| As measured by the rising trend observed in the balance of payments deficits on current account, the Brazilian economy has undergone, starting in the booming late sixties, a substantial augmentation of its degree of internationalization. Since then, relatively more profound changes have taken place in the links between economic growth and the balance of payments, ending up with the consequences of, and the chosen adjustment path to, the oil crisis of 1973-74.; In consequence, the ratio of debt services (interest plus amortizations) to exports and of net debt to GNP, which had been fairly stable up to 1968, have reached much higher levels in the post-OPEC era, leading to generalized worries as to the viability of the Brazilian debt-led growth model into the next decade.; Based on a growth model in the two-gap tradition, this study shows that the basic industry import substitution strategy of 1974-79 had a significant impact on the balance of payments, whether measured by the real reduction in imports, or by the net-debt-equivalent export promotion (or growth reduction) policy. In spite of that, the service and net debt ratios ended up rising in the same period, reflecting the seriousness of the problem. Furthermore, in considering the debt problem into the eighties, this model shows that several combinations of the total import elasticity and the export growth rate, for a GDP growth rate not so much lower than the historical average, are still within the limits of the possible in Brazil, if judged by the previous experience. Thus, in spite of the seriousness of the problem, and aside from very adverse future shocks, it is suggested that the country seems able to manage it in the future.; Finally, some evidence concerning the relative efficiency of the 1974-79 intermediate input import substitution plan is provided by comparing the domestic resource costs (DRCs) of a relatively large sample of actual industrial projects. |
