What prevents economic liberalization? The political economy of trade protectionism (Brazil)

The early success of Brazilian economic reforms during the 1990s, when the country was able to end years of hyperinflation and to launch its first significant trade liberalization program, has led many observers to believe that the Brazilian government has finally given up its state-interventionist policies for a pragmatic market-based economic program. However, as one looks at Brazil's import tariff rates, it becomes clear that, although the government reduced import tariffs across industries, it maintained a pattern of protectionism that closely resembled the pattern of protection which existed during the country's I.S.I. (import-substitution industrialization) program.; The focus of this dissertation is on the political economy of trade reform in Brazil between 1985 and 1999---a period that corresponds to the country's transition from state-interventionist economic policies to market-based practices. In this study, I explain the persistence of the pattern of industrial protectionism in Brazil in spite of the country's trade liberalization efforts. I argue that Brazil's economic leadership never really intended to fully embrace trade liberalization policies in accordance with the precepts of chief economic international organizations. Instead, the goal of the Brazilian authorities was primarily to eliminate the redundancy of the country's import tariff rates (seen then by many as draconian) with the hope of making its industrial sector more competitive.; This case study on Brazil attempts to explain why some countries fail to embark on sustainable trade liberalization programs, reverting subsequently to protectionist policies after a short-lived reform period. In the Brazilian case, I argue that its policy reversal was mostly due to the government's resolve to use trade policies to benefit the country's industrial sector in the mold of a classic import substitution program. Typically, at best, designing trade policies as instruments for the improvement of the welfare of the population was a secondary goal. This is in many ways surprising in light of the fact that Brazil's recent attempt of trade reform represents the first in the country's history that was pursued during a democratic phase. One would expect that the government would be more sensible to the consumer needs of the larger population.