the enormous influence of betting on Brazilian politicians.
Even in foreign economic policy, Brazil has been doing for decades what Trump is pursuing now: the American does not want to conclude free trade agreements with other countries or regions. On the contrary: Trump wants to renegotiate or even abolish the free trade area with Canada and Mexico, the USMCA, which was previously called NAFTA and which has worked well for 30 years.
At the center of Trump’s interests is the US market. American businesses must be able to export without difficulty, since imports are, from this mercantilist perspective, something negative.
Brazil, throughout its history, has also rejected free trade agreements with other countries. Twenty years ago, Brazil and other countries in the region rejected the United States’ proposal for a free trade zone across the Americas.
Negotiations between the European Union and Mercosur have also existed for more than 20 years. If a deal were reached now, Brazil would get generous transition deadlines for many markets. This is not what you might call free trade.
Mercosur itself is not exactly an exception to this rule: there are so many exceptions and special rules for products that one cannot speak of an economic community, but, at best, of a free trade zone full of loopholes.
It even seems that what has always been considered a Brazilian peculiarity – protectionism, state dirigisme and distrust of the free market – has found a surprising echo in the USA. As foreign policy expert Matias Spektor said, “for the first time Brazil exports know-how to the United States.”
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Journalist Alexander Busch has been a South American correspondent for over 30 years. He collaborates with Handelsblatt and the Neue Zürcher Zeitung newspaper. Born in 1963, he grew up in Venezuela and studied economics and politics in Cologne and Buenos Aires. Busch lives and works in Salvador. He is the author of numerous books on Brazil.
The text reflects the personal opinion of the author, not necessarily that of DW.
Source: Terra

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