Tariffs and the Plano Real in Brazil

This article analyses the economic rationale of Brazil's tariff policy during the first two years of the Plano Real. To this end, a study is made of the changes made in import duties for all the products traded. The tariff reform process in Brazil was begun in 1988, after the old Tariff Act had been in effect for thirty years, and represented a marked intensification in the process of trade openness, with the definition of a schedule of gradually decreasing tariffs which was further speeded up as from 1990. The Plano Real began in July 1994 and had many effects on import policy. The trade liberalization process reached its height in the first quarter of 1995 in terms of the average level of tariffs and their degree of dispersion. Since then there have been several episodes of tariff increases, differentiated by sectors, which have increased the degree of dispersion of the tariff structure. If two sectors with special treatment (petroleum and motor vehicles); are excluded, a direct relation may be observed between the value of imports and the nominal tariff level, with pronounced variations over the period studied. At the same time, the fact that for some sectors the tariff rate weighted by the value of imports was below the average rate for a number of months indicates that there are grounds for reviewing tariff levels in some cases. The article concludes with some observations on the performance of import policy.