Brazil is now one of the most ‘protectionist’ markets in the world. Assess the impacts of the government’s recent decision to increase tariffs on manufacture goods further (15 marks)
Protectionism is when the government uses import controls such as quotas and tariffs to shield or protect the domestic industries from foreign competition. A tariff is a tax on imports. The government’s decision to increase tariffs further, means that products imported from the USA now cost around double the price in Brazil.
Brazil is part of the BRIC economies, which include Russia, China and India, and means that it is an emerging economy. Therefore is not as developed as some other MEDC’s such as the US or UK and has to specialise in other sectors to gain a comparative advantage. Brazil actually specialises in the secondary sector which involves manufacturing raw materials into finished products. Because they specialise in the manufacturing of goods the government will want to reduce the amount of foreign competition in the Brazilian market for manufactured goods to attempt to boost the local economy.
Infant industries within the Brazilian economy will benefit from the protectionism from the government, by reducing the foreign competition (who could produce goods cheaper) it will give these infant industries to get a foothold and increase sales and in turn market share. As these infant industries grow they will then become more stable and will be able to benefit from economies of scale allowing for lower average costs of production. Employment within the Brazilian economy will be able to improve, if the government increases it’s already high tariffs. As local businesses begin to expand and grow from organic growth then they are likely to open new branches and stores throughout the country, some may even decide to become a multinational company and go global enabling more posts and jobs to be available to the populations. A knock on effect of this will be increased living...