The Fallacy of the Dutch Disease in Brazil

Nakao Nakahodo, Sidney; Jank, Marcos

The export boom, followed by a significant net trade surplus, has been primarily recognized for its crucial contribution to the country’s balanced current accounts. However, many economists are cautious about the growing trade surplus because of the exchange rate appreciation it has generated and its effects, particularly on the local industry. These discussions refer to a phenomenon detected in the Netherlands in the 1970s when the discovery of large natural gas deposits produced a significant impact on the country´s economy: if, on the one hand, exports allowed for an increase in wealth, on the other, the appreciation of the Dutch guilder – because of higher foreign currency inflows as a result of energy commodity sales – eventually made the exports of other products less competitive. In other words, the scenario for the so-called “resource curse” or “Dutch disease” was now in Brazil. To contribute to the debate around those and other issues, we attempted to provide empirical data that encompasses Brazil’s bilateral trade agenda profile and dynamics. In addition to questioning the use of aggregated commodity price indices, we suggest an alternative version that covers the most relevant variables in the analysis of Brazil’s exports. Finally, we briefly discuss the relationship between deindustrialization and Dutch disease and present our conclusions.

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More About This Work

Academic Units
School of International and Public Affairs
Published Here
January 20, 2023