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Brazil Welcomes Trade, Ricardo Cheers

24 September 2019   |  

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President Jair Bolsonaro’s young tenure as Brazil’s leader has been tumultuous since he was sworn in on January 1, 2019. But from purely an economic standpoint, one clear positive has been his leadership on trade. Since the EU and Mercosur (the South American trade bloc) inked a deal to create a new trade bloc in June, Bolsonaro has taken steps aimed at holding up Brazil’s end—the most recent: lifting tariffs on some 2,300 imported products (no doubt raising a posthumous cheer from David Ricardo).

Not only will Brazil and its trading partners benefit in aggregate, but Brazilians will undoubtedly see a higher quality of life as critical products like cancer drugs can be imported tariff free. Nor do the benefits stop at final goods—like drugs, clothing, dairy products and others—but they extend to intermediate goods, bringing production costs down for Brazilian producers and, with them, costs for Brazilian consumers.

Trade negotiations always involve trade-offs (no pun intended), and there will undoubtedly be local winners and losers from the EU–Mercosur deal—not only among Brazilians but among the populations of the other South American countries and EU countries, too. But the net benefits should outweigh the costs, better enabling local economies to help those hurt by the new policies in the near-term to adjust accordingly—whether by entering a new industry, finding ways to cut their own costs or change suppliers, etc. Bolsonaro, controversial as he may be, deserves credit for the economic changes he’s implemented swiftly in Brazil to help bring the world’s eighth-largest economy out of recession and into a period of economic growth—an outcome which we suspect would be exceedingly welcome by Brazil’s 200+ million people.

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