the impact of trade on economic development in brazil: implication and forecasting

7/29/2019 THE IMPACT OF TRADE ON ECONOMIC DEVELOPMENT IN BRAZIL: IMPLICATION AND FORECASTING

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Problem Statements:To study the implication of trade in economic

development and forecast the trade effectsin Brazil.

Brazil is well-known as one of the newlyindustrialized country (NIC), which is thenations that undergoing rapid economicgrowth (usually in export- oriented).


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From that, it often receive support from internationalorganizations such as WTO and other internal supportbodies. As an evidence, the WTO report along with a

policy statement by the Government of Brazil will bethe 5th basic ofTrade Policy Reviewof Brazil by WTOin 2009.

In order to meet the new challenges presented by the

current world economic slowdown, Brazil needs topress on with its efforts to give additional support totrade, including by lowering effective tariff protection,reducing the use of import prohibitions and providinggreater predictability to the foreign investment.


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J.F. Hornbeck, 2006 outlined that Brazils industrial policy achieved notableresults for decades, but with predictable tradeoffs. The inward orientation of theISI model protected domestic industry from global competition, diminishingmarket incentives to innovate and become more efficient. Trade policy was

essentially administered protectionism. Brazil adopted its own version of theimport substitution industrialization (ISI) model employed throughout much ofLatin America in the 20th century.

Katy Hull, 2009 stated that in order to boost employment creation followingtrade liberalization, country advice recommends a complementary agenda,

including improvements to customs, ports and other critical infrastructure,regulatory reforms, innovation and education. At WTO ministerial in Hong Kong,Brazil played a leading role in continuing to represent developing countryinterests in the Doha Round. The WTO remains an important forum for Brazil,which could be a major winner if barriers to agricultural trade are significantlyreduced.


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To identify the variables in measure the tradein Brazil.

To construct the impact of trade on economicdevelopment in Brazil.

To find out the implication of trade oneconomic development in Brazil.

To forecast the impact of trade on economicdevelopment in Brazil.


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This study is much significant in find out thefactor that influence trade in Brazil and what

are the impact of trade on economicdevelopment in Brazil. From this study, weexplore the structure of Brazilian economy,the trade pattern and trade policies thatadopted by Brazil.


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log(GDPt) = o + 1log(NRXt) + 2log(TRDt) +3log(FDIt) + 4log(TOPt) + 5log(HDIt) +

6log(UNMt) + et Gross Domestic Product= economic development Natural Resources Export= factor abundance export Trade = total trade volume = (import and export) Foreign Direct Investment= investment inflow

Trade Openness = ratio of export to GDP Human Development Index

Unemployment Rate


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Gross Domestic Product of Brazil that showeconomic development of Brazil is positively

responds to Trade, Foreign DirectInvestment, Trade Openness and HumanDevelopment Index while respond negativelyto Natural Resources Export andUnemployment Rate in Brazil.


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1 = -428.3367, 1% increase in NRX will decreaseGDP by 428.3367 USD.

2 = 98.77380, 1% increase in TRD will increase

GDP by 98.7738 USD. 3 = 127.3749, 1% increase in FDI will increase

GDP by 127.3749 USD. 4 = 24228.88, 1% increase in TOP will increase

GDP by 24228.88 USD. 5 = 44379.47, 1% increase in HDI will increase

GDP by 44379.47 USD. 6 = -40.61183, 1% increase in UNM will decrease

GDP by 40.61183 USD.


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The interpretation of R2 = 0.966737 is mean96.67% of variation in GDP are explained by

the variation in NRX, TRD, FDI, TOP, HDI andUNM. Another 3.33% of variations in GDP areexplained by other variables. Hence, themodel fit the data well. The Adjusted R-squared is 0.961685 and the Durbin-Watsonstat is 1.865988 shows that the model fit tothe data.


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The t-statistic of TRD , TOP and HDI aregreater than 2.069 and t-statistic of NRX is

smaller than -2.069. There are statisticallysignificant relationships between GDP,Natural Resources Export, Trade, TOP andHDI but is Trade and Unemployment Rate arenot statistically significant.


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IMPLICATION: trade has relatively small effect on economic

development in Brazil. While trade opennesshave high effect on GDP economicdevelopment in Brazil.

FORECASTING: Brazilians GDP will be majorly effected by

trade openness and human developmentindex.


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Brazil economy are more open nowadayscompare to previous years, which more

contributed to GDP. Human developmentalso contributed to GDP of Brazil and willcontinually increase Brazils GDP.


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Based on my opinion, trade openness are highlyaffect the economic development in Brazil. GDPare increasing when Brazils economy open for

international trade of manufacturing and servicesector. The increase in exports of naturalresources that require more capital. Brazilshould reduce exports of natural resources andfocus on manufacturing and services sector.Foreign Direct Investment and Trade arecontribute to HDI by inflow of capital andtechnologies.


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Several limitations of this research must berecognized in a balanced discussion of its

findings. Further research is needed toimprove the understanding of Brazils growthperformance. The role of other variablesrelated to institutional development,education, labor market informality, andincome inequality, could also be explored infuture research.

the impact of trade on economic development in brazil: implication and forecasting

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