Brazil-Leading the Brics

1. Will “Brazilian capitalism” sustain current GDP growth levels? Is Brazil the country of the future? “Brazilian capitalism” encouraged the development of private sectors and large amount the foreign investments. The liberalization of its economy was effected at the pace of the liberalization of the world economy by Brazil’s accession to the WTO and the rapid development of multinational firms in the primary and industrial production area. In brief, Brazilian capitalism can sustain current GDP growth levels by supporting a variety of businesses and boosting domestic economy.

Brazil’s growth in recent years has been strongly influenced by an increase in investment which promotes the increase in production capacity. Although the country has to improve education and its development strategy towards entrepreneurs, Brazil is on the right track to become one of the world’s largest economies if it continues to promote economic development policies that would sustain its current GDP growth level and if it goes on energizing its leadership role in the international relations. It is definitely a country of the future.

2. How has Brazil taken a leadership role in the global economy? Brazil can be considered as a leader of the global economy due to its rapid growth as well as its powerful impact in different world organizations. On the one side, the economy of Brazil is the world’s sixth largest by nominal GDP. Brazil is one of the fastest-growing major economies in the world with an average annual GDP growth rate of over 5 percent. It is also one of the most important exporting countries in the world. It has hundreds of trade partners, with 60 percent of exports mostly of manufactured or semi-manufactured goods.

On the other hand, Brazil is a member of diverse economic organizations, such as G20, WTO, and the Cairns Group. It held important leadership positions in the G-20 and had become a major player in multilateral trade negotiations. Brazil is also one of the leading players in the WTO’s Doha development round negotiations for discussing on lowering trade barriers around to world to boost global trade.

3. Are Brazil’s WTO actions serving the country’s long-term economic and financial interests? In the compulsory licensing issue, who is right, Brazil or Merck? What are the best arguments Brazil and the U.S. can make to the WTO’s settlement body concerning cotton subsidies? Brazil’s actions in the WTO definitely serve the country’s long-term economic goals. In 2001, Brazil argued in Doha round that the preceding 1994 Uruguay round agreements were biased against emerging markets and that developed countries had failed to uphold commitments to lower agricultural subsidies. Beyond the Doha round of trade negotiations, the Brazilian government initiated a formal dispute with the U.S. on cotton dispute through the WTO dispute process. Finally, Brazil claimed success after eight years of WTO adjudication, protecting Brazil’s agriculture exports in the long run.

In case of the compulsory licensing issue, in my point of view, Brazil is right and can be understood. By breaking the patent on Efavirenz, it has saved the country more money and allowed the government to legally purchase generic versions of the drug under provisions permitted by the WTO rules. While Brazil has been criticized for its strategy to get cheaper AIDS drugs, one can notice that its policy has worked well and has undoubtedly saved many lives. Merck, in its disagreement with Brazil’s negotiation, demonstrated clearly that it is more interested in increasing profits. Therefore, the goals are completely different and Brazil’s tactics to save lives were applauded.

Brazil claimed for reasons which declared that the U.S. has violated the WTO’s Agreement on Agriculture. The best arguments for Brazil are that production flexibility contract payments and direct payments violated WTO provisions regarding trade distorting subsidies, and that export credit guarantees, which included loans to traders and subsidized credit to foreign banks for the purchase of U.S. agricultural products, violated the AoA. The best way to respond government subsidies, according to Paul Krugman is to help establish rules of the game that minimize the use of trade-distorting subsidies (McGraw-Hill, page 211). And this is exactly what Brazil’s stance against the U.S. policy helped the WTO to do. While for the U.S., the best argument would be that article 13 of the AoA, termed the peace clause, granted signatory countries until 2004 to phase out domestic subsidies and export promotions, indicating that they did not violate the agreement and giving themselves good cause to argue.