World Bank – Policy Research Working Paper 7228
As of 2012, Brazil was the country most closed to trade, by measure of trade penetration (combined share of exports and imports in GDP). Although Brazil is a large economy by many measures and it is widely accepted that large economies tend to observe a relatively lower trade penetration, Brazil remains an outlier in this area. This paper shows how Brazil’s closedness cannot be explained by its size or other macro-level characteristics. It further shows important firm-level indicators that help explain
Brazil’s closedness. Finally, the paper argues that by increasing dynamism in exporting and importing as well as integrating into global value chains, Brazil could become more productive.
The rest of this paper is structured as follows: Part 2 reviews Brazil’s trade aggregates over time and compares then with peer countries. Part 3 shows, through a series of univariate and multivariate regressions, that Brazil’s relative closedness cannot be adequately explained by common macro indicators. Part 4 turns to firm-level data, especially the low propensity of Brazilian firms to export, as an explanation of low trade penetration. Part 5 looks into why few Brazilian firms export and Part 6 lays out how increasing trade penetration through deeper integration in global value chains could lead to increased productivity in the Brazilian
economy. Part 7 concludes.
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